Sprint brings back two-year contracts, customers prefer them
For many years, two-year contracts were the rule of the carrier world: if you wanted to get a high-end smartphone, you had to sign a two-year contract unless you paid full retail price for the smartphone on day one (which few can afford in this economy). Eventually, T-Mobile started showing people the freedom of ditching two-year agreements, and this started to catch on with T-Mobile’s competition — namely, AT&T and Verizon, the two carrier giants in the US business. Eventually, Verizon, the top reliable giant when it comes to coverage and service, ditched two-year contracts, allowing those currently using them to keep them if they so chose but ending them for new customers. New customers would have to agree to installment plans from that point forward.
Sprint decided to inaugurate installment plans just last month, with the company removing two-year pricing from its smartphones on its website on January 8th, but the nation’s bottom “top” carrier has had a change of heart. According to an interview the carrier had with FierceWireless, Sprint has decided to reinstate two-year contract options and pricing for its smartphones. “We listened to our customers and are giving them more choices to get their new device. Sprint is the only carrier to offer the most choices to obtain a new device — lease, installment bill, two-year contract or pay full retail price,” said Sprint spokeswoman Michelle Leff Mermelstein.
While it’s true that Sprint is giving customers options, it’s not necessarily the case that two-year agreements are better options. After all, with Verizon, for example, phone lines under the two-year contract are $40 a month, while you pick your data. Under the installment plan, phones can cost up to $30 or so, which includes the price of the line. The first line will be $20 a month (apart from the price of your smartphone), but Verizon has been known to drop the second line price from $20 down to $15 for customers with good payment credit. I just pre-ordered my Gold Platinum Galaxy S7 edge (32GB) and saw the price of the new line discounted by $5 from $20 to $15. Customers who agree to two-year agreements, however, are forced to pay $40 and are often overpaying Verizon for their service (when, on an installment plan, they could be paying $10 less a month, if not more).
For Sprint, though, there’s a reason behind what some see as consumer madness. Sprint is known for its extremely low pricing on smartphones, with two-year contract customers getting the Galaxy Note 5 (as my sister did) for just $50 (and $50 only). After my sister purchased her Note 5, her bill didn’t go up at all — she paid just $50 for the latest high-end smartphone from Samsung and continued to pay the same bill she was paying before. With leasing or installment plans, however, Sprint customers likely saw their bills rise on leasing plans and decided that contracts were more to their liking (why wouldn’t they be if you can get the latest Samsung for just $50 total?).
In any case, Sprint is offering more flexibility with its payment plans, but two-year contracts don’t bring too many rewards (there’s no $0 down second chances for customers who pay their bill on-time for 3 months, for example). If you’re a Sprint customer, you do get the latest phone for cheap, but you won’t see your actual bill rise or fall under the contract plans. You also don’t get choice over whether or not to leave your carrier for another if you find Verizon more attractive, for example, unless you pay a $350 early termination fee (ETF) to break it. That $350 could be the difference between breaking a contract or getting a new phone with a new carrier. That $350 Sprint ETF could be the down payment on a new T-Mobile Galaxy S7 edge that would require you pay only another $150-$250 before getting an upcoming Galaxy Note 6 this Fall. At the end of the day, people want choices over their carriers, payment plans, and devices, not just over carrier agreements. Sprint claims it’s putting customers first, but reinstating contracts ultimately puts Sprint first.