Verizon Adopts $30 Upgrade Fee, Last Major U.S. Carrier to Jump Onboard

From DailyTech: The U.S. carrier market is already slightly odd in comparison to other top smartphone markets like China or Europe. In the U.S., carriers offer deeply subsidized prices, but inflate contract prices to compensate. The approach stands in stark comparison with other regions where customers buy their devices at or near cost and then enjoy cheaper contracts. The American system is a clever one, though as it offers the deceptive appearance of "cheap" bleeding edge upgrades to the consumer, leading to more frequent device purchases -- something that fuels both carrier and gadgetmaker revenue.

U.S. carriers have also figured out that they can charge small upgrade fees as another way of stoking profits, without having a psychological impact. Following the lead of Sprint Nextel Corp. (S), AT&T, Inc. (T), and Deutsche Telekom AG (ETR:DTE) subsidiary T-Mobile USA, Verizon Wireless -- a join venture between Verizon Communications Inc. (VZ) and Vodafone Group Plc. (LON:VOD) -- announced that it would be terminating free handset upgrades, installing a $30 USD upgrade free.

As mentioned, many handsets on the U.S. market are discounted to the point that the customer pays nothing up front. This will not change under the new system, but in effect the customer will now be paying something for any handset, as they will pay the fee, come upgrade time.

While it might seem that upgrade fees would drive customers to other carriers, since everyone is doing it, the flow of outgoing versus incoming customers is unlikely to change substantially. And for every customer who does stay out of loyalty perks, such as convenience, work privileges, or family plans, the carrier will pocket a bit more profit. Thus at the end of the day, upgrade fees are kind of like ATM fees -- financially bad for the consumer in the most direct sense -- but a win-win situation for the fee collector.

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