Verizon Edge & AT&T Next: Another Perspective

In the various rant articles about the new installment plans for the purchase of equipment through carriers, the authors did their analyses using the monthly service fees and included some phantom subsidy to arrive at a conclusion that they are rip-offs, or they included a comparison of the rate plans, which essentially turns the articles into a comparison of rate plans. The rate plans are so different and there are so many non-quantifiable reasons to choose one carrier or another that introducing the rate plan fees is an exercise in futility.

What really should be focused on is the out-of-pocket cost of acquiring equipment and then divesting of the assets, and elimination of any further liabilities. That is the only way to do a true apples-to-apples comparison.

In order to do a true apples-to-apples comparison of acquiring equipment through the installment plans vs. through contract, you need to calculate what actually comes out of your pocket over the timeframe of comparison, what liabilities you would have remaining, what assets that you would have accumulated, and the proceeds from the sale of those assets. To have a fair comparison, the scenarios considered need to yield the ability to walk away from the respective carrier after 24 months after having had the privilege of using 2 new phones for 1 year each during those 24 months.

For the sake of argument, let's say that both the first phone acquired and the new phone acquired at 12 months cost $550 at retail and $200 on contract. We will also consider the ETF for subsidized purchases, which is $325 less $10 per month for AT&T, and $350 less $10 per month for Verizon.

Resale value of any assets is an estimate based on cost of selling a phone on eBay at the time it's taken out of service for a $200 street value less listing fees, final value fees, PayPal fees, etc. A reasonable net is $175. This can obviously increase if you take good care of the device, but for the sake of simplicity, we'll use $175 net proceeds from the sale of any assets.

Third-Party Phone Purchase
Initial Activation Fee: $35
1st Phone Upfront Payment: $550
2nd Phone Upfront Payment: $550
Total Payments/Liabilities: $1135

1st Phone Net Resale: $175
2nd Phone Net Resale: $175
Total Proceeds: $350

Total out-of-pocket: $785

Verizon Contract
Initial Activation Fee: $35
1st Phone Upfront Payment: $200
1st Phone ETF: $230 ($350 - $10 x 12)
New Contract Activation Fee: $35
2nd Phone Upfront Payment: $200
2nd Phone ETF: $230 ($350 - $10 x 12)
Total Payments/Liabilities: $930

1st Phone Net Resale: $175
2nd Phone Net Resale: $175
Total Proceeds: $350

Total out-of-pocket: $580

AT&T Contract
Initial Activation Fee: $35
1st Phone Upfront Payment: $200
1st Phone ETF: $205 ($325 - $10 x 12)
New Contract Activation Fee: $35
2nd Phone Upfront Payment: $200
2nd Phone ETF: $205 ($325 - $10 x 12)
Total Payments/Liabilities: $880

1st Phone Net Resale: $175
2nd Phone Net Resale: $175
Total Proceeds: $350

Total out-of-pocket: $530

Verizon Edge ($22.92 installment payment for 24 months)
Initial Activation Fee: $0 (not applicable)
1st Phone Installment Payments: $275 ($22.92 x 12)
1st Phone ETF: $0 (not applicable)
1st Phone Installment Balance: $0 (eliminated with trade-in)
New Contract Activation Fee: $0 (not applicable)
2nd Phone Installment Payments: $275 ($22.92 x 12)
2nd Phone ETF: $0 (not applicable)
2nd Phone Installment Balance: $275 ($22.92 x 12)
Total Payments/Liabilities: $825

1st Phone Net Resale: $0 (already traded in)
2nd Phone Net Resale: $175
Total Proceeds: $175

Total out-of-pocket: $650

AT&T Next ($27.5 installment payment for 20 months)
Initial Activation Fee: $0 (not applicable)
1st Phone Installment Payments: $330 ($27.5 x 12)
1st Phone ETF: $0 (not applicable)
1st Phone Installment Balance: $0 (eliminated with trade-in)
New Contract Activation Fee: $0 (not applicable)
2nd Phone Installment Payments: $330 ($27.5 x 12)
2nd Phone ETF: $0 (not applicable)
2nd Phone Installment Balance: $220 ($27.5 x 8)
Total Payments/Liabilities: $880

1st Phone Net Resale: $0 (already traded in)
2nd Phone Net Resale: $175
Total Proceeds: $175

Total out-of-pocket: $705

As you can see, the true out-of-pocket amounts for the different scenarios aren't nearly as pronounced as the Verge's rant articles are making them out to be. For people that are too lazy to sell their accumulated devices or simply don't know how to, the accumulated assets are of less value. These assets could actually end up worthless if they sit in a closet for years and have to be disposed as e-waste.

Since these programs are so new, I suspect that they have not even been finalized yet. It may be the case where the carriers may eliminate the final balance on your second installment agreement in exchange for the device before you walk away rather than making you pay off the remaining installments. If that's the case, you'd actually save money with Edge over a Verizon contract, and there'd be a smaller out-of-pocket difference between Next and an AT&T contract.