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New cell service pricing strategies show how industry is changing | LA Times

Increasingly, new cellphone customers pay for their phones in full upfront or in monthly installments, but separate from their cellular service. Above, an ad for a Nokia. (Spencer Platt / Getty Images)

When I say “AT&T” and “Verizon,” what comes to mind?

Most of us might say a cellphone company. But the truth is, companies like T-Mobile and Sprint are really in business to sell a wireless service, like the ability to make voice calls and use mobile data. That’s what they have always been. And it’s becoming more apparent than ever, with moves by these companies to stop supporting two-year contracts and subsidizing the cost of a phone.

T-Mobile was the first to take that step. Since then, so has AT&T. Although it still offers two-year contracts, customers have to work hard to get one; the company has been aggressively promoting an alternative pricing model, AT&T Next. Sprint now lets customers lease its phones for a monthly charge, rather than buying. And last week, Verizon also got on board with the change that is sweeping the industry.

Now, new customers pay for their phones in full upfront or in monthly installments, but separate from their cellular service. (You’re also being encouraged to bring your own phone instead of buying a new one, which will eliminate those device payments altogether.) That’s a big change from the previous model, in which customers often paid a discounted upfront price for the phone (say, $200 for an iPhone) and then received a single monthly bill that covered the remaining cost of the phone and the service together.

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New cell service pricing strategies show how industry is changing – LA Times.