Better late than never. Following a leaked internal document earlier this week, Verizon Communications Inc. (NYSE:VZ) Wireless has made its new Edge program official. Edge is Big Red’s new early upgrade program that hopes to compete with T MOBILE US INC (NYSE:TMUS) Jump and AT&T Inc. (NYSE:T) Next.
Verizon Communications Inc. (NYSE:VZ) Edge is fairly straightforward. There are no contracts or fees, and Verizon is offering a payment plan to finance the device. Customers can upgrade after six months so long as they’ve paid for 50% of the retail price. There is no subsidy to speak of, and Edge is geared toward customers who shun service contracts. The new plans launch at the end of August.
AT&T Inc. (NYSE:T) spreads out the device’s price over 20 months, while Verizon Communications Inc. (NYSE:VZ) splits it into 24 monthly payments. Neither program requires a down payment, undercutting T MOBILE US INC (NYSE:TMUS) in upfront costs. AT&T effectively requires customers to pay for 60% of the cost (12 months out of 20), while Verizon will accept 50%.
Verizon Communications Inc. (NYSE:VZ) says you can upgrade after six months, but if you do so, you’ll find yourself on the hook to pay the difference. After six months, you’ve only paid 25% of the price, so you’ll need to pay the difference out of pocket if you want to upgrade. On a $600 smartphone, that’ll cost you $150 if you want to upgrade immediately after six months.
The real kicker is the service plan. T MOBILE US INC (NYSE:TMUS) now unbundles the service cost from the device cost. AT&T Inc. (NYSE:T) and Verizon Communications Inc. (NYSE:VZ) are hoping that customers stay on the pricier service tiers, which are priced to include a subsidy recovery. If customers choose the pricier plans, even on a month-to-month basis, AT&T and Verizon effectively get to charge higher prices without shelling out a subsidy.
On the prepaid front, excluding device costs, it’s a little more even. Verizon Communications Inc. (NYSE:VZ) and AT&T Inc. (NYSE:T) both offer unlimited talk and text plans with 2 GB of data for prepaid customers for $60 per month. T MOBILE US INC (NYSE:TMUS)’s comparable $60 plan includes 2.5 GB of high-speed data, although it allows unlimited data beyond that at slower speeds.
Big Red’s move signals the third carrier to adopt a new early upgrade program, and now Sprint Nextel Corporation (NYSE:S) is the only national carrier left to unveil a similar offering. With all other three rivals launching upgrade programs, Sprint will inevitably follow suit.
Fool contributor Evan Niu, CFA, owns shares of Verizon Communications (NYSE:VZ). The Motley Fool has no position in any of the stocks mentioned.
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