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Upgrade Wars: Who Benefits from New Smartphone Plans?

 by Ruth Schneider   Posted on August 3 2013

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Two years can seem like a long time in the life of a smartphone. Now, three major cell phone providers are cashing in on consumers' desire for that new, shiny smartphone by offering opportunities to upgrade sooner.

But, of course, it comes at a price.

Consumers who are willing to shell out a little more money each month -- anywhere from about $10-$50 depending on the wireless provider -- for the flexibility to upgrade up to two times during a 12-month period.

With T-Mobile's JUMP program, the company advertises making payments of an additional $10 per month for the option to upgrade up to two times in a 12-month period. What they don't advertise as much is the upgrade down payment -- which for phones like the iPhone 5 would be about $156. Monthly bills for the plan would be $10 (for JUMP plan) + $60 (unlimited talk, text and 2.5GB data) + $20 (monthly device payment) = $90.

AT&T touts their Next plan as down-payment free with device installments of $15-$50 per month. But with service plans of $70-$120 per month, the costs add up -- so much so that the cost for one year with a single upgrade exceeds the costs of same service from T-Mobile.

For example, a typical monthly bill from AT&T for a new iPhone 5 would be $32.50 (the cost of the phone divided over 20 payments) + $59.99 (for 900 minutes a month) + $20 (unlimited texting) + $30 (3GB of data) = $142.49. That is both the out the door cost and the monthly bill for the following 19 months.

Both T-Mobile and AT&T launched their plans in July. Verizon plans to jump into the early-upgrade game in late August with the launch of Next. When customers pay off half of the value of the cell phone, they are eligible for upgrades.

So is it worth the cost? For those who desire "the latest and greatest," it's certainly a better deal than upgrading on a two-year contract. It also might be useful for accident-prone consumer who needs more replacements than a typical two-year contract allows. But the average smartphone user might want to think twice about how bad it really is to put up with the same model for two full years.

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