Late last night, AT&T began promoting its new "Next" smartphone upgrade plan in earnest. And earlier yesterday, a leaked training document revealed Verizon's "Edge" upgrade plan. Both are very obvious four-letter copies of T-Mobile's new Jump plan. Let me give you the breakdown on these Jump competitors as quickly as I can.
AT&T will allow you to finance (0% interest, no down payment, no finance charges) a phone for 20 months, pay it off monthly, and after 12 months of payments, will let you trade it in and start financing a new phone, and remaining payments on the old phone will be forgiven. No contract, no phone insurance, and you have the same plan options available to you as any other new customer, at the same prices. It is unclear if there is any kind of deductible that must be paid if the phone you return is not deemed in satisfactory condition.
Verizon's new Edge plan still has some question marks, as it was revealed in a leak, but we can fill in a lot of the blanks pretty confidently. You'll finance a phone under the existing Device Payment Plan - very likely meaning it must be paid off in full within 12 months, with monthly payments. It's possible the period may grow to greater than 12 months, however. There is no down payment, but there will be a monthly finance charge of around $2. Verizon will let you start financing a new phone after you have paid 50% of the balance on your existing phone. Insurance is not mentioned (so it's pretty unlikely it's included), and it does not sound at this point as though there will be a trade-in scheme that allows you to offset the remaining payments on your old phone. It is possible trade-ins will come into play, but at this point, Edge is sounding a lot like a hyped-up tweak to the existing device payment plans (allowing you to take on a second phone earlier). There's no contract, but you're subject to the same pricing and plans as every other new customer (grandfathering may be allowed for existing customers).
In summary, Verizon and AT&T want you to continue paying the same $90+ a month for an individual plan (at least) as every subsidized customer, and then they want to tack on $25-50 a month on top of that for the new phone upgrade options. Meanwhile, on-contract customers may only be getting new handsets every 2 years, but they're also not paying for the full cost of that phone on top of their service bill.
The really frustrating part? These new payment plans can actually be more expensive than buying on contract in the case where you'd think they'd make the most sense: when you want flexibility to switch carriers on a whim. Allow me to explain.
The AT&T Galaxy S4 16GB costs $200 with a new 2-year agreement. Let's say I buy one and decide 6 months later that I want to leave AT&T. At this point, my early termination fee will be, with 6 months of service paid for in full, $265. That means I'm paying $465 for the privilege of buying a handset on contract at AT&T, and then deciding I want to bounce. If I want to recoup some of that cost, I can then sell that handset, probably for $350-450, depending on condition. I'd end up in the hole (on hardware / ETF costs) anywhere from $15 to $115. Not actually that bad. (Alternatively, I could even just keep the phone and have AT&T unlock it before cancelling service, if I wanted to move to a cheap prepaid GSM provider, for example.)
But if I did the same thing on AT&T Next, I'd be down way more. 6 months into my Next plan on a Galaxy S4, I would have made $192 worth of handset payments (hey, that's like, $200), and would have another $448 due on the phone ($640 off contract price). If AT&T's policy is anything like T-Mobile's, cancelling your line means the remainder of your hardware payment balance comes due immediately (this makes sense, as AT&T is no longer doing business with you). Even selling the phone would still leave me down about a couple hundred bucks compared to the on-contract scenario.
Verizon's ETF is a bit higher at $290 ($350 minus $10 per month of service completed), but with the finance charge on device payment plans it basically ends up being the same raw deal as AT&T.
And if you decide to jump ship after a year? Well, on Verizon your handset would be paid off free and clear. But the math still favors the contract customer. A $200 device plus a $230 ETF comes out to $430 in non-service costs over 12 months. On a device payment plan for a GS4, you would have paid $675 over the course of those 12 months in non-service costs. Yes, there isn't the bill shock of an ETF, but there's no denying that you got the bum end of the deal here as far as an accountant's concerned.
In short, Verizon and AT&T's new upgrade plans really only make sense for customers who plan to stick it out with these carriers for the long run. Even then, they're really no better a value than buying your handsets at full price and just selling them when you decide you want to upgrade (doing this is much less restrictive, too). I'm sure some people will find a reason to take advantage of them, and with AT&T basically offering to finance your phone with no interest over 20 months, there's certain to be some incentive there in some cases. But if you're looking for a way to actually save money on your expensive phone habit or your wireless service (or a way to make switching carriers cheap), look elsewhere.