Verizon Becomes Last Big Four Carrier to Drop Service Contracts

NEWS ANALYSIS: Standard two-year contracts that bundle the cost of the phone with service are now out at Verizon Wireless, which was the last holdout among the big four mobile carriers.  

Verizon Data Plans 2

Two years after the then-smallest national wireless carrier in the United States announced that it was doing away with contracts, the largest, Verizon Wireless, has now followed suit, bringing T-Mobile's "Un-Carrier" approach to the major carriers in the industry.

Verizon made the announcement as part of a move to change its data plans, which are now described as small, medium, large and extra-large. The plans range from 1GB of shareable data to 12GB. Overages are 15 dollars per gigabyte. Verizon does not quote an unlimited plan.

Between T-Mobile's initial move to no-contract plans and Verizon's announcement, the other two national carriers, Sprint and AT&T have also started offering similar plans. AT&T still offers plans with two-year contracts, but most of its plans are also contract-free. Sprint has similarly dropped contracts as it struggles to compete with T-Mobile, which recently supplanted Sprint as the No. 3 mobile service provider.

"These new, simplified plans are designed to meet the needs of consumers and small businesses with 10 lines and less," said Melanie Ortel, Verizon Wireless spokesperson. Larger businesses normally have plans and rates that are negotiated separately from consumer and small business plans.

The new plans will go into effect August 13. New Verizon customers will get a no-contract plan automatically. Existing customers may be able to switch to the new no-contract plans, depending on the details of their existing plan. Existing customers will also be able to keep their contracts.

As is the case with other carriers moving to no-contract plans. Verizon customers will be able to pay for their phones up front or they'll be able to pay for devices on an installment plan. The monthly charge for devices will depend on the price of the device that's being financed. The device purchase plan replaces the similar Verizon Edge.

Verizon's new no-contract plan, combined with its simple sizing plans for data, will go a long way toward removing the mystery about what customers were actually paying for that prevailed in the company's cell phone plans.

It also eliminates the long-standing problem in which customers who don't replace their phones every two years keep paying for phones that have long been paid off. By separating the phone from the voice and data plans, customers will find that once the phone is paid for, the monthly price will be for the cost of communications only.

T-Mobile's early adoption of no-contract plans and of untying devices from communications played a major role in the company's unprecedented growth. While Sprint had its own problems that played a major role in its near-demise, including some bad choices for high-speed data networks, T-Mobile's aggressive pricing and no-contract approach were also major factors.

Wayne Rash

Wayne Rash

Wayne Rash is a freelance writer and editor with a 35 year history covering technology. He’s a frequent speaker on business, technology issues and enterprise computing. He covers Washington and...