Verizon Ditches Contracts: How It Compares to Other Carriers Now

Daniel Howley
·Technology Editor
Updated
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Say goodbye to two-year smartphone contracts. Yes, the Faustian pacts we used to sign — under which your carrier would help pay for your phone in exchange for a two-year commitment — are quickly being replaced by plans with no contracts and no subsidies.

The latest carrier to bid adieu to the two-year contract is Verizon, which recently announced that it will replace the phone subsidies with something like an installment plan: You’ll pay full price for your phone, but you can do so in smaller payments over time.

What does all that mean, and how does Verizon’s plan compare to those from other carriers? Let’s take a look.

Verizon’s new plan

Here’s how Verizon’s new plans work: You pick a new phone — an iPhone 6 with 16GB of storage, say. Instead of paying $199 up front for the phone (as you’d have done in the past), you’ll pay $27.08 a month for 24 months, for a total of about $650.

What’s more, in place of a two-year contract that had you pay $90 per month for 3GB of data, Verizon is introducing a new group of plans that come in small, medium, larger, and extra large varieties.

In this case, the bottom-tier plan gets you 1GB of data for $30 per month, while the tier above that gets you 3GB of data for $45 per month. The top two plans provide 6GB of data for $60 per month and 12GB of data for $80 per month, respectively.

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So if you buy a new iPhone and want to get 3GB of data per month, you’ll end up paying $27.08 per month for the phone and $45 per month for the data. Oh, there’s also a $20 per month “access fee” for each smartphone on your plan (of course), bringing the monthly bill to $92.08.

Under the old plan, by contrast, you’d have paid $90 per month for 3GB of data, plus $199 up front for the iPhone 6.

So the new plan is only a bit more expensive each month, and it gives you the option to leave Verizon whenever you want (as long as you completely pay off whatever balance you might owe for the iPhone). You can also upgrade your phone after 18 months, instead of waiting a full 24.

Single-line plans, compared

How does Verizon’s new plan compare to those offered by AT&T, Sprint, and T-Mobile? Great question.

AT&T: Like Verizon, AT&T offers an installment plan agreement. Under the Next 18 program, you’ll pay no money down and $27.09 over 24 months for a new iPhone, with the option to trade in the phone for a new one after 18 months.

A 3GB data plan with AT&T costs $65 per month, which means your total monthly bill would come out to $92.09 per month — a penny more than Verizon.

However, AT&T is also retaining its two-year contract plans. So you could still, if you want, pay $199 for that new iPhone and $80 per month for 3GB of data. The downside is that you can’t upgrade the phone until your two years are up.

Sprint: It offers three types of plans if you want to buy a new iPhone.

Under the installment plan, you’ll fork over $27.09 per month for 24 months for the phone itself, plus $60 per month for unlimited data, for a total of $87.09 per month. (While that unlimited plan might sound good, remember that Sprint’s network isn’t nearly as built-out as Verizon or AT&T’s.)

You can also get a regular two-year plan: $199 for your iPhone 6 plus $85 per month for unlimited data.

Finally, you could lease your iPhone 6 for $20 per month for 24 months, then exchange the phone for a new one. Add that to the $60 for unlimited data, and you pay $80 per month for your iPhone. The downside is that your iPhone isn’t yours when the 24 months are up.

T-Mobile: You can get an iPhone 6 for $27.08 per month for 24 months, along with $60 per month for 3GB of data, for a total of $87.08 per month.

Bottom line: For a single line, T-Mobile still offers the cheapest plan under which you get to keep your phone after 24 months, sneaking by Sprint’s installment plan by one penny.

Family plans, compared

But what if you’re trying to equip a family of four? Then the terms change a bit. Let’s say for the sake of comparison that you want a plan that provides 6GB of data per month for your family.

To make things easier, we’ve removed the amount you’d pay to finance a phone each month using a month-to-month plan. Instead, the below pricing focus solely on the cost for data.

Verizon: Under Verizon’s new plan, you’ll pay $60 per month for the data plan, plus $20 for each phone line you add to the plan, for a total of $140 per month for you and the family. And, remember: That doesn’t take into account the cost of each phone per month.

AT&T: The 6GB plan would cost $70, with a $25 access fee for each line, for a total of $170 per month for you and your family to connect.

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T-Mobile: It doesn’t have a 6GB plan, but it does offer plans supplying 5GB or unlimited data. If you got that 5GB plan for your family, you’d pay $120 per month; unlimited data would cost $130 per month.

T-Mobile points out that you can also get 10GB per line for four people (40GB total), for $120 per month if you sign up through early September.

Sprint: Like T-Mobile, Sprint doesn’t have a 6GB plan, but it does have 4GB, 8GB, and 10GB tiers. If you opt for the 4GB plan, you’ll pay $140 per month. The 8GB plan, meanwhile, costs $120 per month. You can also get a 10GB plan for $100 per month.

Which plan is best?

Clearly, no single plan is right for everyone. The first thing you need to do is figure out how much data you really use each month. After all, there’s no sense in signing up for a 4GB-per-month plan when all you need is 1GB for yourself.

So before you head to your local carrier store or sign up online, figure out how often you do things like check your email, use apps, and browse the Web. Once you have a rough estimate, stick with that.

You can also check out the carriers’ websites and try out their data usage estimate to get a better idea of how much you use.

The good thing about plans like Verizon’s new offerings is that they are month-to-month, so if you make a mistake and choose the wrong plan, you can change it the next month without any penalty.

(This piece has been updated to reflect changes to pricing in T-Mobile and Verizon’s plans.)

Email Daniel at dhowley@yahoo-inc.com; follow him on Twitter at @DanielHowley or on Google+.