Last year, Verizon launched a plan called Edge in response to AT&T’s Next and T-Mobile’s Jump plans. Much like the latter two, Edge allows you to pay the full price of your phone through monthly installments, thus allowing you to opt out of traditional two-year contracts and upgrade your phone quicker. Even with Edge though, Verizon is still keen on selling you a handset, so long as you sign a two-year contract.
Over at the Deutsche Bank media conference in Florida, Verizon chief financial officer Fran Shammo said that even though Edge and More Everything plans are available to customers, they’re mainly available because of demand. If anything, Verizon still sticks to its traditional guns by preferring the traditional subsidy model.
“We believe that the subsidy model is an extremely good model,” said Shammo. “It has done wonders for us in this industry. So I think to abandon that is a mistake.” Even so, Verizon won’t force you into a two-year contract if you don’t want to – that’s what the Edge and More Everything plans are there for. “We aren’t going to force our customers into anything,” he added.
As for why Verizon has this mindset, Shammo lists several reasons, the first of which is Verizon wanting to take “a conservative approach” to phone financing plans. With Edge, Verizon wants to test the waters rather than go for a full swim, given that Verizon wants to see how many customers upgrade their handsets after the first 6-12 months.
In addition, Shammo points out that, for those on Edge that want to switch to a different carrier and didn’t finish paying off their smartphone, doing so causes a great financial burden in the form of a high bill. “It’s going to be a very dissatisfying thing for the customer at the end of the day if they feel like they want to leave and they end up with a very large bill,” said Shammo.
As such, while Verizon will continue to offer Edge and More Everything plans to customers, the company will continue to rely on the traditional subsidized phone plan until it analyzes the risks of moving away from such a model. For Verizon, this makes sense. Subsidized phones not only mean that you remain its customer for two years, but they also mean hidden phone costs in your bill. Sure, Verizon offers the choice to not have a two-year contract, but the writing is on the wall: for now, the traditional two-year contract is here to stay.