Verizon Wireless, already the priciest of the major U.S. wireless carriers, just got a bit more expensive. Customers who upgrade to a new device must now pay $30 for the privilege instead of $20.
The $10 increase isn’t a lot of money, but I’ve never seen a valid reason for such upgrade charges to exist. Verizon claims it upped the charge because “ongoing costs to provide our customers with America’s best 4G LTE network” have increased, according to a company spokeswoman. But you can color me skeptical. Why would someone buying a new phone make it more expensive to maintain a cellular network?
New upgrade fees pad Verizon’s bottom line
Verizon’s capital expenditures are actually down significantly, according to the company’s latest earnings report. (Tip of the hat to ArsTechnica.com for that tidbit.) More specifically, in the first nine months of 2016, Verizon Wireless capital expenses were $7.78 billion, down from $8.47 billion during the first nine months of 2015, a drop of more than 8.1 percent. Operating income also decreased, however, so perhaps the increased upgrade fees are Verizon’s way of tending to its bottom line.
A Verizon FAQ page reads, “The activation fee is a one-time charge billed when establishing a new line of service. The upgrade fee applies when you purchase a new device to replace an old device on an existing line.”
The fee applies whether customers pay for phones upfront or via monthly installments. And by “one-time” Verizon means you only pay the charge once per new phone, but the next time you trade in a phone, you have to pay the charge again.
No more contracts for current Verizon customers
Verizon also made another change that won’t affect as many customers, but those who are affected will be hit much harder. Existing Verizon subscribers (excluding government and enterprise customers) will no longer be able to renew their two-year contracts and buy phones at subsidized prices. The carrier stopped offering contracts to new customers in 2015, but it let current customers stay on their existing plans and said they would be allowed to renew them.
That’s no longer the case. However, it’s unclear how many customers are still on two-year contracts. Since T-Mobile began its “Un-carrier” promotions a few years ago, two-year contracts and phone subsidies have largely disappeared.
Both of Verizon’s moves amount to rate increases that went into effect last week. Of course, the company didn’t make any formal announcement or notify journalists, so the news went largely unnoticed.