While some data shows Americans are upgrading their phones less often, three of the four major carriers announced plans to get consumers to upgrade every six months or a year instead of every two years. Verizon is the latest to confirm their plan with Verizon Edge that follows T-Mobile's JUMP! and AT&T's Next programs.
The upcoming Verizon Edge plan looks to have costs more closely matched with T-Mobile while AT&T may be the highest price option with 1 year upgrades instead of the six month offerings from T-Mobile and Verizon. According to the Verizon press release, this is how it works:
Choose the phone you want and sign up for a month-to-month service plan, it’s as easy as that. The full retail price of the phone will be divided over 24 months and you’ll pay the first month at the time of purchase. If you want to upgrade after 6 months, just pay off 50% of the full retail price of the phone and you can choose a new phone and start all over again.
Similar to T-Mobile and AT&T, there are no finance charges, upgrade fees or contracts associated directly with this equipment installation plan (EIP). The Verizon Edge plan will be available starting August 25th. As you can see in the breakdown below, the plan costs are all similar over 24 months, but the major difference is monthly carrier service fees that you must consider for a fair evaluation.
How do the three stack up?
Depending on the phone you choose, the plans differ, so let's take a look at the 16GB Galaxy S4 that is available on all three carriers and see how the 24 month costs shake out if we were to upgrade to a comparable phone every six months to a year. I'll leave out local sales taxes, but make sure to consider those in your overall cost if it applies to your state.
T-Mobile: You can buy the Galaxy S4 for $150 today and then sign up for an EIP at $20 per month for 24 months. You then pay $10 per month for the JUMP! plan that also includes full accidental damage protection (only $2 more than just buying the carrier insurance). So in six months you will have paid $150 plus $120 (6 months of $20) plus $60 (6 months of $10) for a total of $330.
After six months you buy another high end phone at $150 and give back your Galaxy S4. You continue the $20/month EIP and $10/month JUMP! fee so add another $330 for this six-month period. Repeat this two more times over the 24 months.
After 24 months you will have paid $1,320 for four phones and still owe 18 more months of $20 for your last upgrade.
AT&T Next: AT&T does away with the upfront down payment cost and instead rolls costs into a variable monthly fee ranging from $15 to $50 per month. For the Galaxy S4, the cost is $32 per month with the device paid off in 20 months. So after one year (AT&T doesn't offer a six-month option) you would pay $384 for the Galaxy S4 and then trade it in for another device.
After 24 months and two new smartphones you will have paid $768. We can't really compare a four-device, six-month option because the monthly cost would likely increase and the total would be closer to what we see with the other two carriers. The device must be in good working condition for the trade-in and since this plan doesn't include insurance coverage, you need to consider this if you tend to drop your phones a lot.
Verizon Edge: Verizon's plan has you take the full retail price, $650 for the 16GB Galaxy S4, and divide it by 24 months. You pay the first month to start and then after six months you pay the balance up to 50% of the full retail price to start over.
So with Edge, you pay $27 to buy the phone and $27 per month for five more months (total of six months at $27 per month) for a total of $162. You then need to pay another $162 to reach the 50% level to pick up a new device. The total cost for six months is equal to half the cost of the full retail value, $325 in this case.
After 24 months and four new smartphones you will have paid $1,300 for Verizon's Edge option.
In summary, over a 24-month period, T-Mobile would cost you $1,320, AT&T would cost you $768 (two phones compared to four) and Verizon would cost you $1,300 just for the phone with no service fees included. There are many variations of this cost breakdown, dependent on which devices you select. I just bought the Nokia Lumia 920 on T-Mobile's JUMP! plan with an upfront cost of just $50.
If you had paid outright for each phone and didn't participate in these incentive plans, the total cost would be something close to $2,600 ($650 times 4) for the phones alone, but you could have sold those phones and likely come out a bit ahead of the game while having to deal with the hassle of selling the phones and making sure they were kept in mint condition.
These costs do not include carrier service, and with T-Mobile offering the lowest cost of these three carriers, make sure to take that into consideration. Industry experts estimate that AT&T and Verizon already include a $20 phone subsidy cost in their monthly service fees, so with their two plans you are essentially paying twice for the "privelege" of upgrading your phones more often.
Sales tax for each phone is due upon purchase at the full price so there is another cost associated with doing this for most states.
In reality, these plans are not very consumer-friendly due to the monthly plan service fees remaining the same for Verizon and AT&T. Right now you can buy a subsidized phone every two years and just pay the up-front cost of $100 to $200, which is what most consumers should just stick to if they are on Verizon or AT&T. If you buy insurance for your phone, then T-Mobile's JUMP! plan makes sense. Are any readers planning to try out these plans?