Verizon ditches annual cell phone contracts

Verizon’s new simple plans start with $20 a smartphone, then add a data plan of small ($30), medium ($45), large (60) or extra large ($80).

Existing customers under contract can keep their plans or switch to new monthly options. Verizon’s the 2nd national carrier after T-Mobile to cut subsidies for fresh customers. Now, customers increasingly pay more for devices in exchange for getting charged lower fees. The company will offer four main data plans to consumers, starting from 1GB per month to 12 GB per month. Customers will have only two options when buying a smartphone, either pay the full retail price of in small installments.

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The move follows a broader trend across the industry to kill the two-year contract and device subsidies, in favor of paying for the two separately. With manufacturers steadily ratcheting up smartphone costs, lowering service fees on contracts further has become unsustainable.

News of Verizon’s upcoming payment structure change has been making the rounds, but what will this mean for next month’s phone bill?

Carriers rarely admit it, but when you buy a $199 phone like the iPhone, you’re not actually spending $199 for it. That’s just your up-front cost. Those who weren’t on subsidized plans paid $140 a month.

Verizon has also not clarified about data plans for high usage individuals.

Existing Verizon customers can stay with their current plans but if they decide to upgrade, there could be extra charges.

Under the new scheme, there will be no family plans or single-line options.

The new Verizon data plans are four in number and don’t include family plans or the possibility of taking a single line. Verizon says there will be restrictions, but it didn’t elaborate. These data plans are assembled and named in a very interesting way but if you cross the maximum set data plan in a given month, you’ll have to pay additional $15 for per GB used.

At first, the plans seem to be cheaper, but you’ll be paying for a couple of add-ons that push the price up to traditional levels.