Doing the Math: Verizon Edge (April 2014)

The original article in this series can be found here and explains a lot of details surrounding the Edge program, including its perceived motivations/tradeoffs. I recently did another article detailing AT&T's Next program, and based on reader feedback, I thought I'd update the numbers for Next since Verizon now offers line discounts similar to AT&T's. I don't want to repeat myself, so I will assume you've either read the articles linked above or are familiar with the information in them.

Upgrade Timing
Verizon has tweaked things just a little since the original article. The possible upgrade timeline has gotten even shorter: you can upgrade after only 30 days of your Edge agreement. However, the same 50% payoff requirement is still in place, so it likely won't affect upgrade timing for most users. For the new devices listed in this article, the 50% mark is still reached after about 13 months, so no changes there either.

Another new thing:  you can choose to make a down payment on the phone at the time of purchase. However, Verizon adjusts your monthly payment accordingly, so it likely won't affect your time to achieve the 50% upgrade milestone. You still cannot make additional contributions toward principal during monthly installments unless you are paying up to 50% of the loan or paying the loan off.

Constants
I think it's worth repeating the constants I use with these scenarios:

• I will not be factoring in other specials/offers which are applicable to all Verizon customers.
• I will not be factoring in insurance or other optional feature costs.
• I will not be factoring in sale or trade-in values of current devices.
• I will assume you are in good standing and have good enough credit to qualify for the program with no down payment.
• I will assume upgrades will be done as soon as possible within the respective cycles. For 2-year calculations, I assume phones chosen during an upgrade in that timeframe will have the same monthly payment as the original phone.
• I will assume all phones are well-maintained and fulfill the criteria for trade-in.

I also now incorporate sales tax into my calculations since there can be a $100+ difference between a service contract plan and an Edge plan. With Edge, you pay sales tax on the full retain price of the phone, whereas you only pay tax on the subsidized price with a service contract.

More or Less
For calculations for individual lines, I have chosen to use the Single Line Plan as opposed to a single-line More plan because even with $10 Edge discount, the More plan still costs $5 more per month (appropriately enough).

However, it should be noted you do get a few features on the More plan which might be worth $5/month to some users, so make your own call on it:

• 25GB of storage with VZ Cloud.
• Unlimited international messaging.
• Mobile hotspot on capable devices.

Not much there to sway me, but I assume there are users for whom those are important features.

Overall Cost - General

I've update the devices I'll be using:

• HTC One M8
• iPhone 5s 32GB
• Moto X
• Nokia Lumia Icon

Just like last time, I will list the devices, plans, and fees for each scenario.

24-Month Cost - Individual

Equipment/Plan

• 1 smartphone (HTC One M8)
• 2GB data

Service Contract Plan

• Initial cost: $248.99
• HTC One M8: $199.99
• Sales tax: $14
• Activation fee: $35
• Monthly cost: $75
• Single-line plan with 2GB data: $75
• 1 phone for the duration of the plan
• Total cost: $2,069.99

Edge Plan

• Initial cost: $42
• Sales tax: $42
• Monthly cost: $89.99
• Single-line plan with 2GB data: $65 (after discount)
• Edge fee for HTC One M8: $24.99
• 2 phones for the duration of the plan
• Phone 1 for months 1-13
• Phone 2 for months 14-24
• Total cost: $2,201.76

The premium for the Edge program has decreased appreciably since the first article: at that time, most phones were in the $300-400 range over two years, but the One M8 is HTC's flagship device, and it's only $131.77 more than the service contract option over two years. Here's the full list of example devices:

• HTC One M8: +$131.77
• iPhone 5s 32GB: +$106.43
• Moto X: +$152.84
• Lumia Icon: +$99.35

With the lower additional cost, the Edge program might actually be worth considering now for individuals who place a high value on a short upgrade cycle.

24-Month Cost - Couple

Equipment/Plan

• 2 smartphones
• HTC One M8
• iPhone 5s 32GB
• 4GB data

Service Contract Plan

• Initial cost: $604.98
• HTC One M8: $199.99
• iPhone 5s 32GB: $299.99
• Sales tax: $35
• 2x activation fee: $70
• Monthly cost: $150
• 2x smartphone line fee: $80
• 4GB data: $70
• 1 phone per person for the duration of the plan
• Total cost: $4,204.98

Edge Plan

• Initial cost: $94.50
• Sales tax: $94.50
• Monthly cost: $182.07
• 2x smartphone line fee: $60 (after discount)
• 4GB data: $70
• Edge fee for HTC One M8: $24.99
• Edge fee for iPhone 5s 32GB: $27.08
• 2 phone per person for the duration of the plan
• Phone 1 for months 1-13
• Phone 2 for months 14-24
• Total cost: $4,464.18

The new monthly line fee discounts definitely make a difference: in the original article, the cost gap was nearly $750, but with a similar scenario, it's only $259.20 today, or about the same ~$65/person/year cost as the individual scenario.

Overall Cost - Family

Equipment/Plan

• 4 smartphones
• HTC One M8
• iPhone 5s 32GB
• Moto X
• Nokia Lumia Icon
• 10GB data

Service Contract Plan

• Initial cost: $888.97
• HTC One M8: $199.99
• iPhone 5s 32GB: $299.99
• Moto X: $0
• Nokia Lumia Icon: $199.99
• Sales tax: $49
• 4x activation fee: $140
• Monthly cost: $260
• 4x smartphone line fee: $160
• 10GB data: $100
• 1 phone per person for the duration of the plan
• Total cost: $7,128.97

Edge Plan

• Initial cost: $161
• Sales tax: $161
• Monthly cost: $251.64
• 4x smartphone line fee: $60 (after discount)
• 10GB data: $100
• Edge fee for HTC One M8: $24.99
• Edge fee for iPhone 5s 32GB: $27.08
• Edge fee for Moto X: $16.66
• Edge fee for Nokia Lumia Icon: $22.91
• 2 phones per person for the duration of the plan
• Phone 1 for months 1-13
• Phone 2 for months 14-24
• Total cost: $6,200.36

Just as expected, the significant discounts on monthly line fees with 10GB+ data plans basically offset the average Edge fees of the phones. With those discounts, the Edge plan has a lower monthly cost in addition to a comparatively small initial payout, so it ends up costing $928.61 less over two years. 

Conclusions

So with these new numbers, have things changed significantly?

If you're on an individual plan, the Edge program might actually deserve some consideration now. If you go with the single-line 2GB plan as opposed to a 2GB More plan, you'll probably end up paying $100-150 more over a two-year period compared to the service contract, depending on the phone. Practically, this means you're paying a $50-75/year fee to upgrade twice as fast. Whether or not that is a good deal depends on how much you value having the latest and greatest hardware.

For couples, the choice has gotten more interesting as well. Similar to the individual plan, you're paying roughly $65/person/year for that shortened upgrade cycle, which is much more reasonable than the previous article.

For families, you should probably switch over as soon as you can. Even if you currently have a lower data plan, it would be worth your time to run the numbers and see if the deep line fee discounts at 10GB would offset the costs of your Edge fees. In the scenario above, the initial cost for four devices is nearly $900, and not only will the Edge program decrease that significantly, it also offers a lower monthly cost and significantly shorter upgrade cycle for all lines.

Additional Considerations

Obviously, the scenarios listed above exist in a vacuum, and there are other factors which you should consider when choosing a plan.

Trade-In Values

All of this assumes you are starting from scratch with no current devices. In the real world, if you currently have a phone, you can get at least some cash/credit for it by using the myriad of used electronic purchasing businesses or the carrier itself. This means your total cost will be lower than the numbers above, but since you will receive the same amount for your trade whether you go with the service contract or Next/Edge programs, it will have no net impact on the cost of your first contract/agreement for comparison purposes.

However, if you choose to upgrade as soon as possible with the Next/Edge program, you will never pay your phone off, so you will never receive any cash for it; your future value is being able to upgrade to a new phone with no out of pocket costs. You'll end up paying slightly more overall for the device with the Edge program, but discounts received on your data plan will offset that additional cost to varying degrees depending on your plan and phone.

If you stay with a service contract, you will get that trade-in value for each upgrade, but will likely still have an initial net cost each time if you choose a similar phone. You will also have waited an additional 6 to 12 months to upgrade compared to the Next/Edge plans, which is a real deciding factor for some people. Net cost of this factor varies widely by device and which trade-in/sale path is taken, so I won't factor it into my example scenarios, but I encourage you to consider it in your decision.

Net Payments

While it might seem like you're paying significantly less for each device with a service contract, you are effectively still paying retail value since there is a portion of the monthly line fee which goes toward the original phone cost. This is what allows the carrier to offer the phone at a discount up front.

If you are in a Next/Edge plan and are not receiving line fee discounts, you are effectively paying more than retail cost for the device since you're paying the Next/Edge fee on top of the normal monthly line fee which includes the phone subsidization cost.

If you are in a Next/Edge plan where you do receive line fee discounts, you're probably getting close to only paying for the device once, depending on your discount. In both programs, those who are getting the smaller discount (<10GB data plan) still either pay a bit of a premium or basically break even when compared to a service contract plan. Those who are getting the larger discount (>=10GB) are probably actually paying a little less than retail for the devices themselves, but the higher cost of large-margin data plans likely offsets that.

Device Damage

With these programs, both carriers have ramped up their insistence you buy insurance with all devices, citing the fact you'll be paying for the device through the full term if you can't trade it in at the allotted time. In reality, the information in the Net Payments section above shows you'll be out about the same money with two of the three options (service contract, Next/Edge programs with line fee discounts) in the event of loss/damage; the Next/Edge programs just make it more obvious you're still paying for the device after the damage. The real difference is simpler: if you're in a Next/Edge agreement, you won't be able to take advantage of the shorter upgrade cycle because you won't have a device to trade in.

So if you currently don't have insurance because you've never damaged a device, don't automatically select the $8-10/month insurance just because you're signing up for Next/Edge. That said: if you have a history of breaking phones, $120/year for insurance might not be a bad deal depending on the retail price of your device.