Three of the four major wireless companies are out with new plans for those who want the latest smartphone sooner. The plans, with names like Verizon Edge and AT&T Next, essentially let you rent a phone for six months or a year and then trade it in for a new one — but there's a catch.
"You're paying essentially twice," says Avi Greengart, who is research director for consumer devices at Current Analysis and does some consulting for the industry.
T-Mobile started this craze with its Jump plan that tacks on a monthly fee for the privilege of upgrading early. But T-Mobile, the underdog, charges less for service. That's not the case with Verizon and AT&T.
"You're also subscribing to a rate plan that historically had a subsidy built in," Greengart says.
A big-name smartphone like the Apple iPhone or Samsung Galaxy costs about $650. Most of us never pay that much upfront. Instead, we plop down $200 for the phone and sign a two-year contract. Baked into our monthly fees is about $20 a month that, over the life of the contract, recoups the full cost of the phone.
But in the new Verizon and AT&T plans, you're paying that $20, and you're paying the full cost of the phone in monthly installments. That's why in many cases, the carrier comes out ahead.
"It certainly looks like AT&T has developed its plan in such a way that it doesn't lose any money," Greengart says.
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