How to save $200 on your next Verizon cell phone

My teenage daughter was finally eligible for a new cell phone last week, and of course she wanted the new LG ENV2, a clamshell phone that includes a built-in QUERTY keyboard that's ideal for texting. She almost overpaid by $200.

The deal we made with her was that she could get basic, "free" phone, but she had to pay if she wanted a fancier one. The price for the ENV2 at the local authorized Verizon reseller was $199.99, and she was ready to pick up the tab. But by asking questions and doing some comparison shopping we ended up getting the same phone for free. Here's what happened - and why you should check with Verizon before buying through an authorized reseller.

Verizon's marketing policy states that after two years you can get a new phone at a reduced price - if you sign up for another two years of service. Of course the "discounted" price is really a subsidy built into the monthly service contract. In this case the full retail price of the ENV2 is $279.99. The sticker price in the store, the "upgrade" price, was discounted to $199.99 with an additional $50 mail-in rebate from Verizon Wireless. Net price: $149.99. Net savings: $130. However, Verizon recoups that over the two years of your service contract. It's a shell game. The total number of sheckels is the same. They're just under different cups.

Anyway, my daughter's two year contract was up on the 17th and she was anxious to get a new model. We started looking at phones two weeks ago and found that was offering the ENV2 for $149.99 after a $50 rebate. Then we went to our local authorized reseller (there are no corporate stores within 50 miles of Keene, NH). They were selling the same model for $199.99.

We asked the reseller if they would match the Verizon Wireless price. We also told them that we did not want to change our service contact, as we don't need extra minutes and Verizon had raised the base contract prices since we originally signed up. I'm sure that didn't leave them much room for profit, but the sales person said they would work something out.

Bait and switch

On the 18th I was away so my daughter and wife struck out for the local store to pick up the phone. A quick check online showed that Verizon had dropped the price of the phone to $99.99 after an instant rebate. The sales person at the reseller said he would match the price after a mail-in rebate.

But there was just one problem, he said. My daugher could not get the phone for the $99.99 price because hers was not the primary phone on the family plan account. But he could process the sale if we agreed to let him put it in as a replacement for the primary phone (mine). He would then switch the phone over to my daughter's cell phone number and all would be well. At this point my wife was starting to feel that something was not right.

If that made her suspicious, what transpired next made her walk out. After reviewing our account, the sales person said that we had an older plan and therefore he could not guarantee that we would be able to actually receive all of the text and picture messages sent to our daughter's new phone.

Furthermore, all sales were final. If it didn't work, we would have to come back and upgrade to a more expensive plan. At that point my wife and daughter walked out the door, called me, and asked me to deal with it.

The deception

On my way home Sunday I stopped by a Verizon-owned retail store. As it turns out, the sales person at the authorized reseller was partially right - Verizon recently instituted a $20 "activation fee" for any new phone upgrade except for the primary account holder's phone. And like the authorized reseller, the Verizon Wireless sales person offered to set up the sale as an upgrade to my primary phone on the account (which also qualified for a new phone). She would then switch the number over to my daughter's line to save us $20 fee (That was fine with me, as my phone works fine and was recently replaced under warranty).

But what the independent reseller didn't tell me was that the primary phone is eligible for an additional $100 Verizon Wireless discount on a new phone. Had I bought at that store, the $100 would have gone right into the pocket of the reseller.

Instead, I was able to pick up the phone at a corporate store for $50. After the mail-in rebate the ENV2 will be free - a big deal to my daugher, a student who doesn't have a full time job. Better still, all sales weren't final. We could return the phone within 30 days for a full refund if we didn't like it.

As for the claim that our "old plan" wouldn't be able to receive all of my daughter's text messages, I was pretty sure that was bunk, and the Verizon Wireless store rep reassured me that it was. The billing plan has nothing at all to do with how texting works.

What's the lesson here? Caveat emptor. When it comes to buying a cell phone, you have few choices - and you're working through an authorized reseller, you probably should comparison shop with Verizon Wireless directly to make sure you're getting the best deal. "Their prices are different than ours," said a Verizon Wireless rep. "They sell our phones and service, but they don't have to comply [with Verizon's pricing]."

In addition, Verizon offers a 15-day price guarantee. So if we had bought the phone at the $149.99 price we would have been eligible for a $50 refund when the price dropped to $99.99.

The real culprit

But the real lesson here is not that you should buy from the Verizion corporate store but that you have such limited choices. What bothers me is the sleight-of-hand way in which these phones are marketed. Only a telephone company (or an insurance company) could make the process of buying a cell phone so convoluted. Between the hidden subsidy, the 2-year customer lock-in requirement for the "discount price," the $50 mail-in rebate, $20 "activation" fee on secondary lines and the $100 additional upgrade credit for primary phones it's hard to imagine that any consumer can understand what their phone really costs without a spreadsheet program. Given the level of deception and obfuscation involved, buying a cell phone is worse than buying a car.

Last year Verizon Wireless announced that it was opening up its network to third party phone vendors. But until the carrier decouples cell phone pricing from its service plans, opens up access to its network, and stops subsidizing phones, third party vendors won't be able to compete and consumers will be left with few choices.

When it comes to cell phone hardware, the current situation is simply a modification of the old Western Electric model in which the telephone company controlled the phone and you rented it. Today you can buy the phone, but the carrier or its authorized agents sell it to you. They lock it so it can't be used elsewhere and they determine what applications and features run on it. You pay for it but you don't control it. So who really owns it?

This outdated business model holds back innovation by tightly restricting which phones the consumer can buy, how they're priced and what software can run on them. But if Verizon truly opens up its network and allows cell phone vendors to innovate on both hardware and software - as it promised more than eight months ago - it would see more business, not less, over its cellular network.

That won't happen, however, unless Verizon stops subsidizing its phones.

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