Verizon Wireless may toss 12-month contracts

Caroline Gabriel/Rethink Wireless
11 Apr 2011

Verizon Wireless is reported to be scrapping its one-year mobile contracts, giving postpaid customers a choice of two-year lock-ins or month-by-month deals.

This would set a contrasting pattern to that of Europe, where 12-month contracts had virtually disappeared, but are now being reintroduced by a few operators, like Vodafone, and will soon be mandated by the European Commission.

Reports indicate that Verizon Wireless will end its 12-month offerings from April 17. It claims there is little consumer demand, presumably because the one-year option falls between two stools - lower subsidy on the handset than a two-year commitment, but without the flexibility of month-by-month or prepaid.

However, as in Europe in recent years, there are sure to be consumer complaints that they are being forced into committing to 24-month deals when smartphone lifecycles are shortening. They then face hefty penalties for early device upgrades, as highlighted by the woes of iPhone customers in countries where there are no one-year choices.

Last month, Vodafone became the first major cellco in the ultra-competitive UK to introduce smartphone deals of just 12 months. The operator was responding to the huge pressure from its rivals, especially in the UK, where it trails behind both the T-Mobile/Orange joint venture, Everything Everywhere, and O2.

It also sees competition from MVNOs at the low end - retail giant Tesco's mobile offering has already introduced 12-month deals, and has been marketing these aggressively against the main carriers.

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