Verizon's new phone upgrade policy draws scrutiny

Verizon Chief Financial Officer Fran Shammo says he doesn't believe the company will face a backlash from extending the upgrade period to 24 months.

Verizon's flagship Droid DNA. Sarah Tew/CNET

Verizon Wireless' decision to extend the wait time for a phone upgrade has some concerned about the potential consumer reaction.

Verizon recently said it would do away with early upgrades, forcing consumers to wait the full 24 months before they are eligible to buy a new phone with the lower subsidized price. Customers previously had to wait only 20 months before getting the early upgrade.

The move comes as T-Mobile said it would do away with contracts and subsidized pricing, providing a better financial deal to consumers. From a broader industry perspective, more consumers are starting to move away from two-year contracts, with the harsher financial times forcing many to look into no-contract and prepaid options.

The change drew a lot of questions from Wall Street analysts during Verizon's first-quarter earnings conference call Thursday. But Verizon Chief Financial Officer Fran Shammo said he isn't worried.

"We don't anticipate a lot of dissatisfaction," he said during the call today. "We're not seeing a lot of resistance here."

Some expressed concern that the lengthened upgrade cycle -- at a time when consumers more hungry for newer phones than ever -- will drive subscribers out of the service. T-Mobile Chief Marketing Officer Mike Sievert couldn't help but jab Verizon for the change in an earlier interview with CNET .

But Shammo argued that customers signed up and stuck with Verizon not for an early upgrade policy, but other factors including customer service, reliability of its network, and options in terms of devices and its Share Everything family data plan.

The company last year introduced a $30 upgrade fee that didn't really cause any waves with consumers.

Verizon earlier reported its first-quarter results , with profit up thanks to continued growth in its wireless business. The company continues to boast an industry-low customer turnover rate with its contract business.

"This is nothing new," he said of the potential reaction to the new upgrade policy.

He noted that many older customers will keep their phones past the two-year upgrade period, while younger customers are more prone to upgrading quicker. The company is attempting to find some balance.

"We're trying to conform to consistent policy so it makes sense for customers and us," he said.

On whether there's some wiggle room on the policy, Shammo said he would leave it to the front-line customer service staff at Verizon Wireless. Still, he hinted at some flexibility.

"There are always exceptions to the rules," he said.

 

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