Verizon Wireless to eliminate one-year contract option on April 17th | BGR

Verizon Wireless is eliminating its one-year contract option. After April 17th, a customer purchasing a new device must either sign a two-year agreement and pay the standard advertised price, or pay the full cost of a handset. Some might see the move as "anti-consumer" in some way, but apparently few customers actually opt for a one-year contract when they can choose to pay full price for a handset, with no contract, or get a substantially-subsidized device with a two-year contract.

In the European Community, regulators recently have decided to require one-year contracts, and some mobile providers already have begun to do so, perhaps because of the competitive situation in the United Kingdom. Vodafone trails behind both the T-Mobile/Orange joint venture, Everything Everywhere, and O2, and has been seeing competition from MVNOs at the low end. Retailer Tesco has been offering 12-month deals, for example.

Vodafone's one-year contracts start at £35 a month and so far come with four high end handsets - the HTC Desire HD, RIM BlackBerry Torch, Samsung/Google Nexus S, and the Nokia N8. Other models will also be included in the scheme as it evolves. Vodafone has had12-month terms for SIM-only contracts for some time.

There's no magic here. Consumers can pay full price for their devices and buy service with no contract. But most consumers want subsidized phones, and the two-year contract terms are set at levels that arguably simply recoup the cost of the subsidies. The one-year plans obviously represent less generous subsidies.

Market dynamics also are different in the EC nations and in the U.S. market. In the EC, virtually all providers use a single air interface, so a phone purchased for service with one carrier can be shifted easily to another carrier. In the U.S. market, the air interfaces remain split. A CDMA phone that works on Verizon or Sprint networks will not work on AT&T or T-Mobile networks. For that reason alone there is less opportunity to switch providers.

Still, the point is that no-contract service, one-year or two-year contract plans simply represent different combinations of value and price.

Verizon Wireless to eliminate one-year contract option