Verizon Wireless Makes Further Changes to Upgrade Policy, New Smartphone Financing Policy Surfaces

Verizon Wireless has announced further changes to its handset upgrade policy after it had previously eliminated the New Every Two early upgrade program in 2011.

Now, in an attempt to curb the increasing incidence of early upgrades with still valid New Every Two credits, the credits will expire on Monday April 15th and upgrade eligibility will only begin when the initial 2 year agreement has been completed, with those customers under and agreement that ends on January 2014 having an additional 4 months added to the agreement before becoming eligible for upgrade pricing.

The business has evolved and the extensive Verizon Wireless device portfolio gives customers more options than ever before. It is not uncommon for customers to have multiple devices such as a smartphone and a tablet or a Jetpack. In that context, Verizon Wireless is making the following changes to its upgrade practices:

• Upgrade eligibility begins at the end of 24-month contract. The change allows customers to plan on a single upgrade date for each of their connected devices and is in keeping with how the majority of customers purchase their new phones today. The first customers impacted by this change are customers whose contracts expire in January 2014. Customers may purchase a new phone at the full retail price at any time prior to the end of their contract.
• Customers with New Every Two credits have until April 15, 2013 to use those credits. The New Every Two program ended in Jan. 2011.
• Customers may continue to share an upgrade with another person on an account as long as that customer is purchasing another device in the same category. A basic phone or a smartphone upgrade may be used to purchase another mobile phone. The option to transfer upgrades from non-phone devices (such as a Jetpack or tablet) will no longer be available.

While the intent behind the changes is to simplify the upgrade process by synchronizing all devices on the account under a single upgrade date, the elimination of early upgrades takes away another incentive for customers to stay with the carrier, as many savvy customers found ways to use early upgrade eligibility to finance new device purchases, sometimes paying much less than the new customer price depending on the handset.

However, all is not completely lost, as stated above, upgrade eligibility transfers will still remain and be permitted, though without the early upgrade eligibility allowed in the past and the upgrade must be applied to the same device type that is being upgraded, meaning, a smartphone must be upgraded to a smartphone, no longer will customers be allowed to upgrade smartphones for tablets and vice versa.

The policy essentially ensures that Verizon customers will be forced to upgrade during the complete agreement cycles based on the idea (and presumably, years of historical data) that the majority of customers already wait to upgrade at the end of the agreement, and that offering additional incentives to upgrade early made little if any difference to all but the most savvy customers.

This policy change also sets up another potentially big change to the way Verizon does things in the future. Recent comments made by the CEO have hinted that the company is seriously considering slowly adopting T-Mobile’s installment plan sales model for smartphones in the future, with internal documentation confirming the preliminary plans.

With the preliminary plans underway, what remains to be seen is how Verizon will handle financing and the sizable remainder of customers that are not currently under contract in order to keep increasingly valuable unlimited data plans, as the new smartphone financing model is not expected to carry an annual agreement, much ;like T-Mobile’s model, with the caveat that the monthly payments themselves function as the defacto agreement.