With the explosion of ever-more-powerful new smartphones every few months, wireless carrier customers stuck with a two-year plan are in a bit of bind: They can stick with that obsolete iPhone or pay exorbitant fees to break the contract and upgrade. But new plans by each of the major US wireless carriers are seeking to make these upgrades more affordable and, possibly, put an end to buyer’s remorse.
In a conversation with The New York Times, T-Mobile CEO John Legere mused that you must endure “730 days of watching new phones come out that you can’t have, or live with a cracked screen or an outdated camera. We say two years is just too long to wait.”
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Indeed, T-Mobile struck first last week with its new Jump plan. Under the terms of this new plan, customers pay a down payment for a new smartphone and then make additional monthly payments for one year, both of which vary by device type. (For example, an iPhone 5 would require a $146 down payment plus an additional $20 per month.) But the benefit of this plan is that the customer can upgrade at any time, twice per year, with each upgrade triggering a new down payment.
This week, it was AT&T Wireless’s turn. On Tuesday, the firm introduced a similar plan called AT&T Next. But unlike with T-Mobile Jump, AT&T Next customers will not pay a down payment for a new smartphone (or tablet). Instead, the monthly fee will run for 20 months, though the customer can replace the phone after a year has elapsed and start over with a new 20-month fee schedule. Those who decide to keep the device instead will no longer need to make the additional monthly payment after 20 months.
Verizon hasn’t announced its own plan yet, but it will soon: Leaked documents suggest that a coming VZ Edge plan will provide customers of that carrier with a way to pay more each month and then upgrade to a new device after 50 percent of the actual cost of the device has been paid. It sounds a lot like the plans offered by T-Mobile and AT&T. (There’s no word yet from Sprint, the nation’s number-three carrier. Given how the rest of the market is changing, one has to think it’s only a matter of time.)
Regardless of minor differences, these plans all attack the same dark underbelly of the smartphone world: The devices we think we’re buying for $199 or less are actually highly subsidized, incredibly expensive devices that really cost $500 to $750 depending on the model. And today, most customers who continue to use the same phone past the end of their two-year contract will keep making monthly subsidized payments for that phone long after it’s actually been paid off.
Many believe that new plans like T-Mobile Jump and AT&T Next will appeal only to the gadget obsessed who simply must have a new device more regularly. But even regular consumers should carefully weigh the benefits of these and other new plans, including so-called contract-less plans. There are potential savings to be had, regardless of how long you plan to keep using your next phone.