Why is Verizon eliminating the option to upgrade early?

Taylor Martin
 from Concord, NC
Published: January 5, 2011

It's no secret that many people's favorite time of the year is when they're eligible for an upgrade. A lot of those people don't mind waiting for two years (20 months, actually) before the full upgrade is available, but some like to take advantage of early upgrades and getting phones annually. With the way the current cell phone market is trending, two-year contracts are becoming harder to sit through than ever. Watching bigger and better phones being released on nearly a monthly basis can become aggravating.

Unfortunately, US carriers are doing their best to keep subsidizing alive and prosperous, and keeping you in your contract as long as they can goes along with that. AT&T has bumped up the fee associated with early upgrades and upped some off-contract prices to match. Now comes Verizon with their new 2011 upgrade policies. Big Red will be stripping their customers of some of their best features offered to contracted users: NE2 (New Every 2) and the ability to upgrade within 13-20 months of signing the contract.

How things used to work was, after passing the 13 month mark you could pay an extra fee and upgrade early, signing a new two-year contract in the process. To be honest, I don't understand what the harm in this is. If anything, I figure it would put them at risk of losing more customers by getting rid of early upgrades. If a customer is frustrated with their phone, they're going to look to the carrier for help. If that person is approaching the 13 month mark, that carrier can lend a helping hand and offer a way to upgrade to a better phone before the contract is up. Without having that option, customers will be more likely to become so frustrated with the phone that they will inevitably blame it on the carrier for not being there for them.

Yes, the customer should be aware that they picked the phone and they agreed to a two-year contract. Their name is the one signed in ink on the paper contract, but I've worked in wireless sales and it's inevitable. People will get mad at carriers for whatever reason they can find and will look for anything and everything that can convince them to leave, not knowing that they will face much of the same on the next carrier they jump to. But I digress.

Early upgrades are seemingly harmless and the only reason I can even fathom as to Verizon would get rid of them is money. Selling a phone on contract requires the carrier to drop the price of the phone dramatically (i.e.: a $600 phone off-contract may cost $200 on-contract). This money is earned back over the course of the contract. If everyone turns to upgrading early as soon as they possibly can (13 months), Verizon would only be making just over half of what they expected to be getting back. This puts them in a perpetual loop of “earning back” money.

If this is the case, I could understand bumping up the fee to compensate for losses. But completely scrapping the early upgrade option is a little radical. This limits customers frustrated with their outdated or broken phones to buying off-contract, which can be quite expensive in comparison. You would think at least offering the option to save a few pennies and tie them back into another contract would appeal to the carrier. Maybe they have something bigger up their sleeves. What do you think pushed Verizon to get rid of the early upgrade policy? Do any of you upgrade early? Or do you wait for your full upgrade?