Verizon killing off phone subsidies: Will consumers accept paying more than $200 for their iPhone?

Verizon customers are used to paying for two year contracts with the ability to buy a new phone every couple years at a rather low subsidized price. That's changing soon.

T-Mobile's aggressive Un-Carrier campaigns educate the consumer and have caused other carriers to react and change the way business is done in the US.

CNET reports that Verizon is introducing a radical change by moving away from service contracts towards the European and T-Mobile model of flat fees and separate phone payment options.

For a long time US wireless customers paid a monthly fee that covered service and paid for phone subsidies. Those fees remained fairly constant and were charged for as long as the customer stayed with the carrier, even if the phone was technically already paid off.

These types of long term contracts caused many consumers to think that an iPhone only cost $100 or $200 or that their new Moto X was free. The true cost of the phones was hidden in the subsidy and fees. By separating the service from the phone cost, the consumer can better track where their money is going.

The new Verizon plans will go into effect on August 13. There will no longer be family plans so those customers should probably try to keep their existing contract in place. If a family does switch over, it's likely their overall fees will go up. If you add a new phone, then don't forget to add on the phone installment fee.

Plans will start at $30 per month for 1GB of data and go up to $80 for 12GB of data. You will then need to pay an access fee, depending on what type of device you want to use. A smartphone is $20, a tablet or Wi-Fi hotspot is $10, and a connected device, like a smartwatch, is $5.

Thus, the lowest monthly fee is $50 for a smartphone with 1GB of data. You then either buy your phone at full price or pay a monthly equipment installation plan fee.

It will be very interesting to see how the market responds to this change. Verizon is the largest carrier in the US and I think most customers were satisfied thinking they were getting a new iPhone for $200.


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