Smartphone Plans and Early Upgrades
Our Love of Smartphones
Smartphones are an important part of people’s lives; they’ve almost become an appendage. Technological improvements have fueled this smartphone craze, and the trend does not seem to be ending any time soon. Anyone doubting this only need to see the media firestorm that erupts when a newly designed smartphone hits the market. When it comes to smartphones, the public is insatiable. People are willing to camp outside stores to ensure they get the new smartphone as soon as it is available.
The Demand is Greater than the Availability
With so much demand, the cell phone service providers have found a way to make more money while satisfying people’s desire for the latest and greatest smartphone. Historically, phone plans offered customers a discounted phone upgrade every couple of years. If a great new phone came out, and the customer was not entitled to an upgrade, they faced a dilemma; wait until they qualify for an upgrade, or pay an expensive fee.
Capitalizing on the Craze
In the summer of 2013, T-Mobile changed the industry by introducing the Jump plan. With Jump, a customer can upgrade their phone twice a year, without having to pay a huge fee. Now, instead of waiting years to upgrade their smartphone, T-Mobile Jump customers only had to wait a few months. Jump was a bold move, triggered by the lagging sales of the industry’s 4th largest provider. Jump was a huge success, and it did not take long for the industry leaders to follow. To capitalize on the demand, Verizon launched their Edge program, and AT&T followed suit with the Next program. From a retail standpoint, this is a real win-win situation. For the person who always wants the newest smartphone, this plan is perfect. For the service providers, these plans offer a way to make additional money.
Understanding Early Upgrade Plans
Let’s take a close look at the different phone plan options. A traditional plan allows for smartphone upgrades every two years, and after the initial fee, the cost of the smartphone is amortized over the two years of the contract. So the customer will own the phone and pay a slight premium for the right to for pay it off over two years. The structure of an early upgrade plan is different, and more lucrative for the providers. With an early upgrade plan, the cost of the smartphone is spread over the 2-years of the contract, but the customer is not required to wait the full two years to upgrade. With AT&T and Verizon’s early upgrade plans, in addition to the phone cost, an early upgrade fee is added to the customer’s bill. So, Next and Edge customers are paying for their phones twice. Sprint’s early upgrade plan One Up is the same, except they give customers a $15 monthly discount in their billing. Just like with AT&T and Verizon, One Up customers pay twice, but not as much. T-Mobile’s plan is a little different; they do not have long contracts, and they do not subsidize phones. Compared to AT&T, Verizon and Sprint, T-Mobile can be significantly less expensive. T-Mobile customers pay an additional $10 a month fee, and then a second fee for the upgrade. When a Jump customer upgrades their phone, they do not need to continue paying off their original phone. Unlike customers of the other major providers, Jump customers are not rolling negative equity into their bill every time they upgrade their smartphone.
Comparing the Plans
Early upgrade plans are new, so the pricing is sure to fluctuate. But right now from a pricing standpoint, there are two levels. For most customers, the least expensive early upgrade plans are either T-Mobile’s Jump or Sprint’s One Up plans, but the pricing is close. Both Verizon’s Edge and AT&T’s Next programs are close in price, and more expensive than T-Mobile’s Jump or Sprint’s One Up. Early upgrade plan customers must look at the entire plan, including the amount of data offered, coverage areas along with the upgrade element to determine the proper plan for their needs.
