Here’s How Verizon’s New $20 Activation Charge Works
Wireless customers hoping to buy a new smartphone or tablet from Verizon Wireless (VZ) will soon need to plunk down some cash to get out the door.
Starting on Sunday, Verizon Wireless customers who activate either a new line or tablet connection will need to pay a one-time $20 activation fee, spokeswoman Kelly Crummey has confirmed to Fortune. Those customers will be charged if they pay for a device through Verizon’s payment-installment program, as well as activate a device they already own or pay for a device in full. The activation charge applies to new Verizon customers, or existing ones adding a new line of service to their account. But existing customers will not be charged if they use the installment plans to simply upgrade the handset on their existing line.
“It covers the cost of turning on a new line of service, things that have to happen to activate a new phone number,” Crummey says. She confirmed that the charge also applies to tablets.
Verizon, the largest U.S. carrier, offers two plans to so-called “postpaid” customers, or those who pay for ongoing service after it’s provided. On the smartphone side, customers can opt to buy the device outright with no contract, which on a base iPhone 6s model, can set them back $650. The other, most-popular option, Crummey says, is Verizon’s installment plan, which lets users pay for the cost of the device over a period of 24 months and put nothing down at the time of purchase.
“Many customers prefer those plans to putting up all of the money upfront,” she says.
Verizon doesn’t offer two-year contract plans on smartphones to new customers, but lets existing two-year-contract subscribers stay on the plans, if they wish.
Prior to this change, Verizon was notable for being the only major wireless carrier without a requirement that customers pay an activation fee to sign up for monthly payments. Sprint (S), for example, charges a $36 activation fee on installment plans, while AT&T (T) charges customers $15. T-Mobile (TMUS) charges a “SIM starter kit” fee of $15.
The move adds another turn in what is becoming a maze of plans for customers to consider before they choose a device and carrier. Most of the top wireless carriers in the U.S. offer three types of plans: the standard two-year agreement, which requires them to pay a fee for the device and then service charges over the period (again, which Verizon does not offer to new customers); an installment plan that requires no money down (besides activation fees) that amortizes a device’s cost over a set number of months; and off-contract, which requires a customer to pay for a device’s full cost at the time of purchase.
Just a few years ago, customers were largely kept to two options: an off-contract charge or the two-year agreement. Since then, new types of plans have come onboard, and customers must now decide which option would be best based on their buying habits, their credit history, and how much money they want to dole out at any given time.
To make matters worse, earlier this year Apple announced its own payment-plan service that lets customers pay a monthly fee for an iPhone and be guaranteed to get the latest version each year.
All the while, smartphones are enjoying ever-increasing popularity, and they’re running in tandem with hundreds of millions of tablets and other devices all connecting to carrier networks. The load placed on those networks has forced many carriers to make the controversial decision to force customers into plans that have monthly data limits, rather than their previously offered unlimited plans. If customers run over, they’re often charged fees for their extra data usage.
To ease the notion of now charging new fees, Verizon has instituted several caveats. For one, current Verizon customers who plan to buy a new smartphone as well as keep their existing line will not be required to pay the activation fee. Verizon’s Crummey also says that customers who have bought devices at another store but want to put them on Verizon’s network will now be charged $20 instead of the previously charged $40. The new activation fee affects only consumers: business customers are not part of the new policy.
The activation fee isn’t the only charge that is increasing on Sunday. Starting on Nov. 15, Verizon is also upping the price on its unlimited data plans by $20-per-month. While the company doesn’t offer unlimited data plans to new customers, those who have been grandfathered in are allowed to keep their plans—for $20 more. According to Crummey, unlimited data plan holders number in the “low single-digit percentage” of Verizon’s total subscriber base of more than 137.5 million.
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