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Verizon to cut two-year plans, introduce monthly fees

According to Verizon, it's all about simplicity. But the new plan means the cost of the phone will no longer be subsidized.

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Charles Krupa/AP
This June 4, 2014, file photo shows signage at a Verizon Wireless retail store at Downtown Crossing in Boston. Verizon, the nation's largest wireless provider, will stop offering phones at discounted prices when customers sign two-year service contracts, taking effect Aug. 13, 2015.

Verizon is officially nixing two-year contracts in an effort to simplify payment options, the communications giant on Friday.

Beginning Thursday, customers will have four different monthly plans to choose from. Small: $30 a month for 1 GB of shareable data. Medium: $45 a month for 3 GB of shareable data. Large: $60 a month for 6 GB of shareable data. X-Large: $80 a month for 12 GB of shareable data.

All of the data options can be shared by up to 10 devices, but each device has a flat monthly charge: $20 for smartphones, $10 for Jetpack mobile hotspots, and $5 for connected devices like smart watches.

But this also means that the cost of new cell phones will no longer be subsidized. In the past, customers who signed up for annual contracts could buy phones for significantly discounted prices. Now, if they can鈥檛 afford to pay for a new phone, customers can use the carrier鈥檚 payment plan to pay off a new device in monthly installments over two years,

Will consumers continue to gobble up smart phones, even as they become increasingly expensive?

The simple answer: probably. collected by the Pew Research Center suggests that Americans are growing more dependent on their 鈥渟mart鈥 devices. As of October 2014, owned a smartphone and as of January 2014 90% owned a cell phone.

More interesting :

  • 67% of cell owners find themselves checking their phone for messages, alerts, or calls 鈥 even when they didn鈥檛 notice their phone ringing or vibrating.
  • 44% of cell owners have slept with their phone next to their bed because they wanted to make sure they didn鈥檛 miss any calls, text messages, or other updates during the night.
  • 29% of cell owners describe their cell phone as 鈥渟omething they can鈥檛 imagine living without.鈥

And, according to Pew Research Center, 15% of American smartphone users say that they have a limited number of ways to get online other than their cell phone and聽10% of Americans own a smartphone but do not have any other form of high-speed Internet access at home beyond their phone鈥檚 data plan 鈥 this is especially true for low-income users. Essentially, these customers are using their cell phones as their primary source of Internet.

, poor Americans are more likely to be heavily reliant on their smart phones and will probably continue to cash in even if they become more expensive.

鈥淭he connections to online resources that smartphones facilitate are often most tenuous for those users who rely on those connections the most,鈥 said Aaron Smith, a senior researcher at Pew Research Center, talking with CNBC about their findings.

But for Verizon, the focus is on the simplicity of their new payment plan.

鈥淐hoosing a wireless plan is now easier than ever,鈥 Rob Miller, vice-president of consumer pricing for Verizon Wireless, said in a statement. 鈥淐ustomers said they don鈥檛 want to have to do a lot of math to figure out their best options, and we heard them.鈥澛

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