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Comparing the New Frequent Device Upgrade Programs from U.S. Carriers
Earlier today, Verizon became the third major U.S. iPhone carrier to announce a program designed to allow customers to upgrade their handsets more frequently. Verizon's "Edge" program, which launches August 25, will join AT&T's "Next" program introduced earlier this week and T-Mobile's "Jump" offering announced last week.
While the new frequent upgrade plans may seem appealing to some users, The Verge earlier this week highlighted how AT&T's Next program is actually a poor deal for most customers.
Through the program, customers end up double paying for their devices through both the new monthly handset payments and the portion of the monthly service charge that has traditionally been collected by the carrier to recoup its upfront handset subsidies. Assuming that $20 of AT&T's monthly service fees go toward recouping the carrier's handset subsidy, a customer looking to upgrade after 12 months would have paid $390 in device payments on a 16 GB iPhone 5 and $240 from monthly service fees, yielding total payments of $630 for the $650 device, although they also have to turn in the device to AT&T.
Verizon's Edge program appears to work in a similar manner, although perhaps with a slightly better deal than at AT&T. Splitting the $650 iPhone cost over 24 months yields monthly payments of just over $27, and thus a customer looking to upgrade after 12 months would have paid $325 in device payments and $240 from monthly service fees, making for total payments of $565 plus the device trade-in.
Device payments for a 16 GB iPhone 5 owner upgrading after 12 months
T-Mobile has addressed this issue by completely decoupling handset purchases from service charges, creating lower monthly service fees while moving the device costs into a separate no-interest financing plan. Under T-Mobile's Jump plan, a customer purchasing a 16 GB iPhone 5 with a retail price of $650 and then looking to upgrade after a year would pay the $146 down payment plus $252 in monthly device payments plus $120 in Jump program charges, making for total payments of $518 plus the device trade-in.
In all cases, customers would seem to be able to save some money by purchasing a contract-free phone upfront for $650 and then reselling it on their own terms whenever they wish to upgrade, almost certainly saving hundreds of dollars in the process. Customers looking to upgrade more frequently than once per year may do somewhat better, but still likely not better than simply purchasing a unsubsidized device directly.
While the new frequent upgrade plans may seem appealing to some users, The Verge earlier this week highlighted how AT&T's Next program is actually a poor deal for most customers.
Through the program, customers end up double paying for their devices through both the new monthly handset payments and the portion of the monthly service charge that has traditionally been collected by the carrier to recoup its upfront handset subsidies. Assuming that $20 of AT&T's monthly service fees go toward recouping the carrier's handset subsidy, a customer looking to upgrade after 12 months would have paid $390 in device payments on a 16 GB iPhone 5 and $240 from monthly service fees, yielding total payments of $630 for the $650 device, although they also have to turn in the device to AT&T.
Verizon's Edge program appears to work in a similar manner, although perhaps with a slightly better deal than at AT&T. Splitting the $650 iPhone cost over 24 months yields monthly payments of just over $27, and thus a customer looking to upgrade after 12 months would have paid $325 in device payments and $240 from monthly service fees, making for total payments of $565 plus the device trade-in.
T-Mobile has addressed this issue by completely decoupling handset purchases from service charges, creating lower monthly service fees while moving the device costs into a separate no-interest financing plan. Under T-Mobile's Jump plan, a customer purchasing a 16 GB iPhone 5 with a retail price of $650 and then looking to upgrade after a year would pay the $146 down payment plus $252 in monthly device payments plus $120 in Jump program charges, making for total payments of $518 plus the device trade-in.
In all cases, customers would seem to be able to save some money by purchasing a contract-free phone upfront for $650 and then reselling it on their own terms whenever they wish to upgrade, almost certainly saving hundreds of dollars in the process. Customers looking to upgrade more frequently than once per year may do somewhat better, but still likely not better than simply purchasing a unsubsidized device directly.
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73 months ago
Does either AT&T or Verizon offer an "off contract" price that is $20 cheaper if you bring them an unlocked phone? I don't see them advertising cheaper rates.
If they don't, then this chart makes no sense because there is no option to "save" the $240 cost that they are assuming in the chart.
Also this must be analyzed based on the expected resale value of the phone. I'm confident about resale value for an iPhone 5, but much less so for a GS4 or an HTC One. The right to put either of those android phones back to the carrier at the end of the year for a new phone might be very valuable.
If they don't, then this chart makes no sense because there is no option to "save" the $240 cost that they are assuming in the chart.
Also this must be analyzed based on the expected resale value of the phone. I'm confident about resale value for an iPhone 5, but much less so for a GS4 or an HTC One. The right to put either of those android phones back to the carrier at the end of the year for a new phone might be very valuable.
73 months ago
What a ripoff. So now instead of paying $199 for phone and having a contract that includes paying off your phone built into the montly bill, you now pay an additional $27 a month for the phone without your actual phone bill being cut $27. Wow, a double bonus for AT&T and Verizon.
73 months ago
This post fails to recognize that even if you pay full retail of $650 for a new iPhone, you STILL are paying the inflated $20/month in service charges for a subsidy that never happened. So you must tack on the $240 "Device portion of monthly fees" which makes buying outright more like $890.
While you can then sell your phone after 12 months, you still take a hit on the depreciated value of the old phone. Say you sell it for $350 on Craigslist, your net cost is $540 for the year. So when you look at it this way, the Next program isn't as bad as it seems. Remember, you are paying a bit for the convenience to finance the phone interest free and the ability to upgrade at $0/down without having to worry about selling your old phone. Convenience has a price people. It's up to you.
While you can then sell your phone after 12 months, you still take a hit on the depreciated value of the old phone. Say you sell it for $350 on Craigslist, your net cost is $540 for the year. So when you look at it this way, the Next program isn't as bad as it seems. Remember, you are paying a bit for the convenience to finance the phone interest free and the ability to upgrade at $0/down without having to worry about selling your old phone. Convenience has a price people. It's up to you.
73 months ago
Why would someone do this at AT&T or Verizon when you could just cancel your plan, pay the ETF, keep your phone, and get a new subsidized handset any time you want?
The complexity of these hidden phone costs and payment systems are starting to exceed even bank/credit card industry levels.
The complexity of these hidden phone costs and payment systems are starting to exceed even bank/credit card industry levels.
73 months ago
I'm confused why any of these plans are better than just getting a 2-year contract. I paid $250 for my 32GB iPhone 5 (Bestbuy sale in december), and pay $158/month unevenly split between 3 people (lots of grandfathered stuff) on AT&T. My portion is about $46.
When my contract is up, I'll purchase the latest iPhone on contract, sell my old one on eBay to nearly cover the cost of my old one (I think I paid maybe $10 bucks after selling my iPhone 4 32GB) and soldier on.
Personally, I don't feel the need to switch carriers on a whim, and buying a new phone every year feels a little absurd. I've had ATT going on 3 years now, and I'm ok with sticking with them until I find a much better deal or AT&T screws me over.
When my contract is up, I'll purchase the latest iPhone on contract, sell my old one on eBay to nearly cover the cost of my old one (I think I paid maybe $10 bucks after selling my iPhone 4 32GB) and soldier on.
Personally, I don't feel the need to switch carriers on a whim, and buying a new phone every year feels a little absurd. I've had ATT going on 3 years now, and I'm ok with sticking with them until I find a much better deal or AT&T screws me over.
73 months ago
This perfectly illustrates why the US govt's denial of the AT&T and TMobile merger was the right decision. If the merger had gone through, we wouldn't be seeing changes and competition like this.
I'd expect Sprint to offer something similar to compete with these guys soon.
I'd expect Sprint to offer something similar to compete with these guys soon.
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