Verizon

Deployment of VZ Edge expected to have no affect on financial results

Following both the release of its new "Verizon Edge" upgrade plans and Q2 2013 financial results, Verizon CFO Fran Shammo had some interesting statements regarding the new upgrade scheme. When asked if there was any plan to change Verizon's service pricing to reflect the new off-contract and unsubsidized "Edge" upgrades, Shammo clearly stated "We will not touch our service pricing." That's a big disappointing to many of us who have done the rough math on VZ Edge, which shows how much more expensive it will be for customers. T-Mobile, by contrast, reduced the cost of its service plans to reflect the subsidy component being moved to an "Equipment Installment Plan".

Further, Shammo does not expect many customers to move over to the new VZ Edge plan, expecting them to continue along with the two-year contract and subsidized phone model. So few customers are expected to try the new system when it launches August 25th that it will have no impact on Verizon's earnings.

These new types of upgrade plans, which both AT&T and Verizon have now introduced to follow in the footsteps of T-Mobile, essentially charge customers twice for the handset -- once in a built-in subsidy as part of the service, and again explicitly in a payment plan for a device. We wouldn't expect many consumers to bite on this rather expensive scheme either, but considering how financially positive it would be for these carriers to have more customers on-board with the plans, we would think that they would feel more positively towards their prospects.

Source: Reuters

 

Reader comments

Verizon CFO: 'We will not touch our service pricing' after launch of VZ Edge

68 Comments

Of course few consumers will move over to this new plan, they set it up to fail from the get go.

Sheesh...

Posted via Android Central App

Not set up to fail at all. Most people in the US stick to the 2 yr contract schedule. This option is for the small group who upgrade often enough to make it worthwhile, and even then, it's only a bit higher than buying outright then selling in 6 months when you buy again.

Not true at all. That small segment you talk about already exist through buying new phones online and selling their old phones Used. They will come out SEVERAL hundred dollars ahead of anyone using Edge. This program is set up to fail because the costs are so much higher. The segment you talk about won't use it.

I think we should let that segment of consumers decide, before we pass judgment.

However, I will say that it does seem like a long shot.

Posted via Android Central App

That small group already works in wireless and they know that this program is designed to charge the customer 2 twice for a phone. Or they had previously worked in the wireless industry.

Posted via Android Central App

I wouldn't think of it as "set up to fail". EDGE was setup to cause T-Mobile to fail by on the surface looking similar to their JUMP! plan. In other words, they wanted to cause FUD and lower churn from folks leaving to go to T-Mobile. Since it's obvious from the comments on the previous article that many people are too lazy to actually do the math & calculate the true cost, Verizon likely will achieve that goal.

"Following both the release of its new "Verizon Edge" upgrade plans and Q2 2013 financial results, Verizon CFO Fran Shammo had some interesting statements regarding the new upgrade scheme."

The KEY word above is: "SCHEME"

Now that Canada is getting two year contracts, is this what we have to look forward to? Carriers double dipping and calling it a favour? yay.

This. After having to pay that Verizon ETF, I will try to, never again, sign a phone contract.

Posted via Android Central App

Well if you're dumb enough to take big red up on their new upgrade option you deserve to have your pocket$ raped.

anybody else picking up on a negative tone to the article? If most VZW customers are not expected to use this service, why would Verizon change its plan structure to accommodate any more or any less than 1 subsidized device every 24 months? Seems like they've spent the better part of the last 3 years trying to simplify and consolidate their monthly pricing. The larger used/full-retail device markets of VZWs competitors, along with a larger demand for no-contract service makes financing options for unsubsidized phones more attractive. To me its more likely that its being implemented for customers who are mid-contract and need to replace a damaged/lost device. Especially if there's truth to their behind-the-scenes push to eliminate ghost lines. Customer care departments have to account for a significant portion of any thriving carrier's expenses.
Subscriber or Stockholder, any way Big Red can become more efficient & avoid conflict with their own subscribers is a smart move.

Posted via Android Central App

It's basically a zero cost option (in fact, a small money maker) for the few customers that would be interested. No reason not for them to offer it as a way to have the latest hardware.

I hadn't considered the replacement idea in the sense you mention it. If the first payment they charge is cheaper than insurance, it could be a good option. (And helpful in a pinch anyway)

I believe this is how they plan to get more money out those who are out of contract and hanging on to their grandfathered unlimited plans. Instead of losing those people to Swappa, Ebay, Craigslist, etc they finance the phone. This allows them to claim high sales numbers, make money off the pre-installed bloat, make money off of finance charges, and possibly handset protection since they are not going to let you trade in a damaged phone.

You are RIGHT, If you grandfathered into unlimited data.

HOWEVER!!! -

You CAN use Verizons 12 Month plan and still keep unlimited data.

24 month plan - NO unlimited Data.

12 month plan you CAN.

verified by Creepy VZWsupport account on twitter who stalked me
after tweeting John Legere T-mo ceo that I wanted to leave vzw...

incorrect, there are zero finance charges and insurance is all 3rd party, Verizon is not an insurance company

Posted via Android Central App

My bad, the last article I read spoke of a $2.00 a month finance charge. It makes me wonder what the real intention is of it excludes grandfathered plans and there are no finance charges. For people who just have to have a new phone every few months no matter what the cost?

Posted via Android Central App

Why do people say it's double? In a contract you pay $250 up front for a top end phone that retails for $700 and an upgrade fee of what like $18. Salvage value after 2 years is pretty much nothing, so who cares that you get to keep the phone. With edge you pay $350 and you get a new phone. So it's less than $100 to get the right to upgrade more often. It's still money but it's not as bad as what people are acting like.

Posted via Android Central App

I understand that the next time you upgrade it's another $350, so yeah it gets pricey compared to a contact, but you get your upgrade fix with interest free financing if that's what you want.

Posted via Android Central App

VZW is targeting you and folks that think like you. They have done the math (that is why they delayed their upgrade plan until now) and decided there is a population that will not do the math and upgrade under this plan.
VZW simply COULD NOT let T-Mo's plan go unanswered, even if it did not make any sense. The same with ATT. Both plans are ripoffs and T-Mo's is only slightly better.
Bottom line, T-Mo adjusted their service prices to reflect no contract/subsidy and the others did not/will not. For now anyway...

If you use this new plan to upgrade every 6 months, you're paying about $60 more per month simply for the phone, so after 6 months you would have paid $350, then you can trade it for another brand new phone. Compare that to simply buying your own for $700, after 6 months you can still get more than $350 for it, so it's cheaper to buy full retail and then sell when you want a new one, assuming you keep it in good shape.

Big difference being the initail investment money. For some people, that will be a big difference.

IMHO, if have to pay in installments in order to afford something, and will wind up paying double/triple due to interest (or this shenanigans) just to get it, then you shouldn't be buying it. But... people are free to be as stupid as they please. :)

They're only doing it 'cause T-Mobile did it. Same reason ATT is doing it. It's all marketing.

Posted via Android Central App

Exactly. They are only doing it to make themselves look better and like they are trying to compete with T-Mobile. They have no interest in doing anything that will lower the amount of money they are making. One day though no matter how big Verizon is right now they will fall. It always happens. Companies get too big for their britches and arrogant and some small no named company comes from no where to take the top spot.

I liked it when Sprint did the 1 year upgrade plan. That was awesome, but only lasted 2 years... I do miss my yearly upgrade, but refuse to be bent over by a carrier to get my geek fix!

how is the carrier responsible for "bending you over"? does your cable provider pay a significant portion of your new television cost every 24 months? Manufacturers make the phone and set the retail price, while your service provider pays upwards of $400-$500 of that cost, activates that phone, operates stores for you to get help with that phone, invests into networks to send data to that phone (at speeds few Americans experienced on their home wired connections no more than 4-5 years ago), all at a competitive monthly cost or you wouldn't be there to begin with.
I've ever understood the negative reactions people have to these companies. Let me know when Time Warner Cable decides to pay ⅔ of the cost of your new 50" plasma tv and has staff on call 24 hours to help you, just in case the manufacturer shipped you a defective product 300 days into ownership. Time Warner doesn't do this because they know you have this awesome television at home that you want connected to great service. Factor in the amount of people that could go a week without cable... compare that number to the amount of people that could go a week without their cell phone. Not wise to bite the hand that feeds you.

Posted via Android Central App

"Manufacturers make the phone and set the retail price, while your service provider pays upwards of $400-$500 of that cost"

This is where you are not understanding what is going on, at all.

1. Manufacturers make the phone and sell at WHOLESALE cost. Wholesale cost is typically about half of what the retail cost ends up being. There is such a thing as an MSRP (manufacturer's SUGGESTED retail price). Which is simply a suggestion, based on the current retail market. Look at what the google play store sold their nexus 4 for (299, 349) even though the MSRP was hundreds of dollars more. The retailer always sets the retail price. They can use the MSRP, or they can throw the MSRP out the window and sell for more or less. This is why you can find devices at different prices at different retailers.

The phone carriers are device retailers also.

2. On a typical 2 year contract, the carriers charge you a down payment ($199 or whatever) for a new device. Then as part of you monthly "service" charge they overcharge you on the service to make back everything they "gave the customer" on their subsidy and a whole lot more (compare a bring-your-own-phone/pre-pay plan from anywhere in the world to a traditonal 2 year contract plan in the United States). Add the total costs for two years.

You wil see exactly how badly the carriers rip off the customers in the US. It is horrendous. That 400-500 dollars that you believe that you save?

BWAAAA HAAA HAAA... hilarious.

Ask to cancel your contract on one of these deals! You will pay the difference on the subsidy (and you claim they are giving you "$400-$500 of that cost"). That is complete nonsense. The customer pays MORE than retail if they stick it out through the whole contract. Carriers simply are RETAILERS in addition to service providers. They sell devices along with their service. They just happen to rip their customers off on the devices, and confuse the customers so badly that many customers believe that they are getting $400 or $500 dollars worth of device for free. Those customers are very naive. Carriers are the most expensive retailers to get a device from, by far.

TWC does not do retail devices at all. That comparison does make any sense whatsoever.

Your post is GREAT.

The "free" devices in the US will cost you $2400 ($100 x 24) during the length of the contract.

As a reference, I can buy a Sony Xperia Z for $0 down in the store, $80 per month with a Tele2 contract in Sweden that includes 15 GB of data, unlimited talk and text and with a monthly installment of $8 per month (included in those $80).

If I can do fine with less data, I can buy it an a different plan with 5 GB and then pay $180 in store and $41.50 per month. The only drawback is that the unlimited talk and text is to other Tele2 customers only.

In the US, a basic plan with 2 GB of data on contract will be $100 per month PLUS $0-299 for the device on top of that. The total cost is just horrendous.

That the customers believe that the carriers are giving them a $400-500 device for "free" says a lot about the ignorant population. I have NEVER heard about a "phone charity" carrier that loves their customers so much that they treat them to FREE high end smartphones!

You are always PAYING for the device even if it is hidden in the contract. That is why it is called "subsidy" - if the plan would be cheaper if you bring your own device etc - it is not a "subsidy" any more but an "installment". In Sweden, installments are common. The subsidy model was the norm in the beginning but the carriers phased it out, went for installments and lowered their prices. It is now cheaper to have a mobile phone than a land line there.

What Verizon is doing now is to charge for TWO devices. One of them is the subsidized one included in the plan, the other is the Edge installment. If their customers had a clue,VZW would adopt a more honest business model just because of customer requirements (they would switch carriers otherwise - that is how the free market is supposed to operate).

Verizon is doing what all for-profit companies want to do - charge a lot in order to get high profits and have customers that defends them all the time. The customers of VZW are clearly in favor of getting their wallets raped and the carrier would be stupid if they didn't used the situation to their benefit.

Verizon would lower their prices if their customers use their consumer power and go for other carriers. The coverage argument is invalid too - get Page Plus then.

You are welcome to the Swedish market. I paid $199 in store and $50 per month for my Note II last year, that includes 5 GB of data.

I can also get a Galaxy S 4 right now for $0 down payment and $40-45 per month including 10 GB of data with 3.

It is also worth to check prices in Denmark.

A Galaxy S 4 with $0 down payment and 100 GB (yes, 100 GB!) of LTE data can be yours for $70 per month.

So yes, the contracts here in the US is just ridiculous and I laugh when people defends them with arguments like "Verizon invests sooo much in their network!" and "if you can't afford $150 per month for a phone, get a better job" etc. Ahem, check their revenues and profits and also ask the question how Page Plus can give access to the same Verizon network for $55 per month.

To BMWall: Where should I go to get $400-500 OFF my new device?

I love the charity: A carrier that is paying $400-500 for me in order to give me a "free" device is just great! I want a free smartphone! Why paying when you can get it for FREE!?

Competitive cost? What provider offers competitive plans on postpaid in the US? I want to switch to one of them - i.e. the carrier that gives me a free smartphone (since they decided to take a cost of $400-500 because they love their customers) and pair this with competitive pricing. Where should I go? I will port my number today!

I have a suggestion for you: The mobile industry is a GLOBAL industry and checking it on a GLOBAL level is interesting and a great way to learn something new.

Just checking the US market is like never leaving your own garden.;)

I have my number ready for porting over if you can tell me which carrier that will give me a rebate of $400-500 off my next device and pair this with those competitive plans.

Just one catch: I have decided to get a Sony Honami next time and I want it unbranded.

The cable company (verizon/comcast my area) bends people over with the boxes they make you rent/lease. They advertise $79-$99 bundle price but then hit you with $30-$60 extra for boxes(4rooms). If you use a card/tivo you get no on-demand or pay-per-view.

So he basically told us that they came up with a service that he does not expect many existing customers to utilize. Then why bother? Because they ran the numbers and saw profit. That is what they are in business for.

For years I have read how US companies price the phone subsidy into the price of monthly service for that discounted device.

We have choices. Make the one best for you in terms of price and quality of service.

Posted via Android Central App

I think they did this so if a customer says "With T-Mobile I can get a phone for free and pay for it every month", Verizon can come back and say they offer that too, even though it's a worse implementation.

I believe that VZW and ATT really only care what plans each other come out with.

ATT tried to buy T Mobile and was turned back by the FCC.

T Mobile is firmly in 4th Place. In order to move up, they need to acquire subscribers "somehow". Pre-paid isn't growing as fast as the post-paid churn. I believe this is why they came up with the "un contract" plans (or whatever they are calling it. Remember T- Mobile was owned by Deutsch Telecom and the non-contract/no phone subsidy model had been aroun for years in countries that they operate. The only way VZW and ATT will do this is "if and when" they start losing customers in large numbers to T-Mobile and/or Sprint. Compare the subscriber base/numbers of the top 2 carriers . Even if Sprint and T Mobile merged, they would still remain behind the top 2 carriers. Plus they use different technology and frequencies.

Bottom line, all the posts here and elsewhere suggests:

1. If you like to upgrade frequently or buy unlocked phones, you need to have a GSM phone. That means going to ATT or T Mobile. Since ATT still wants you to have a contract, even when you bring your own phone.

2. T Mobile coverage isn't great everywhere, but if you have good coverage in most places, it is acceptable. Especially for the price.

3. VZW and ATT are racing against each other the build out LTE. That doesn't come cheap. Until a carrier matches their phone selection and coverage, people will not leave.

At the end of the day, we all have a choice to make.

I like how everyone thinks that these huge companies just come up with these plans overnight "just because T-Mobile did it." If that were the case you probably would be a business that didn't succeed. I also like how people complain that businesses are all about making as much profit as possible. Um, last I checked, that is what a business is supposed to do. Why don't you take all this money you are saving by going with another carrier and put it into buying stock for one of these BIG companies so that you can either make money or lose it based upon the business decisions with them so you can actually see how business works. If it doesn't work for you, great, if it does, great. Everybody needs to make a decision on their own needs and wants. If people are so worried about being bent over, don't worry, the President has a phone for you.

Posted via Android Central App

You're quite correct, the point of most businesses is to make as much money with as little coat as possible. Pay your employees as little as possible, sell for the highest markup and provide as little support as you can get away with, then funnel all the profits to the executives and stockholders (the folks who do the least work).
The difference is you think this is a good thing, whereas others think it's shameful to keep milking employees and customers to make fatcats even fatter.

And...why, if there are other options in their area, do people stay with this carrier?

Posted via Android Central App

It's still a huge hassle to switch carriers in the U.S. for most people, especially with a group/family plan. In many cases its simpler to keep paying the more expensive carrier than to go through the trouble of switching. It stinks, but that's why these carriers get to hold onto their customer bases with very low churn, even though they charge so much.

I have been monitoring this VZW Edge situation and, barring further developments, I think it is something I am going to pass on. Many comments have been made, including by myself, and I have come to the conclusion it makes no sense to me or my family, especially financially. I am going to stay status quo.

I think Verizon had a chance to not only "JUMP" on the T-Mobile bandwagon, but also 1-up chief competitor AT&T in the process, and at this stage in the game, it has failed. If it cuts out the double-dipping, maybe I will revisit the situation, but for now, I will pass.

I mostly agree with you. But, keep in mind that VZW has more subscribers and ATT generally follows VZW plan changes. I believe VZW was first to eliminate the Unlimited Data. At least ATT allows you to get a discounted phone and keep unlimited data. I believe VZW came out with the Share Plans, then ATT followed.

So, VZW clearly believes they are the leader (in terms of subscribers, and offering differnt plans). Wait and see, ATT will see how much money VZW is making and change their plans to match.

When voice and data coverage is better on T Mobile (and possible Sprint), people may vote with their wallets and leave the big 2. Until then, they will complain and stay put.

I'm on big red because I have to be where I travel... Network is the only reason. If the other minor carriers (Sprint, Tmo, other MVNOs) ever get to the coverage levels, even with somewhat slower speeds, I will make that jump. In all of this marketing, I still believe reliable broad network coverage is the key. This deal may work for some folks who are willing to pay a little extra on top of their current service charges, or those who are unaware and do it anyway. But bottom line is, there's no such thing as free... If you get a new device this way, and the carrier doesn't have really adjust charges to make it beneficial, you're still going to pay for it. As things stand, as with Tmo adjusting its pricing, you unfortunately pay with limited large area coverage. I want larger, more complete networks before I think about deals like this from any of the carriers.

Posted via Android Central App

I didn't stay put. My contract expired in May & we decided to eat the etf on my wife's line. & we had unlimited data. Just can't justify the 30 bucks a month. Sure, there are some off the grid areas where we see service drops. But LTE for t-mobile came to Boston last month. So we're more than satisfied. & here's another interesting article you all should have a look at... http://m.blogs.computerworld.com/android/22283/verizon-android-enthusias...

Posted via Android Central App

But you're still paying twice for the phone. The funny thing about this VZ Edge plan coming out is that it just reminds us that Verizon is screwing people who pay full-price off-contract for their phones.

Whether you buy the device unsubsidized or buy it on VZ Edge, you're paying for the phone up-front and again as part of the subsidy baked into the service. You're not winning here no matter your choice.

A couple of things from scanning the comments so far.

Double dipping doesn't necessarily equal paying double the cost, only paying for the same thing twice (even if you pay two different prices). I think Vz doing that is slimy on principal alone. Be transparent (yeah, lol).

While it may be on the shady side (and when has anyone ever used shady marketing), does it make anyone feel better to think of the doiuble dip as the hidden financing cost? They are "letting" you buy on installments without any up front financing fee. In my mind, it seems as though the double dipping, while not ideal by any means, may in fact not add much more than if they did charge you a fincancing fee. For those who have crunched actual numbers, is that close to true?

Does anyone have experience buying phones over time that way? I know it's not something that has been routinely done by the carriers, but I have a hazy recollection they may have allowed it long ago? If so, how did your payment compare (assuming today's dollars) then with the cost of the EDGE upgrade "without finance fees?"

I am not sure i understand all the backlash with these plans....
Yes i agree that VZW and ATT are double dipping....

BUT

they have been doing it forever.... you have always had the ability to buy a phone outright and pay the same plan cost as someone who took the 2 yr subsidized phone.

The difference now is they let you pay for it in payments and turn it in half way through and get a new phone if you want. This an an easier way for a small group of people who are ok with the double dipping so they have have the latest and greatest phone. The ones who will take advantage of this are already getting screwed by buying a new phone out right and paying the same service, but they know it and are ok with it... This is just another option for them.

Verizon can make a FORTUNE by pushing marketing from other companies to their Edge subscribers. It's a subset of users who have proven that they're too stupid to handle math and are willing to buy anything if the marketing is done properly.

verizon lost me on this new plan when they denied it to people who aren't on share everything plans (people with grandfathered unlimited data).