Verizon Wireless to charge customers $30 for upgrading to a new phone
Verizon Wireless has decided to tack on a $30 surcharge when users opt to upgrade their mobile device. AT&T has indicated it will likely follow suit.
Pinched by the heavy subsidies it pays Apple to attract iPhone buyers, Verizon has announced it will charge upgrading customers an additional $30 fee when they qualify for a subsidized device and choose to switch phones.
In a report by Reuters, the carrier said it would be charging the fee to "provide customers with the level of service and support they have come to expect."
Verizon and other carriers have agreed to pay Apple industry leading subsidies of around $450 to attract new subscribers who want an iPhone, in order to lock them into a contract of two years or more.
However, when existing customers upgrade their phone, carriers don't earn as much additional new income; the customers merely continue to pay for the phone and data service they use.
Verizon's move may be intended to counter the shift of its existing smartphone customers, many of whom bought Android devices in 2010 before the company began selling iPhones. Customers who will be finishing their two year contract this year will qualify for a steeply subsidized new iPhone, but likely won't be paying anything additional for service because they were already signed up for expensive data contracts.
Verizon has been charging its customers more for Android phones, due to the limited clout Android manufacturers have in negotiating phone subsidies with the carrier.
Typical Android subsidies at Verizon range from $60 to $200 less than the $450 subsidy iPhone users get, making comparable devices more expensive up front and pushing low end Android phones into the the same price range as Apple's iPhone 4. Verizon is eating the difference, causing Android users to effectively subsidize the price of iPhones.
After an initial period of attracting new iPhone users and converting many feature phone customers to more expensive data contracts, Verizon is now finding itself with less low hanging fruit to take advantage of, as the market for smartphones begins to satiate demand, even as new alternative and regional US carriers gain access to the cash cow iPhone.
Chicken Little says the subsidy is falling
Last week, BITG Research analyst Walter Piecyk decided Apple's high iPhone subsidies wouldn't last, and issued a downgrade and a prediction of revenues $1 billion below consensus.
However, a year ago analysts were saying the same thing.
James Ratcliffe, an analyst at Barclays, estimated last January that Verizon would sell just 9 million iPhones in 2011, spending $350 to subsidize each sale, for a total of $3.2 billion.
Ratcliffe also expected AT&T to sell just six million iPhones in 2011, down from around 15 million in the previous year. He also figured that AT&T's subsidy will drop from $400 to $350 per device due to the end of its exclusive deal with Apple.
In reality, AT&T sold 9.4 million iPhones just in the fourth calendar quarter of 2011, and Verizon sold 4.3 million in the same quarter. Neither carrier has cut its iPhone subsidies, even as Sprint and a variety of new carriers have joined Apple in selling iPhones in the US.
Pinched by the heavy subsidies it pays Apple to attract iPhone buyers, Verizon has announced it will charge upgrading customers an additional $30 fee when they qualify for a subsidized device and choose to switch phones.
In a report by Reuters, the carrier said it would be charging the fee to "provide customers with the level of service and support they have come to expect."
Verizon and other carriers have agreed to pay Apple industry leading subsidies of around $450 to attract new subscribers who want an iPhone, in order to lock them into a contract of two years or more.
However, when existing customers upgrade their phone, carriers don't earn as much additional new income; the customers merely continue to pay for the phone and data service they use.
Verizon's move may be intended to counter the shift of its existing smartphone customers, many of whom bought Android devices in 2010 before the company began selling iPhones. Customers who will be finishing their two year contract this year will qualify for a steeply subsidized new iPhone, but likely won't be paying anything additional for service because they were already signed up for expensive data contracts.
Verizon has been charging its customers more for Android phones, due to the limited clout Android manufacturers have in negotiating phone subsidies with the carrier.
Typical Android subsidies at Verizon range from $60 to $200 less than the $450 subsidy iPhone users get, making comparable devices more expensive up front and pushing low end Android phones into the the same price range as Apple's iPhone 4. Verizon is eating the difference, causing Android users to effectively subsidize the price of iPhones.
After an initial period of attracting new iPhone users and converting many feature phone customers to more expensive data contracts, Verizon is now finding itself with less low hanging fruit to take advantage of, as the market for smartphones begins to satiate demand, even as new alternative and regional US carriers gain access to the cash cow iPhone.
Chicken Little says the subsidy is falling
Last week, BITG Research analyst Walter Piecyk decided Apple's high iPhone subsidies wouldn't last, and issued a downgrade and a prediction of revenues $1 billion below consensus.
However, a year ago analysts were saying the same thing.
James Ratcliffe, an analyst at Barclays, estimated last January that Verizon would sell just 9 million iPhones in 2011, spending $350 to subsidize each sale, for a total of $3.2 billion.
Ratcliffe also expected AT&T to sell just six million iPhones in 2011, down from around 15 million in the previous year. He also figured that AT&T's subsidy will drop from $400 to $350 per device due to the end of its exclusive deal with Apple.
In reality, AT&T sold 9.4 million iPhones just in the fourth calendar quarter of 2011, and Verizon sold 4.3 million in the same quarter. Neither carrier has cut its iPhone subsidies, even as Sprint and a variety of new carriers have joined Apple in selling iPhones in the US.
Comments
I wouldn't be surprised if AT&T tries to terminate unlimited data plans on any next iPhone upgrades to LTE this year too.
This sucks. Looks like the iPhone 5 is going to cost me $30 more when I decide to ditch my 4-year old moto-dumbphone.
It feels that more people will buy smartphones since there will be no free dumbphones. I probably will get a smartphone when my current 2-year term is up.
This is stated as a known fact, but I don't think we have any information regarding what price ATT and VZ pay for iPhones, right?
So at the end of the my contract I would have to pay $30 to upgrade to a new iPhone on top of what it already costs? If true, it sounds like they're nickel and diming me.
Verizon Wireless has decided to tack on a $30 surcharge when users opt to upgrade their mobile device. AT&T has indicated it will likely follow suit.
This doesn't invite antirust scrutiny?!
^%#$*&.
?iPhone 5?
SIX.
Also, it is now CHEAPER to move to a different carrier every two years than to stay with the same one.
Pretty sure they'd waive this idiot tax when I bring up that point at upgrade time.
When i asked them to wave the fee they refused and when i asked what it was for they said it was also for them to pay employees at the store to help me decide what phone is best for me. I never even talked to them before upgrading nor would i want to.
What sucks is that I'm pretty sure the other carriers do the same BS.
Also, it is now CHEAPER to move to a different carrier every two years than to stay with the same one.
Pretty sure they'd waive this idiot tax when I bring up that point at upgrade time.
Why isn't the DOJ investigating this insane business practice? Charing users a start up fee is bad enough (I still don't understand why a provider needs money to start my service) but charging users a fee when they stay with their carrier and upgrade is outrageous.
Apple Insider is making much to do about nothing. You're paying $100+ a month....you shouldn't worry about $30 every two years.
Okay so let me get this straight...sorry for being stupid...
So at the end of the my contract I would have to pay $30 to upgrade to a new iPhone on top of what it already costs? If true, it sounds like they're nickel and diming me.
They all ready charge a service activation fee anytime you reup your contract.
Looks like I'll finish my AT&T contract, demand they unlock my phone and head to tmobile or such. They will be so happy to see me that they will probably pay me $30 to sign up
What the article doesn't seem to include is that AT&T, Sprint and T-Mobile have been charging this fee for quite awhile now. AT&T was charging $18 and it sounds like they are going to raise it to $30 to match Verizon. Sprint charges $36 and T-Mobile charges $18.
Apple Insider is making much to do about nothing. You're paying $100+ a month....you shouldn't worry about $30 every two years.
Sprint, ATT, Tmobile, charge around 30 for new line activation, but they don't charge for upgrades.
When i asked them to wave the fee they refused and when i asked what it was for they said it was also for them to pay employees at the store to help me decide what phone is best for me.
I would have been like 'you can and will waive that part since you legally can't charge me for a service you didn't provide as I bought my iPhone at the Apple Store.
Why isn't the DOJ investigating this insane business practice? Charing users a start up fee is bad enough (I still don't understand why a provider needs money to start my service) but charging users a fee when they stay with their carrier and upgrade is outrageous.
What about the not so little detail that about $15 of your bill is to payback your subsidy but when you are out of contract they don't remove that charge and same if you pay full rce
So at the end of the my contract I would have to pay $30 to upgrade to a new iPhone on top of what it already costs? If true, it sounds like they're nickel and diming me.
Ya Think?!
What the article doesn't seem to include is that AT&T, Sprint and T-Mobile have been charging this fee for quite awhile now. AT&T was charging $18 and it sounds like they are going to raise it to $30 to match Verizon. Sprint charges $36 and T-Mobile charges $18.
Apple Insider is making much to do about nothing. You're paying $100+ a month....you shouldn't worry about $30 every two years.
Every year. If they only charged it to people who were getting "early" upgrades like me (ATT gives me a new iPhone every 12 months) I would understand this fee. I don't see how they can get away with charging people who wait 2 years for a new phone.