Verizon Kills off Contracts and Subsidies

Verizon has announced that it will officially be the second carrier to stop wrangling their customers into two-year contracts every time they purchase a new phone. Verizon subscribers will be able to choose from a new selection of cheaper plans (sans the subsidy fee), but that means customers will have to purchase the phone outright — by either paying for it in-full or through monthly payment installations.

Verizon Kills Subsidies

T-Mobile was the first wireless carrier in the US to cut ties with subsidizing phones for its customers, but in doing so they set forth a ripple effect that has convinced the other carriers to follow suit.

For customers, this means that they’ll now have to purchase phones outright, which incentivizes manufacturers to offer phones at more competitive prices and, hopefully, entices them to put smartphones on sale more often.

According to Verizon, the subsidy fee they charged in a two-year contract was about $19 a month. Multiplying that number by the number of months in two years means customers were paying around $456 a year. An iPhone 6 is currently $649 through Verizon, so if you tack on the $200 a user would typically pay for a subsidized iPhone 6 then it’s easy to see that users won’t really pay any more or less without a contract. Suddenly that subsidy doesn’t really seem like much of a subsidy.

Verizon to Offer a New Range of Plans

Starting on August 13, Verizon is also going to be offering a new set of plans that range from four main options: small, medium, large, and extra large. Verizon will be eliminating the subsidy fee, which will discount voice, text, and data plans by about $20 a month. The amount will depend based on each plan, however.

The different “sizes” refer to the amount of data each plan offers. A small plan only offers 1GB of data, while an extra large plan offers up to 12GB. Here is a quick price breakdown for single lines:

Small – $30/month 1GB of data
Medium – $45/month 3GB of data
Large – $60/month 6GB of data
Extra Large – $80/month 12GB of data

Grandfathering is Alive and Well

Current customers who don’t want to switch plans will still be able to keep the same plans they have now. Verizon mentioned that there would be some restrictions that may apply (perhaps with regard to the few still holding onto their unlimited data plans), but Verizon didn’t give any precise details about what the stipulations might be.