***EDIT: Verizon has made several significant changes to their policies since I made this. I'll post a new version soon***
With the announcement of the Incredible, X, and a slew of other handsets, some of you may be considering Verizon as your next carrier (or if you?re with Verizon, you?re considering making the jump to smartphones) and the whole process of contracts, early termination fees, and upgrades might seem like a daunting amount of information to sift through before you purchase. Hopefully, this can help clarify some things for you.
But why listen to me? I used to manage a Verizon Wireless Premium Retailer store. This means that while I don?t understand EVERYTHING about the inner workings of ?big red? I spent a lot of time going over how contracts work, and even more time thinking of ways to explain that legalise in a way that others might understand.
I'll split this first post into two main sections. The first will go over contracts in general: What they mean, how ETF's work, and what they limit you to. In the second section, I'll give an overview of the three main contract agreements Verizon offers and the costs/benefits you can expect if you choose them.
Contract Basics: Early Term Fee and Contract Expectations
Your customer agreement is a contract between you and Verizon saying that you?ll pay them for service for a set amount of time (or longer). In exchange for this agreement, you get certain perks (customer service, warranty exchanges over the phone, etc) and if you agree to sign on for one or two years, they will give you a phone for a significantly discounted price.
This is where the Early Termination Fee (ETF) comes in. This has two purposes. The first is to make up for the discounted prices of the device. The second is to make up for the lost revenue from a cancelled contract (or more accurately, to ensure that you keep in contract for the 2 years).
For smartphones like android, the Early Termination Fee for both one and two year contracts is $350. For every month that you maintain service, Verizon removes $10 from the ETF amount. This means that if you canceled after 1 month, the ETF would be $340, after 2 months it would become $330, etc.
The contract (and thus the etf) ONLY require that you continue service with verizon in some form for whatever your agreement with them is. This means that you can raise (or lower) your minutes, add (or remove) data--providing your phone doesn't require the feature--whenever you want without extending your contract or worrying about getting smacked with an early termination fee.
What does this mean? Say you buy the new DroidX at the launch, signing a new contract for them on an unlimited everything plan. If, six months down the road, you decide that you don't really need unlimited minutes, and maybe you switched to using Google Voice for all your texting. You can call up customer service, lower yourself to a cheaper plan without any penalty. Say that in a year, you decide you don't need a smart phone anymore and pick up a cheap flip phone off Ebay and activate it. Again, no penalty.
Typically the only time your contract is extended is if you receive a new phone for a discounted price (activation, upgrade, etc) or if you accept some promotion for re-signing a contract, such as "get 100 bonus minutes a month free if you sign up for an additional 2 years."
So while you are "locked in" to Verizon for one or two years, you're not locked in to a certain plan, or even a certain phone for that length of time.
Contracts, Phone Pricing, and Upgrades:
Before we start talking about when you can upgrade your phone, how much the phone will cost, and if it has a free pony, we need to cover the Three basic contract "terms" offered by Verizon. These terms have the same monthly cost associated with them, but they change the upfront cost (and upgrade date) of the devices dramatically.
Standard two year pricing:
This is the typical contract that verizon wants to sign you up for. Whenever you see a phone advertised for "$199.99" or "bogo" it is for a two year contract. This contract give you the cheapest price up front for the phone and more "perks"than other options, but it also requires the longest commitment and wait time before you're eligible for cheap pricing again.
For two year contracts, you can upgrade every twenty months. This means that if you got the DroidX at launch (7/15/2010), you'd be able to get promotional pricing again on 3/15/2012.
One thing to remember is that any special promotions like buy one get one sales, special "coupons," New every 2 discounts or "24hr sales" will only work with Two year contracts.
Two year contracts have two other benefits that are different from what the other options offer. The first is that if you agree to another two year agreement when you're eligible to upgrade, you'll receive an additional discount (an extra $30 to $50 dollars depending on your plan) on top of the promotional price. If you're content with verizon's service and coverage, this is a nice added benefit to the agreement.
The second benefit is what's called an "Annual Upgrade." This is available to any single line or primary line on a family share plan that meets a certain plan criteria. If your account qualifies, you can upgrade to a new phone every 12 months at standard 2 year pricing (plus a $20 annual upgrade fee).
To qualify for an annual upgrade, single line plans must have a Plan package $59.99 or higher BEFORE adding any features, such as email&web. This is any Nationwide Talk plan above 900 minutes, or any Nationwide Talk&Text plan. For family share plans, Family Nationwide Talk plans over 1400 minutes or any Family Nationwide Talk&Text plans qualify. Remember, $9.99 share plans or any "legacy" plans (such as Americas Choice) do not qualify for annual upgrades.
One year contracts:
Like the name implies, this is a one year agreement with Verizon. Store reps, and most phone/online reps will not mention this option because it's less profitable for the company and more importantly (at least for them) it makes them a LOT less money in commission. For you the user, you'll be expected to pay a slight premium (typically $70 more than the two year price) in exchange for the shorter contract.
A lot authorized retailers (like the one I worked for) won't even offer one year contracts as an option because it means they end up losing money on the deal. Just like coupons and special offers only work with 2 year contracts, most "spiffs" (what Verizon pays the retailer to help cover the discount of the phone) only work with 2 year contracts as well. If you want to go for a one year contract, your best best is to do it online.
What a one year contract allows you to do is to get new phone ever 10 months for a discounted price. For android users, this can be a huge benefit since it seems you can's sneeze before a new android phone is announced. It's not an "anytime upgrade" but it's about as good as you'll get if you want some sort of discount on your new toy.
Month to Month contracts:
For those of us who like having the best devices as soon as they come out, or if you're someone who hates the idea of being tied down for any period of time, this is the best option. There are absolutely no discounts on the phone itself (no coupons, special offers, etc will work with this contract) so you'll be paying the "sticker price" of a phone. To give you a point of reference, the sticker price of the Motorola Droid is $559.99 while it is only $149.99 on a two year agreement through verizon.
So why buy a phone this way? Purchasing a phone retail also helps sooth that irrational anger we as consumers can get when we go to get a new phone and the salesperson quotes the retail price since we can't upgrade yet. And if you're like me, knowing that the phone in your pocket is a $600 piece of technology instead of a $199 special makes you take extra care of it. But these are psychological benefits, but there are also very tangible benefits to consider.
For one, buying a phone at retail cost means that you can end your contract with Verizon whenever you feel like it. For some customers (such as myself) this is a big enough benefit for them to forgo contracts completely. If you're someone who likes the latest and greatest (and you take care of your phones) selling your old models to friends or on ebay will help soften the sticker shock somewhat.
If you are currently in a contract with Verizon, you can purchase a new phone to put on your line at full retail cost without extending your contract, so if you're thinking of switching to Verizon, but don't want to spend the extra money now, you can always sign a one or two year agreement now, and then buy the "next big thing" at retail whenever it comes out. Conversely, if you're on a month to month plan and want to sign a new contract (1 or 2 year) for a new phone, you can do so at any time.
Closing Thoughts, a Question, and Contact:
I hope I cleared some questions up about how Verizon contracts and upgrades work. I know that there is a lot I didn't cover in this guide, but hopefully it's a good foundation for us to build on.
Which brings me to my question; what questions do you have about Verizon, the upgrade process, or Android in general? Feel free to ask me a question on twitter (@mennomobile) or send an email to mennomobileblog (at) gmail (dot) com.
In a world that doesn't, Droid Does.
With the announcement of the Incredible, X, and a slew of other handsets, some of you may be considering Verizon as your next carrier (or if you?re with Verizon, you?re considering making the jump to smartphones) and the whole process of contracts, early termination fees, and upgrades might seem like a daunting amount of information to sift through before you purchase. Hopefully, this can help clarify some things for you.
But why listen to me? I used to manage a Verizon Wireless Premium Retailer store. This means that while I don?t understand EVERYTHING about the inner workings of ?big red? I spent a lot of time going over how contracts work, and even more time thinking of ways to explain that legalise in a way that others might understand.
I'll split this first post into two main sections. The first will go over contracts in general: What they mean, how ETF's work, and what they limit you to. In the second section, I'll give an overview of the three main contract agreements Verizon offers and the costs/benefits you can expect if you choose them.
Contract Basics: Early Term Fee and Contract Expectations
Your customer agreement is a contract between you and Verizon saying that you?ll pay them for service for a set amount of time (or longer). In exchange for this agreement, you get certain perks (customer service, warranty exchanges over the phone, etc) and if you agree to sign on for one or two years, they will give you a phone for a significantly discounted price.
This is where the Early Termination Fee (ETF) comes in. This has two purposes. The first is to make up for the discounted prices of the device. The second is to make up for the lost revenue from a cancelled contract (or more accurately, to ensure that you keep in contract for the 2 years).
For smartphones like android, the Early Termination Fee for both one and two year contracts is $350. For every month that you maintain service, Verizon removes $10 from the ETF amount. This means that if you canceled after 1 month, the ETF would be $340, after 2 months it would become $330, etc.
The contract (and thus the etf) ONLY require that you continue service with verizon in some form for whatever your agreement with them is. This means that you can raise (or lower) your minutes, add (or remove) data--providing your phone doesn't require the feature--whenever you want without extending your contract or worrying about getting smacked with an early termination fee.
What does this mean? Say you buy the new DroidX at the launch, signing a new contract for them on an unlimited everything plan. If, six months down the road, you decide that you don't really need unlimited minutes, and maybe you switched to using Google Voice for all your texting. You can call up customer service, lower yourself to a cheaper plan without any penalty. Say that in a year, you decide you don't need a smart phone anymore and pick up a cheap flip phone off Ebay and activate it. Again, no penalty.
Typically the only time your contract is extended is if you receive a new phone for a discounted price (activation, upgrade, etc) or if you accept some promotion for re-signing a contract, such as "get 100 bonus minutes a month free if you sign up for an additional 2 years."
So while you are "locked in" to Verizon for one or two years, you're not locked in to a certain plan, or even a certain phone for that length of time.
Contracts, Phone Pricing, and Upgrades:
Before we start talking about when you can upgrade your phone, how much the phone will cost, and if it has a free pony, we need to cover the Three basic contract "terms" offered by Verizon. These terms have the same monthly cost associated with them, but they change the upfront cost (and upgrade date) of the devices dramatically.
Standard two year pricing:
This is the typical contract that verizon wants to sign you up for. Whenever you see a phone advertised for "$199.99" or "bogo" it is for a two year contract. This contract give you the cheapest price up front for the phone and more "perks"than other options, but it also requires the longest commitment and wait time before you're eligible for cheap pricing again.
For two year contracts, you can upgrade every twenty months. This means that if you got the DroidX at launch (7/15/2010), you'd be able to get promotional pricing again on 3/15/2012.
One thing to remember is that any special promotions like buy one get one sales, special "coupons," New every 2 discounts or "24hr sales" will only work with Two year contracts.
Two year contracts have two other benefits that are different from what the other options offer. The first is that if you agree to another two year agreement when you're eligible to upgrade, you'll receive an additional discount (an extra $30 to $50 dollars depending on your plan) on top of the promotional price. If you're content with verizon's service and coverage, this is a nice added benefit to the agreement.
The second benefit is what's called an "Annual Upgrade." This is available to any single line or primary line on a family share plan that meets a certain plan criteria. If your account qualifies, you can upgrade to a new phone every 12 months at standard 2 year pricing (plus a $20 annual upgrade fee).
To qualify for an annual upgrade, single line plans must have a Plan package $59.99 or higher BEFORE adding any features, such as email&web. This is any Nationwide Talk plan above 900 minutes, or any Nationwide Talk&Text plan. For family share plans, Family Nationwide Talk plans over 1400 minutes or any Family Nationwide Talk&Text plans qualify. Remember, $9.99 share plans or any "legacy" plans (such as Americas Choice) do not qualify for annual upgrades.
One year contracts:
Like the name implies, this is a one year agreement with Verizon. Store reps, and most phone/online reps will not mention this option because it's less profitable for the company and more importantly (at least for them) it makes them a LOT less money in commission. For you the user, you'll be expected to pay a slight premium (typically $70 more than the two year price) in exchange for the shorter contract.
A lot authorized retailers (like the one I worked for) won't even offer one year contracts as an option because it means they end up losing money on the deal. Just like coupons and special offers only work with 2 year contracts, most "spiffs" (what Verizon pays the retailer to help cover the discount of the phone) only work with 2 year contracts as well. If you want to go for a one year contract, your best best is to do it online.
What a one year contract allows you to do is to get new phone ever 10 months for a discounted price. For android users, this can be a huge benefit since it seems you can's sneeze before a new android phone is announced. It's not an "anytime upgrade" but it's about as good as you'll get if you want some sort of discount on your new toy.
Month to Month contracts:
For those of us who like having the best devices as soon as they come out, or if you're someone who hates the idea of being tied down for any period of time, this is the best option. There are absolutely no discounts on the phone itself (no coupons, special offers, etc will work with this contract) so you'll be paying the "sticker price" of a phone. To give you a point of reference, the sticker price of the Motorola Droid is $559.99 while it is only $149.99 on a two year agreement through verizon.
So why buy a phone this way? Purchasing a phone retail also helps sooth that irrational anger we as consumers can get when we go to get a new phone and the salesperson quotes the retail price since we can't upgrade yet. And if you're like me, knowing that the phone in your pocket is a $600 piece of technology instead of a $199 special makes you take extra care of it. But these are psychological benefits, but there are also very tangible benefits to consider.
For one, buying a phone at retail cost means that you can end your contract with Verizon whenever you feel like it. For some customers (such as myself) this is a big enough benefit for them to forgo contracts completely. If you're someone who likes the latest and greatest (and you take care of your phones) selling your old models to friends or on ebay will help soften the sticker shock somewhat.
If you are currently in a contract with Verizon, you can purchase a new phone to put on your line at full retail cost without extending your contract, so if you're thinking of switching to Verizon, but don't want to spend the extra money now, you can always sign a one or two year agreement now, and then buy the "next big thing" at retail whenever it comes out. Conversely, if you're on a month to month plan and want to sign a new contract (1 or 2 year) for a new phone, you can do so at any time.
Closing Thoughts, a Question, and Contact:
I hope I cleared some questions up about how Verizon contracts and upgrades work. I know that there is a lot I didn't cover in this guide, but hopefully it's a good foundation for us to build on.
Which brings me to my question; what questions do you have about Verizon, the upgrade process, or Android in general? Feel free to ask me a question on twitter (@mennomobile) or send an email to mennomobileblog (at) gmail (dot) com.
In a world that doesn't, Droid Does.
Last edited:
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