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Mighty Verizon Joins The Mobile Price War

Feb 13 2014, 5:45pm CST | by , in News | Mobile Phones

Mighty Verizon Joins The Mobile Price War

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Mighty Verizon Joins The Mobile Price War

It was inevitable. Once second-place AT&T began tweaking its rate plans in response to T-Mobile’s shakeup of the mobile industry, it was clear market-leader Verizon would have to consider some sort of response. And, like Sprint’s new Framily plan, Verizon’s new More Everything offerings are certainly better and cheaper. But as if with every one of these rate-plan modifications, we have to add the caveat: for some people.

What was done

Verizon fundamentally did two things that matter. First, it increased the data allowances on plans ranging from 500MB to 2GB without increasing prices. If before you were paying $40 for 500MB of data that’s now doubled to 1GB (and a 500MB plan is now just $30, while an even smaller 250MB was added at $15.) The same thing happened to the $50 1GB plans; it’s now boosted to 2GB. The $60 plan previously offered that much, so Verizon kicked it up to 3GB. Above that, nothing has changed: 4GB was $70 a month and it still is. Keep in mind these data buckets can be used by one person or several on a Share Everything plan.

The second thing Verizon did was cut the cost of each phone you have on your plan, but only if you move to Verizon Edge, which replaces discounted phones with a series of monthly installments. This mimics a similar move by AT&T and removes the worst feature of Edge which was that if you took it before, you still paid the same rate to cover a subsidized phone, but Verizon stopped giving you one.

The monthly fee for a smartphone is normally $40 on Verizon, but with Edge you can now cut that down to $30 if your plan includes 8GB of less and $20 if you get a plan with at least 10GB. Those plans start at $100 for just the data bucket, so they typically only apply for people with 4 or more lines. Of course, in that case, the savings are 4 times $20 versus the old plan, so you come out $80 ahead.

Who gets the edge?

To take advantage of those discounts, you have to give to get. The way it works is still convoluted, so let’s step through it again. The old, traditional method allowed you a discounted phone every 2 years, say a $199 iPhone that would normally be $650. With Edge, you can upgrade anytime after just 30 days, provided you have paid off half your phone’s cost and you trade it in. Normally, on an iPhone that would take 12 months and $327 to do, but if you were only 9 months in, you could give Verizon the $82 difference and walk out with a shiny new phone.

If you make it through all 24 payments on Edge, the phone belongs to you and you no longer make monthly payments toward it. But if you want a new phone, you’re back on the treadmill. So Edge, like similar programs from other carriers, only makes sense if (a) you’re a frequent upgrader who doesn’t want to go to the trouble of selling your old phone on eBay or accepting the current trade-in value from Verizon or (b) you plan to keep it for more than 2 years, in which case you’ll certainly come out ahead. This is true, however, only for people getting that $20 discount per line in most cases, i.e. people with 10GB or more of data in their monthly bucket.

Extra and noteworthy

Verizon also threw in two extras, which are likely worth somewhere between zero and a few dollars to you. It no longer costs extra to send a text message from the U.S. to a foreign country. How many people are doing this in the era of free chat apps — WhatsApp now processes more messages daily than all the carriers standard text services combined — is unclear, but it’s now costless from Verizon. (The reverse isn’t true. If you’re abroad, texting and data use will still cost an arm and a leg.) Verizon is also throwing in 25GB of Dropbox-like cloud storage. Exactly how comparable this storage is to other offerings isn’t yet clear, but it’s not especially valuable anyway as Dropbox will give you 4 times that for $99 a year.

The last bit of oddness is that Verizon is really interested in moving you to Edge. If you haven’t upgraded since November 13, 2013, you can trade in your phone now and get a new smartphone on Edge. While that will come with monthly payments, the discount on your bill — again, assuming you get the full $20 off — means it’s close to a wash for a lot of the phones Verizon has, particularly midrange Android models. The chance to switch to Edge is good through February 31st according to Verizon’s web site, so it’s not clear when this will go away. Regardless, once you’re eligible for a discounted phone again, you can always switch to Edge at that point.

Altogether, it’s nearly impossible to complain about what Verizon has done. Prices are down and the company claims 4G data speeds have been improved in a number of cities as well. Both Verizon and AT&T are still more expensive than T-Mobile and Sprint for most people, but both clearly provide more coverage in return for the extra dollars. So far, the biggest beneficiary of the mobile pricing wars has been consumers. AT&T just reported a strong enough quarter to suggest that T-Mobile’s strategy isn’t winning away huge numbers of its customers despite the blood feud between the two. (AT&T not only added customers, but its “churn” fell against year-ago figures.)

Of course, if the carriers wish to engage in another round of price cutting in an effort to get our attention, that would also be acceptable.

Follow me on Twitter and on Facebook. Find the rest of my Forbes posts here.

Source: Forbes


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