Americans Buy Low-Tech Phones And Keep Them Forever - InformationWeek

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Commentary
5/31/2007
11:41 AM
Eric Ogren
Eric Ogren
Commentary
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Americans Buy Low-Tech Phones And Keep Them Forever

According to J.D. Power and Associates, Americans are keeping their phones an average of 17.5 months, up from 16.6 months since last fall. That means more and more people are opting for 2-year contracts...and opting against the latest technology. Do people care about high tech?

According to J.D. Power and Associates, Americans are keeping their phones an average of 17.5 months, up from 16.6 months since last fall. That means more and more people are opting for 2-year contracts...and opting against the latest technology. Do people care about high tech?If you believe J.D. Power and Associates' latest study, not really. "It's clear that wireless service carriers are using mobile phones as bait to increase consumer traffic, applying discounts either through rebates or free limited-time offers," said Kirk Parsons, senior director of wireless services at J.D Power in a prepared statement. "The problem with this strategy is that, in most cases, the discounted handsets being offered are older models, which typically lack the latest technological advancements or desired design features." That's kind of depressing.

What's even more depressing is that people are allowing themselves to be roped into long contracts by purchasing subsidized handsets. This is a double-edged sword for the carriers. "While these longer contracts help wireless carriers recover the costs associated with offering subsidized cell phones, customers tend to hold on to their current cell phones longer to avoid termination fees when switching service, which may ultimately lead to lower renewal rates," said Parsons.

The drop in average handset prices underscores the fact that people are buying cheaper, less-advanced phones.

The price a customer pays for their wireless mobile phone has dropped from an average of $103 in 2002 to $93 in 2007. The decline is primarily due to discounts given by handset providers and wireless service carriers to incentivize sales. Currently, 36 percent of customers report receiving a free mobile phone when subscribing to a wireless service -- up considerably from 28 percent in the 2002 study.

Over one-third of Americans opt for the cheap-o free phone. So does that mean advanced phones like the iPhone, or BlackBerry Curve (which retail for $500 and $200, respectively) have a future? Only in certain circles, it appears.

The subsidization model has deceived Americans about the real cost of cell phones and actually set the bar lower for the entire industry. With one-third of people choosing the free phone, it's obvious that they don't expect to have to pay anything for a phone. Heaven forbid carriers move away from the subsidization model (like Korea has done, and Japan is doing). People won't know what to do with themselves if they have to actually fork over some cash for their phones.

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