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Verizon kills two-year contracts and smartphone subsidies


Verizon confirmed to FierceWireless that it will no longer offer two-year service contracts to new and existing customers and will instead will require all customers to sign up for its equipment installment plans (EIP).

The carrier also confirmed it will raise its activation and upgrade fees from $20 to $30.

The news was first reported by Wave7 Research.

Verizon said it instituted the changes on Jan. 5.

The death of two-year service contracts at Verizon marks a milestone in the wireless industry’s evolution from smartphone subsidies to EIP plans. Four years ago, two-year service contacts and smartphone subsidies were ubiquitous across all the major wireless network operators. Such plans built the cost of a smartphone into the duration of a two-year service contract, a scenario that allowed customers to purchase smartphones at prices well below their value but also locked them to a particular carrier for two years.

Such plans though have almost completely been replaced by EIP offerings, where the cost of a phone is separated from the cost of wireless service, and customers can pay off their phones through interest-free monthly payments over the course of one, two or three years. Customers have embraced such plans because, after they pay off their phones, their monthly bills are then reduced to just include their wireless service fees, and they aren’t contractually obligated to remain with one wireless carrier for two years.

T-Mobile was the first wireless carrier to introduce EIPs, and the plans have since been launched by all of the nation’s major carriers. AT&T a year ago stopped offering two-year contracts to new and existing customers. And Verizon stopped offering two-year service contracts to new customers in August, though continued to offer them to existing customers who wanted them.

As for the increase in Verizon’s upgrade and activation fee, the move is likely an attempt by Verizon to boost its profits as it enters the first quarter.

Source: FierceWireless

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