Commentary

So Many Smartphones, So Few Upgrade Options

Angry-Person-on-Phone

Should you buy the long-awaited white iPhone 4 that comes out tomorrow, or wait until the summer or later for the next-generation Apple phone? Even if your heart isn't set on the white iPhone, mobile users increasingly face a dilemma in deciding when to upgrade phones because of the volume and velocity of new smartphones hitting the market.

A new study from Retrevo today found nearly two-thirds (62%) of mobile customers feel stuck with outdated smartphones because their two-year contracts won't allow them to buy new handsets more frequently. At the same time, manufacturers are pumping out new models faster than ever. More than 120 smartphones were released from major vendors over the course of about a year, according to Retrevo.

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That leaves mobile consumers, typically locked into two-year deals, feeling frustrated. When asked whether they would consider changing smartphones before their contract was up, 48% said they would if the terms were favorable. Only 20% said a two-year contract on their device was fine with them. But when asked if they'd be willing to pay extra for a shorter contract, most said they wouldn't.

The policies of wireless carriers fly in the face of the study findings. Explaining its decision to phase out one-year contracts this month, Verizon Wireless said very few customers opt for the one-year agreements. Customers can still get discounts on new phones, but not the full subsidy they get with two-year contracts.

The fact is, two-year contracts have become the industry standard in the U.S. -- and that's what the carriers market. Customers could've easily assumed Verizon didn't offer one-year contracts before they were eliminated because they would have been hard-pressed to find that option.

On top of that, Verizon earlier this year scrapped its "New Every Two" program -- which offered subscribers a credit of $30 to $100 toward a new phone every two years -- and changed its early upgrade program from as early as 13 months (within a two-year contract) to 20 months. AT&T also has also set early upgrades at 20 months, just four months short of the full contract term.

Retrevo points to Sprint as an industry model, allowing customer paying more than $89.99 for a contract to get a fully discounted new phone after a year along with a contract extension. But with Verizon's first-quarter profit tripling, and AT&T's increasing 39%, don't expect the nation's two dominant carriers to take their cue from Sprint. That will be even more true if AT&T completes its proposed $39 billion acquisition of T-Mobile, leaving Sprint even further behind in the wireless market.

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