Better late than never. Following a leaked internal document earlier this week, Verizon (NYSE:VZ) Wireless has made its new Edge program official. Edge is Big Red's new early upgrade program that hopes to compete with T-Mobile (NASDAQ:TMUS) Jump and AT&T (NYSE:T) Next.
Verizon Edge is fairly straightforward. There are no contracts or fees, and Verizon is offering a payment plan to finance the device. Customers can upgrade after six months so long as they've paid for 50% of the retail price. There is no subsidy to speak of, and Edge is geared toward customers who shun service contracts. The new plans launch at the end of August.
Verizon doesn't explicitly mention trading in the used device, but this is a given. If you've only paid for half of the device, you can bet Verizon wants it back so it can resell it. Verizon's plan is more similar to AT&T's in that there's no monthly fee just to participate, and that the only requirement to upgrade is that you've paid a sizable portion of the device cost.
AT&T spreads out the device's price over 20 months, while Verizon splits it into 24 monthly payments. Neither program requires a down payment, undercutting T-Mobile in upfront costs. AT&T effectively requires customers to pay for 60% of the cost (12 months out of 20), while Verizon will accept 50%.
Verizon says you can upgrade after six months, but if you do so, you'll find yourself on the hook to pay the difference. After six months, you've only paid 25% of the price, so you'll need to pay the difference out of pocket if you want to upgrade. On a $600 smartphone, that'll cost you $150 if you want to upgrade immediately after six months.
The real kicker is the service plan. T-Mobile now unbundles the service cost from the device cost. AT&T and Verizon are hoping that customers stay on the pricier service tiers, which are priced to include a subsidy recovery. If customers choose the pricier plans, even on a month-to-month basis, AT&T and Verizon effectively get to charge higher prices without shelling out a subsidy.
On the prepaid front, excluding device costs, it's a little more even. Verizon and AT&T both offer unlimited talk and text plans with 2 GB of data for prepaid customers for $60 per month. T-Mobile's comparable $60 plan includes 2.5 GB of high-speed data, although it allows unlimited data beyond that at slower speeds.
Big Red's move signals the third carrier to adopt a new early upgrade program, and now Sprint is the only national carrier left to unveil a similar offering. With all other three rivals launching upgrade programs, Sprint will inevitably follow suit.
Fool contributor Evan Niu, CFA, owns shares of Verizon Communications. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.