Here's Why Verizon Dropped Contracts for Customers
NEWS ANALYSIS: After resisting contract-cutting moves by competitors like T-Mobile for some time, Verizon finally succumbs and drops contracts.Starting Aug. 13, when Verizon Wireless begins offering its new no-contract cellular data and phone packages to new and existing customers, the company will essentially be hoisting a white flag and giving up on the contract wars. For Verizon, this is a huge concession. Firm in its belief for years that contracts are king, the company pushed back against rivals like T-Mobile that were tearing up customer contracts and letting their customers choose their services and their carrier relationships without limitations. But on Aug. 7, Verizon announced it would resist no more. In a brief announcement, the company said that it will rid its customer relationships of contracts starting on Aug. 13, when users can begin to choose from no-contract services that will more closely match their wireless needs and lifestyles. "T-Mobile has been carving an impressive swath in both AT&T and Verizon of late, and this is apparently their response," Rob Enderle, principal of the Enderle Group, told eWEEK in an email reply. "Typically you look at a market like this and figure the big guys will drive the change. In this case it is T-Mobile and it is clear that if the big guys don't change that T-Mobile may be the new big guy and Verizon and AT&T will be crying about what they once had."
What likely drove Verizon to make the move to ditch contracts, wrote Enderle, is that "T-Mobile has been taking an impressive amount of business from them" by being aggressive, but the number of customers moving to T-Mobile still hasn't been as high as it could be, he explained. "But these things tend to snowball and Verizon needed a better defense before this got a lot worse."