clock menu more-arrow no yes

Verizon Drops Contracts and Subsidies for New Customers

The company is also simplifying its monthly plans by taking a cue from the fast food industry, offering plans in small, medium, large and extra large.

Northfoto/Shutterstock

Verizon announced Friday that it will stop subsidizing phones for new customers, at the same time fully doing away with two-year contracts as well.

Things have been headed that way both at Verizon and throughout the industry, but it is still notable that the company is now eliminating such sales entirely.

T-Mobile stopped subsidized pricing a while ago. AT&T still offers the option to buy a subsidized smartphone with a two-year contract, but not through third-party retailers, and has been steering most customers toward its Next installment billing options. In the most recent quarter, two-thirds of customers opted for one of the installment plans.

“I think it is one of those options that is going to go away slowly,” AT&T Mobile and Enterprise Solutions CEO Ralph de la Vega told Re/code in a June interview.

Existing Verizon customers will still have some options to get subsidized phones when they are ready to upgrade, but it’s a safe bet those options will narrow over time.

In addition to doing away with contract pricing, Verizon is simplifying its monthly rate plan options.

Taking its cue from the fast food and clothing industries, Verizon is announcing a new set of rate plans with just four sizes: Small, medium, large and extra large.

The new plans, which go into effect Aug. 13, aren’t necessarily cheaper nor are they more expensive. Instead, there are just fewer variables.

Customers pay $20 a month for each smartphone and then choose one of the four sizes of data buckets. The new plans apply both to single lines and to those sharing their bucket of data among many devices.

The small bucket, with one gigabyte of data, costs $30 per month, medium (3GB) is $45, large (6GB) is $60 and extra large (12GB) is $80. Customers who go over their monthly bucket will pay a rather hefty $15 per gigabyte for more data, so it pays to go for the baggy look in case you decide to binge one month.

In the past, Verizon had separate plans for single lines, and also charged more per smartphone when paired with a small data bucket than when tied to a large one.

Of course, if Verizon really wanted to make things simple, it could just price things the way Google is with its Google Fi service. Google charges $20 per month for unlimited calling and texting, with data priced at $10 per gigabyte. Customers pay only for the amount of data they use.

“Google Fi is one of those things we are watching closely,” said Verizon Vice President of Consumer Pricing Rob Miller. If that type of pricing resonates with consumers, Miller said that Verizon will consider such pricing. “Nothing is off the table.”

As for why it isn’t cutting its prices, Miller said Verizon’s goal is to offer a good value and a best-in-class network.

“We’re not going to be a price leader — never said we would,” Miller said.

This article originally appeared on Recode.net.