2 New Plans to Upgrade Smartphones After a Year

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For devotees of new technology, the people who help set trends and chase the latest gadgets, the joy of buying a new smartphone has been met with an equally strong annoyance: long-term commitment.

Now they are getting some overtures to avoid breaking up. In recent days, several major phone carriers have announced plans to tweak the typical cellphone contract, usually two years long, giving the tech aficionados an incentive to stay and giving other customers also frustrated with their plans a possible cause for hope.

AT&T, the second-largest American phone carrier, plans to announce on Tuesday a plan that gives customers a chance to upgrade phones after one year. T-Mobile USA announced a similar option last week, underscoring one of the biggest problems in the phone industry: fewer people are upgrading year after year.

That could be because smartphones have been hitting a wall in terms of what they can do. Smartphones with nice screens and high-quality cameras are commonplace, and people may be feeling less compelled to upgrade frequently, said Tero Kuittinen, an analyst at Alekstra, a mobile analytics firm.

"We're entering a barrier of slow innovation," Mr. Kuittinen said. "We've reached the limits of the camera and display." Traditional cellphones with black and white screens had a similar slowdown before color displays came out, he added.

And if anyone is going to upgrade, it is the earlier adopters and heavy users, customers who are crucial to a carrier's bottom line.

John Legere, chief executive of T-Mobile, said in a statement last week that people shouldn't have to wait so long to get a new phone. "Seven-hundred-thirty days of watching new phones come out that you can't have. Or having to live with a cracked screen or an outdated camera," he said. "We say two years is just too long to wait."

AT&T's new plan, called AT&T Next, will offer customers a way to essentially rent a phone for a year. The customer will pay no cost upfront but will then pay monthly installments for a year. After that period, the customer can upgrade to a new smartphone or tablet, again with no down payment. (The monthly installment cost varies depending on the device.)

T-Mobile USA's new offering, called T-Mobile Jump, requires an upfront payment for a smartphone -- an iPhone 5, for example, is $146 -- in addition to a period of monthly payments. The customer can upgrade to a new smartphone for another down payment twice a year.

Sprint, the No. 3 carrier, last week also announced a plan that could lure heavy users, though in a different manner: a guarantee that customers who sign up for an unlimited data plan will keep it for life. It did not say, however, that the price for a data plan would remain the same forever.

The American wireless business has long been dominated by Verizon Wireless and AT&T, which account for two-thirds of the subscribers in the country. Many telecommunications analysts have described their domination as a duopoly that leaves little room for competition or change. For instance, soon after AT&T discontinued unlimited data plans, Verizon did the same.

In March, T-Mobile introduced other payment plans that did away with traditional two-year contracts. Its plans allowed customers to pay less upfront for a smartphone, but pay monthly installments for the device along with a phone and a data plan, without signing a long-term contract. At the time, there were rumblings that the move could force other companies to follow.

AT&T's offering of Next, just a week after T-Mobile offered its Jump program, suggests that the industry's top players might have at least a bit of fight left in them. But Ralph de la Vega, chief executive of AT&T Mobility, said that the company was not reacting to T-Mobile and that Next had been in the works for a while.

"This is feedback we got from our customers," he said. "This program has required a lot of I.T. work and behind-the-scenes work to bring it to customers in an effortless way."

Under AT&T's new plan, a customer buying Apple's iPhone 5 would pay zero upfront and pay $32.50 every month for one year. After that period, the customer would have the option to trade in the device for a new one.

In the past, the customer would pay $200 upfront for an iPhone 5, then have to wait two years to be able to pay $200 for a new iPhone. Upgrading to a new iPhone in less than two years would cost the full price of the phone, or about $650. In contrast, a person who chooses AT&T's Next option would pay $390 over a year to be able to upgrade to the next iPhone, theoretically saving $260.

"It makes it really easy to come in and get your new phone every year," said Mr. de la Vega.

Chetan Sharma, an independent telecom analyst who does consulting for carriers, said the new payment options would not make a big difference for the average, budget-conscious cellphone owner. T-Mobile's Jump is aimed at gadget enthusiasts who always want the latest generation technology -- a minority of customers, he said. And Sprint's guaranteed unlimited data plan is intended for avid technology users who regularly burn through their data plans by streaming video and music from their phones.

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This article originally appeared in The New York Times.


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