iPhone 5 Upgrades: Beware of the ‘Verizon Tax’

Update: After this was published, Verizon clarified its policy on the upgrade. Existing customers have to change their data plans, but do not have to migrate to the “share everything plan.” In the case of the users I wrote about, moving from their existing unlimited data plan to the 5GB a month plan would cost $20 additional a month, or $240 a year.  A 2GB plan data would cost about the same as the current unlimited plan.

If you’re a Verizon customer thinking of upgrading to the spiffy new iPhone 5 you’d better check your contract. Buying the new smartphone at the subsidized price means you’ll have to move to Verizon’s new “Share Everything” plan and for many people that means a substantial increase in their monthly bill.

Here’s a real-life example. My friend George and his partner Eric (for business reasons they don’t want to be named accurately) and three family members own a basketful of phones. George and Eric each own a smartphone; George’s mother and Eric’s mother each have dumb phones (this is to say old-style cell phone that don’t connect to the Internet) and so does Eric’s sister.

Collectively, they currently share 3GB of data and 1400 minutes of talk time. The bill: $180 a month, and while that may seem a bit tight for such a big crew, George says they always manage to stay within the limits.   

When he checked Verizon’s new plans, he found that buying just one new iPhone 5 to replace his iPhone 4, would add $60 a month to the family bill. And that, of course, is in addition to the $199 or $299, depending on the amount of storage, he’d have to pay for the smartphone itself.

The new plan offered unlimited minutes and texts, but that’s simply not an issue for George’s family. They don’t need the extras or additional data. So just for privilege of upgrading, it will cost them $720 a year. The only other option would be to buy the new phone at the non-contract price. Currently, the 16GB iPhone 4S would cost $649, which is a lot of cash to lay out all at once. It seems likely that the non-contract cost of the iPhone 5 will be the same.

AT&T, which also moved to a shared data plan, does not require existing customers to shift to it. Switching to AT&T could be an option for some people, but if you live in San Francisco, as I do, that would be a big mistake because Ma Bell’s network performance coverage in this city, as well as in New York, is not nearly as good as Verizon’s.

New Connector Means Buying Adapters

As you may have already heard during Wednesday’s announcement, there’s an entirely separate issue for iPhone upgraders. Apple has redesigned the connector, called Lightning, moving from the long-used 30-pin design, to nine pins. Apple may well have made the switch to save room inside the thinner, lighter iPhone 5, but it means that anyone who now has a device the iPhone connects to has a problem. Hundreds, maybe thousands, of devices from car stereos to chargers to home music systems were designed with the 30-pin connector in mind.

Now they won’t work. It’s not a terribly difficult engineering problem, but those new connectors won’t be free, and you’re going to pay the freight. At the moment, it’s simply too soon to know how much they’ll cost and who is going to make them. Apple did not give many component makers an early look at its connector design, so component makers haven’t yet figured out to manage the change.

I spoke to Sonos, a maker of high-end home audio systems, and all PR manager Eric Nielsen could tell me is that they will continue to support the iPhone in their products, but “we didn’t get the specs until yesterday, so we’re evaluating what to do.”

When I hear what Sonos and other component makers are going to do about this issue, I’ll let you know. In the meantime, if you come across information on new adapters fro the new connectors, feel free to send it my way to share with our readers.

(In the image above, the iPhone 5 and its new Lightning connector are on the left. Image: Peter DaSilva for The New York Times)