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August 17, 2015

Say Bye-Bye to $199 iPhones at Verizon

Filed under: Electronics,Telephone — Edgar (aka MrConsumer) @ 6:14 am

  As of August 13, Verizon Wireless is no longer going to subsidize the purchase of new cellphones. That means you can kiss that $199 price for iPhone 6 or Samsung Galaxy S6 goodbye. When you get a new phone, you’ll be asked to pay around $650 for those high-end phones, but you can do so in monthly installments of about $27 to soften the blow. Other phones will be available at other prices. Current customers can apparently continue to renew their two year contracts and get subsidized phones, according to the AP.

On the bright side, elimination of subsidies also means the elimination of two-year contracts. So you are no longer bound to remain a customer for 24 months. You will, however, need to fully pay off the remaining monthly payments on your phone if you choose to leave Verizon.

Now the big question: Since you are now paying full price for the phone, are Verizon’s monthly rates for service lower than they were? Remember, depending on the plan, they did have embedded in them a roughly $20 charge to cover the cost of that $650 phone that you got for only $199.

Old plan pricing choices:

Verizon old plan phone costs

In the old system, you had three choices: pay for the phone in full ($650), pay in 24 equal installments ($27.08), or pay $199 (with a two-year contract.)

In the new system, you only have two choices: pay $650 in full or pay it off in 24 installments of $27.08:

new payment options

Besides the cost of the phone, there has always been a line charge, or a charge for the cost of the service per smartphone. The old charge was $40 per line, but if you were on “Edge,” you got a $15 monthly discount making it $25.

Data charges were separate charges also. In the old system, there were many choices with varying prices. Some examples, old/new: 3 gigs – $50/$45; 6 gigs – $70/$60.

Putting it all together, here is the old pricing for an iPhone 6 with monthly installments, on Edge, and with 3 gigs of data:

old total

Here under the new system is pricing for an iPhone 6 with monthly installments and 3 gigs of data:

new system pricing

In this scenario, you are paying $10 a month less than in the former system.

So how does this compare to the old system if you had gotten an iPhone 6 for $199 upfront with 3 gigs of data? You would have been paying $90 a month ($40 for line, $50 for data) plus the equivalent of $8.33 for the phone itself, or $98.33 per month. It is now $6.25 a month cheaper.

At least in these scenarios, the new plan is a little less money, but the rate shock of paying $650 for a phone may still be too bitter a pill to swallow for some. The problem is that you don’t have a ton of alternatives since increasingly the other carriers are also moving away with subsidized telephones.

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9 Comments

  1. I believe Verizon’s elimination of the subsidized phone is a reaction to competitors offering to pay Early Termination Fees (ETF) for cancelling a contract. The ETF did not fully cover the residual cost to Verizon. With the new installment plan, it is harder for T-Mobile or other competitors to pay it off the same way.

    Comment by Marc — August 17, 2015 @ 7:39 am
  2. I am happy to have more transparency in costs – even if it means I pay more. When costs are separated it becomes easier for companies to compete on price changes. The phone can go on sale separate from the service plan and vice versa.

    I’ve been on T-mobile for years, and though T-mobile doesn’t have the best network, I have liked the pricing structure and the ability to switch out a phone without penalty whenever I want or need to.

    Comment by Wayne R — August 17, 2015 @ 8:18 am
  3. My daughter had 5 of us on a Family Plan with 4 of us charged $9.99/month. All of us were on a 2 yr contract with new phones every 2 years if desired. This new plan charges 4 of us on Family Plan $30/month and the account holder $40. No contract but my cost went up $20/mo. Too much of a hassle to change carriers. I researched online and there are plenty for less but just $10/mo +/- so I’ll keep Verizon.

    Comment by Gerry Pong — August 17, 2015 @ 1:24 pm
  4. A better comparison would have been to the “Single Line Plan” that Verizon just killed too, that offered a subsidized phone and 2 GB of data + unlimited talk/text for $60 a month. For users that were on that plan, this is a $32/month price hike for 1 extra GB of data.

    Edgar replies: This was originally known as their “loyalty plan.” I could not use a 2-gig before and after comparison because the new system does not have a 2-gig plan. Anyone still on that plan, I believe, can remain on it.

    Comment by Greg — August 17, 2015 @ 3:54 pm
  5. I lease my phone from Verizon, and on that plan it’s the same as paying full price. The advantage is that I can upgrade at any time with a very small increase in the monthly leasing price of the phone.

    Comment by Ronnie — August 18, 2015 @ 11:05 am
  6. By the way, I didn’t mention this, but when I switched over to their leasing plan they lowered my monthly rates so that I was only paying like $3.00 more per month with the lease rate factored in. Not bad, it’s almost like not paying for the phone at all.

    Comment by Ronnie — August 18, 2015 @ 11:08 am
  7. All companies seem to be changing plans now and they still charge too much for data.

    Comment by Richard — August 18, 2015 @ 12:29 pm
  8. This is excellent. With subsidies gone, consumers will see the true cost of phones and will push back against the obscene profits ($250 – $300 on a $650 phone).

    Comment by Marc K — August 20, 2015 @ 10:54 pm
  9. I’ve never had a need or a desire for a cell phone of any kind and this ridiculousness only makes me want one less.

    Comment by Anna — August 21, 2015 @ 11:41 am

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