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Two Year Cellphone Are Contracts are Dead, Maybe

canstockphoto26388971It is with great glee and little regret that we report that the two year cellphone contract has died; sort of. Are we finally rid of this painful financial burden? Maybe. In the past cellphone providers have charged you for long distance calls long after technology eliminated it, forced you to buy a new phone if you switched carriers and locked you into two year contracts to keep you hooked like an addict to a drug dealer. 

All this has changed. President Obama signed into law an end to being forced to buy a new phone if you switch carriers.  And now the two year contract is dying. Thats the good news. The bad news is you gonna have to pay full price for smartphones.

The AACR has repeatedly reported that the state of the cellphone industry is an all out bloodbath for customers. Except for school children getting their first phone there are few new customers. 

So why is this important for African-Ameicans? Black people use their cellphones more than any other group.  A report last year by the Federal Reserve Board revealed that blacks and Latinos make up a “disproportionately high rate” of mobile-banking users. A study by Pew Internet research showed that 41 percent of non-whites say they use their smartphones to check their balances, pay bills and perform other transactions, including 39 percent of blacks. Now throw in text messages, email, online shopping and of course phone calls. So the question really is, do you have a cellphone contract? Are you paying for text, talk and data? All that is changing.

T-Mobile, Sprint, Verizon and AT&T have all announced the move to no contract phone plans.

T-Mobile started the trend of killing off the two year contract with its un-carrier movement. T-Mobile is offering customers the ability upgrade three times a year with its Jump! On Demand offering. In addition to approved credit Jump! On Demand still has a monthly fee associated with the phone. It’s stretched out over 18 months and that’s close enough to a two year contract. If you don’t switch phones with Jump! On Demand, you’ll owe a final lump sum at the end of that 18 month period. T-Mobile has also eliminated  roaming charges in Canada and Mexico. Aggressive moves like this have pushed T-Mobile pass Sprint in total connections.

AT&T is the only company still offering a two year contract.  But the company is slowly closing out this option for third-party retailers.  AT&T plans to offer its contract-free Next program.

Emily Edmonds, spokesperson for AT&T said, “Our customers increasingly choose AT&T Next, so we’re responding by featuring Next as the most prominent way to get a new smartphone at our national retailers and local dealers. Customers who would rather have a two-year contract still have that option.” Two-year contracts will still be available but only at AT&T stores online or brick and mortar. 

Verizon announced its dumping its two year contract plan earlier this month. By the end of 2015 Verizon expects 50 percent of new smartphone sales to be sold without contracts as part of its “Edge” program. Verizon is dropping the subsidy for new smartphones and encouraging customers to buy their own devices. This is the trend in the industry.

But if you wish to get a new phone Verizon is still willing to accommodate you. They simply tack the price of the phone on your bill in montly installments. Yeah, that’s a contract. Verizon’s Edge program allows custmers to upgrade to a new phone anytime they wish as long as the old phone is paid off.

Verizon’s new plans took effect Aug. 13. Prices for voice, text and data services will be reduced by an estimated $20 per month compared with plans where the company subsidized the price of a new phone. Verizon is dropping its phone subsidies along with its two year contract. 

Verizon’s introduced its new plans based around shared data packages. There’s no more single line or family plan. Instead Verizon customers will pay for a specific amount of data and a pay a per-device enrollment fee for the plan. The plans was launched on August 13th. Current Verizon subscribers can keep their existing plans, and the perks that go with it, or switch over to the new plans but some restrictions will apply.

Sprint announced the termination of its two year plan and will offer plans where customers lease their smartphones. For customers it means buying a new phone out right at full retail price or choosing the lease option. According to Sprint, in the last quarter, 51 percent of customers used the lease option to purchase a new phone.

Sprint knows that customers are not looking forward to buying a new phone that sometimes retail for as much as $700. So they have sweetened the pot a little. The company has introduced the iPhone Forever plan. For $22 a month more on their monthly bill customers can upgrade to the newest iPhone annually as soon as it becomes available. This option will be very popular among techno-geeks and gadget hounds who can’t be seen without the latest smartphone. But yeah, that’s a contract.

Breaking It Down

Cellphone carriers are fighting for their lives. The market is saturated and finding new customers is like trying to find diamonds on the street. Right now if you are a cellphone customer, and who isn’t, the game is all yours. This switch to no contracts means the market will open up and go crazy for a short while. Many people who are in a contract can jump ship anytime they want because a competitor will pay their early termination fee. That is about to end because there will be no more contracts. With the cellphone carriers in an all out war there will be winners. First, cellphone makers will see an increase in sales as all the carriers offer anytime upgrades. So cellphone makers will crank up the factory and marketing to get more, newer and better phones on the market. Cellphone re-sellers are going to make a few bucks and so keep an eye out for the explosion of used cellphones about to hit the market. Some will be nearly brand new. And customers, with their new phones can pick any carrier, anytime they want.

So now what? Now the game gets really bloody. Cellphone carriers, the big ones, will soon die off or merge. You’ll see more and more small and regional cell carriers. Remember the break up of Ma Bell? These smaller companies will offer more options, more deals and more services. Thats the sweet spot for black people. The competitive market is just too tough a game and its not going to change. Now the game is to buy the best cellphone you can afford and hold on to it. Switch to the carrier with the best deal and dump them when you find a better deal.  The next blood letting will come from the data plans. Unlimited text, talk and data is the next next and final battle for survival. One or more of the big carriers will finally die off.