Verizon CFO Sees Risks in Installment Plans, Says Subsidized Route is Safest Bet

It might not be the most cost-effective solution for smartphone owners, but paying for installment plans that allow subscribers to break up the retail cost of their handsets into monthly payments in exchange for being able to upgrade more frequently are proving somewhat popular, especially among smartphone enthusiasts. Interestingly, at least one wireless carrier views this as a risky business model.

Verizon CFO Fran Shammo was giving a presentation at a Deutsche Bank conference and one of the things he talked about was his company's Edge program, which allows customers to pay off their device in installments. Customers on the Edge program are allowed to upgrade to a newer device after just 30 days, provided they've paid at least 50 percent of their current handset's retail value. Though it seems Verizon would benefit the most from its Edge program, Shammo still prefers the subsidy model.

Verizon Edge

"We believe that the subsidy model is an extremely good model. It has done wonders for us in the industry," Shammo said, according to CNET. "So I think to abandon that I think is a mistake. But I do think that there are customers out there that want that installment plan."

Shammo also said that installment plans can lead to angry customers. For example, if a customer decides to leave Verizon early, they're responsible for paying off their handset in full, which can be a rather larger bill to be saddled with. On top of that, if a customer leaves early because they're not satisfied with the service, the chances of them paying off the early termination fee are next to nothing.

These are both reasons why Verizon limits its Edge programs to "very high creditworthy customers," Shammo says.