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.
Verizon Becomes Last Big Four Carrier to Drop Service Contracts
Since its first “Un-Carrier” moves that eliminated contracts, T-Mobile has taken a number of aggressive steps beyond that. For example, the company no longer counts streaming music services against a customer’s data limits.
It doesn’t charge roaming fees anywhere in North America, and small amounts of data for tablets and other devices are now free. Furthermore, international roaming is free for data in most countries and it charges minimal fees for voice calls.
Verizon’s new data rates, which are as low as $10 per month for tablets and devices, and $5 per month for connected watches, are similar to charges by T-Mobile and other carriers.
The result will be lower costs for most users, with bigger savings for users with the biggest data plans. However, because the charges for devices will drop off once the devices are paid for, the ultimate price will be far lower over time than it is for Verizon customers now.
As you might expect, the vocal CEO of T-Mobile, John Legere, was not silent on the new Verizon plans. Legere took to Twitter to write “first @sprint with a random, more confusing, mimic of #MobileWithoutBorders … Then @Verizonwireless 2yrs late with a lame #SimpleChoice copy?”
But in reality, what Verizon, T-Mobile and the others are doing is following the lead of the wireless industry pretty much everywhere else in the world. This is made a little easier, of course, because in most of the world, the wireless protocol is GSM and phones are easily moved from one network to another.
Many users have multiple phones and simply swap Subscriber Identity Module (SIM) cards when they want to use a different phone. While phone locking does exist outside of the United States, it usually applies only when the phone is being paid for on an installment plan.
Things are different with U.S. service providers, where Verizon Wireless and Sprint use Code Division Multiple Access (CDMA) networks, while AT&T and T-Mobile use GSM. Sprint and Verizon share relatively little in terms of frequencies, so unlocking their phones might not be a big gain for customers.
However, both companies comply with the CTIA’s policy on unlocking phones. Perhaps more significantly, Verizon doesn’t lock the GSM portion of its world phones, so there’s nothing to unlock.
The result of Verizon’s new, announced no-contract plan is that customers will eventually see lower costs; they will have some greater flexibility in how they use their phones, since many regional carriers can use phones set for Verizon’s frequencies; and it should be good for the overall wireless industry. But will it keep T-Mobile at bay? If I were AT&T or Verizon, I’d keep my eyes on my rearview mirror.