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Verizon Adds Upgrade Fee as Smartphone Subsidies Bite

Verizon Adds Upgrade Fee as Smartphone Subsidies Bite
April 11, 2012 2:06PM

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Verizon, with its $30 fee, joins the other three largest carriers in charging fees for upgrades: AT&T and Sprint charge $36, while T-Mobile's fee is half that. New Verizon customers also pay a fee for their devices, a $35 activation fee at the time of starting a new Verizon account, in addition to the device cost.

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Customers of the nation's largest wireless carrier will have to shell out another $30 to get their hands on a better device after April 22. Verizon Wireless says the upgrade fee will help the company avoid deterioration of service.

"This fee will help us continue to provide customers with the level of service and support they have come to expect, which includes Wireless Workshops, online educational tools, and consultations with experts who provide advice and guidance on devices that are more sophisticated than ever," company spokeswoman Brenda Raney said in a post on the company's Web site.

Trade-Ins Help

She added that trading in older phones through Verizon's recycling program can earn a gift card to offset the upgrade cost. Customers can appraise their devices online.

We tried several phone models to get an idea of the trade-in value (for fully functional, undamaged devices). A first generation Motorola Droid was worth only $7, while an HTC Evo 3D was worth $80. A 16 GB iPhone 3G also trades in for more than the upgrade fee: $65.

Those hoping to upgrade a feature phone to a smartphone, however, may be disappointed. An LG Voyager had no trade-in value. Neither did the Motorola Rapture.

Verizon joins the other three largest carriers in charging fees for upgrades: AT&T and Sprint charge $36, while T-Mobile's fee is half that price.

New customers also pay a fee for their devices, a $35 activation fee at the time of starting a new account, in addition to the device cost.

The company backed down, however, from a recent plan to start charging customers a $2 processing fee to pay their bill online after a public outcry. The company was evidently trying to encourage more people to sign up for free automatic payments.

Carriers are likely to try to drive bills up even higher as costs increase and they build up faster 4G networks.

More Income Needed

"Carriers are constantly looking at how much they are being hit by the capital buydown fees they are paying to handset makers," analyst Gerry Purdy of MobileTrax told us. "In the case of Sprint they gained a tremendous increase of subscribers with the iPhone but it cost them hundreds of millions to pay Apple, which they will recover later."

As smartphones get more expensive, Purdy said, carriers "have to shell out more money up front rather than get it in monthly fees to pay the vendors for the smarter device. In a sense it was easier in the feature phone world, the expense was much lower than today."

But Purdy said competition may force carriers to back down and waive fees. He noted that cable providers now routinely have customer retention departments ready to make sweetheart deals for those about to bail, and wireless carriers may have to do the same.

"I think they will try to keep the customers, especially since smartphones are generating more income per unit, with data plans," he said. "Smartphones are already half the market and could be 90 percent by 2016."

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