US operator Sprint announced its early upgrade tariff, joining similar initiatives from the other national US networks: T-Mobile's JUMP! (Just Upgrade My Phone), Verizon's EDGE, and AT&T's Next.
With Sprint's One Up plan, subscribers will receive a smartphone of their choice without a down payment, and pay off the device in 24 monthly instalments. After 12 months, consumers will have the option to trade-in their existing device and upgrade to a new one.
A $15 discount will be available on Sprint's Unlimited, All-in, and My Way plans.
Sprint is the last of the big four to launch an early upgrade plan. Its new early upgrade plan is the latest in a series of attempts to attract consumers to its network. It has been the number three carrier in terms of market share and is facing competition from a revitalised T-Mobile. Earlier this year Sprint was acquired by Softbank, and is hoping to turn its tides under new leadership.
T-Mobile was the first operator to launch a new pricing system in the US as part of its "un-carrier" initiative that decouples the cost of the device from the service charge and implements 30-day rolling contracts. The operator later announced its JUMP! subscription plan, offering bi-annual smartphone upgrades for an extra $10/month on top of the equipment instalments, which includes insurance. With each smartphone upgrade, a new down payment is required and the existing handset needs to be traded in. Should the consumer wish to terminate the contract, the remainder of the smartphone retail price would need to be paid off.
Verizon was the second to announce its early upgrade plan, called EDGE. Unlike T-Mobile, Verizon has not separated the device cost from the service charge. Instead, Verizon offers smartphones with no down payment (however there is an activation fee), and upgrades are available every six months provided 50 per cent of the smartphone's retail price has been paid off. Unlike T-Mobile's plans, Verizon's price plans already include a phone subsidy, so by adding the EDGE fee customers end up paying a significant premium over the device's retail price.
AT&T's early upgrade plan, Next, is most similar to Verizon's. While Verizon offers two smartphone upgrades per year if conditions are met, AT&T offers only one. The difference between the two plans lies in how the device cost is split: AT&T splits it into 20 months, while Verizon does it into 24 months.
The US mobile market has always had one of the highest average revenues per user (ARPU) in the world. Due to increased competition in the mobile market, carriers have been coming up with new ways to avoid the erosion of those ARPUs. T-Mobile's new management has shaken up the market, proclaiming the "un-carrier" model by simplifying its monthly mobile fees. This push has been well received by consumers, adding over 600,000 contract subscribers in the second quarter of 2013.
The biggest complaint from US mobile consumers, aside from the high prices, is being left with an aging device in a rapidly changing marketplace. While T-Mobile addressed this by offering short-term contracts and equipment instalment plans, Verizon and AT&T saw a new potential revenue stream instead. With the newly announced early upgrade plans, consumers end up paying the subsidy included in the service plan and the cleverly disguised early upgrade device fee. In addition to paying twice for the same device, when consumers upgrade their device, they trade-in the old one which will likely be resold as a refurbished device, accruing revenue for the device for the third time.
The increased charges and complexity of the plans mean that Verizon's and AT&T's early upgrade plans are not likely to appeal to many customers. These plans are aimed specifically at the early adopter niche that will be willing to pay extra to not be tied down to a rapidly obsolescent device.
T-Mobile's and Sprint's offers are priced much more competitively as both are aggressively trying to win customers from the two larger operators. With Sprint and T-Mobile putting their weight behind their respective LTE deployments as well, AT&T and Verizon's superior networks will be a weaker differentiator in the future.