Within the last few months, major carriers, including AT&T (T) and Verizon (VZ), have unveiled plans that allow subscribers with older handsets to save a fair amount of cash.
Abolishing the Two-Year Treadmill
Until recently, two-year handset upgrade cycles were the norm for the major carriers. Wireless subscribers would sign a contract, get a new smartphone and after two years be eligible for a new-phone upgrade. At that point, the subscriber would sign a new contract, get a new phone, and the cycle would repeat in perpetuity.
Of course, if they really wanted to, AT&T and Verizon subscribers could hold onto their old smartphones and refuse to sign a new contract. Choosing this option didn't make much sense because even after a wireless contract had run its course, the monthly bill remained the same. In that respect, not taking advantage of an upgrade was a bit like leaving free money on the table -- AT&T and Verizon were willing to pay for most (or all) of the new phone's cost, so why not take them up on the offer?
But things have changed. In December, AT&T announced an alternative policy that allows subscribers with paid-for handsets to save money. Verizon followed in April, announcing that subscribers whose contracts had run their course could receive a monthly discount on their bill.
How to Take Advantage of These News Plans
To take advantage of these savings, subscribers with AT&T and Verizon will need to be on the correct plans -- for Verizon, More Everything; for AT&T, the Mobile Share Value plan. Switching may entail giving up unlimited data plans or other valuable arrangements. But many subscribers who signed a two-year contract within the last few years should see a benefit.
Recent advertisements from both companies have trumpeted the potential savings -- a popular deal promises 10GB of data on four phones for $160 per month. To get that price, however, subscribers will need handsets that are already paid for -- purchasing new phones on two-year contracts will cancel out the monthly savings, and financing new phones using monthly installment plans (AT&T's Next and Verizon's Edge) will bring additional costs.
Holding on to an old phone isn't for everyone. Gadget enthusiasts obsessed with the latest tech may scoff at the prospect, and subscribers with damaged, malfunctioning or sluggish handsets may be counting down the days until their contracts expire.
In the past, upgrading every two years was a forgone conclusion. With these recent pricing policy changes, it's not a simple slam-dunk decision. Given the hundreds of dollars in potential savings, it's a welcome dilemma.
Motley Fool contributor Sam Mattera has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of Motley Fool newsletter service free for 30 days.