Upgrade? No Thanks. Americans Are Sticking With Their Old Phones
Upgrade? No Thanks. Americans Are Sticking With Their Old
Phones
Contract changes, pricier smartphones lead consumers to
keep their devices longer
Smartphone users are waiting nearly three years to
upgrade their devices.
By Sarah Krouse Oct. 29, 2018 9:00 a.m. ET
Americans are holding on to their smartphones for longer
than ever.
Pricier devices, fewer subsidies from carriers and the
demise of the two-year cellphone contract have led consumers to wait an average
of 2.83 years to upgrade their smartphones, according to data for the third
quarter from HYLA Mobile Inc., a mobile-device trade-in company that works with
carriers and big-box stores. That is up from 2.39 years two years earlier.
Apple Inc. iPhones traded in during the period were an
average of 2.92 years old, and those phone owners held on to them longer than
Android users, HYLA’s data through the third quarter show.
Smartphone makers have launched increasingly pricey
phones in recent years, with some premium devices costing more than $1,000.
Apple’s highest-end phone, the iPhone XS Max, costs $1,099.
That has meant that some buyers try to make their phones
last longer. Many families pass down to their children smartphones that are
fully paid for or hand them to other relatives on their plans.
Changes to the structure of wireless phone contracts have
forced more customers to pay full price for devices that were once subsidized
by big carriers like Verizon Communications Inc. and AT&T Inc. Carriers in
recent years have offered less-generous promotions and separated the cost of a
phone from a customer’s monthly service fees, leading to the demise of the
two-year ritual of upgrading devices and service contracts simultaneously.
“Once you’ve paid the phone off, you realize that you’re
getting a considerable sum knocked off your bill every month. When you get a
new phone you lose that financial advantage,” said Jeffrey Moore, a
telecom-industry analyst and principal of Wave7 Research. Smartphones are also
less differentiated today, he said, making some consumers less eager to
upgrade.
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Sprint Corp. currently offers a “bring your own phone”
deal that cuts $10 a month per line on some of its unlimited plans.
UBS Group AG analysts expect 22.8% of U.S. postpaid phone
users—or those that pay their bill monthly under longer-term contracts—to
upgrade their device in 2018, down from 30% in 2015.
Customers keeping devices longer can help carriers hang
on to clients because upgrading is a time when consumers may jump to another
service provider.
The shift had helped improve churn rates for wireless
carriers, Citigroup analysts wrote earlier this month, referring to the rate at
which customers leave.
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