Bidding adieu to ‘new every two’?
Published: Monday, August 25, 2014 at 6:01 a.m.
Last Modified: Sunday, August 24, 2014 at 11:39 p.m.
Families are becoming a pain in family plans.
Carriers are squeamishly moving away from “new-every-two” cellphone plans that ensure customers can purchase every other new model, while keeping, hocking or passing down the existing one. For years, carriers were content in this tradeoff as it meant a baited hook for re-upping the two-year contracts they have long coveted.
The problem is as consumers began to sign up more family members to these accounts, carriers began to take on exponential overhead from the additional devices.
While you thought the $200 you paid for your phone was expensive, the real sticker price was closer to $700. The carrier takes that subsidized amount, roughly $500, and conveniently hides it in the myriad of fees that make up your monthly bills. However, when you add on your spouse and three kids to the account, the carriers are taking on about $2,000 in fees and trying to hide about $100 in each of your monthly bills. It’s clear the model is wearing thin.
Now, all four major carriers — Verizon, AT&T, Sprint and T-Mobile — are offering up a new brand of family plans that are essentially new bait on the old hook. You either bring a fully purchased phone into the relationship or agree to pay a specified monthly fee for each device. The give-and-take here is that you get a new phone every year, but, at the end of the year, you must return the device instead of selling it.
Sprint made a splash this week when it offered a new plan that allows up to 10 lines that share 20 gigabytes of data with unlimited talk and text for $100. T-Mobile is currently pushing four lines at 10 gigabytes for the same price. Both of these plans only stand for a fixed amount of time opening up a can of uncertainty. AT&T comes in at $160 for four lines and 10 gigabytes, while big daddy Verizon only matches the AT&T deal if you purchase new phones. That is where this new deal gets sour.
The allure in all of these marketing mirages is that you can substantially lower your bill, but the companies leave out the non-subsidized costs of new devices. Under the traditional Verizon plan, I have four lines and 4 gigabytes for about $260 a month, or about the monthly lease price of a nicely equipped Cadillac. If I switched to the new Verizon Edge plan with non-contract devices, I would have to dump all my current 5S iPhones to be eligible for the discounts and then rent new ones at $32.49 per month. All together, my new monthly rate is $261, or the price of the same Cadillac and a soda. Sure, I get a new phone every year, but I lose out on about $1,000 in resale value every two years.
Of course, Verizon is essentially the Cadillac of networks so my personal example is at the higher end of the spectrum. With Sprint or T-Mobile, you might find more substantial savings each month depending on your situation. However, the fact that the deals are only valid for a limited time would leave me uneasy. By default, the best next-gen plan goes to AT&T, which allows existing devices to be brought into the deal without strings attached.
The question is: Does an unsubsidized model make sense for a market that has grown accustomed to new every two?
Outside of T-Mobile, subsidized phones are still alive and well. Still, many are wondering if the kibosh is coming. All the carriers are heavily pushing these new plans in a manner that hints they would like to make them standardized. Analysts suggest that the carriers can no longer cover the subsidies with the cost of phones getting higher and the number of new users growing. What we should prepare ourselves for is either perpetually leasing a phone or coming to grips with the fact that we need to purchase phones at the full price and keep them longer to recoup our losses.
Neither of those choices sound good to me.
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