Incentives to Upgrade

New Plans Encourage Changeouts

By Anca Gagiuc on Jul 14, 2013 in Technology | 1 Comment

I’m always curious to discover what innovations manufacturers have brought to the market when they announce new smartphone devices. Fortunately for my budget, I can’t purchase all those that make my eyebrows rise. Like most, I am on a standard payment plan that limits me to upgrade every two years.

However, smartphones have hit a level where innovation has slowed down. At this point, they all flaunt beautiful screens and high-quality cameras. The new models don’t differ drastically from their previous versions, and this decreases the urge to purchase newer ones more frequently. Fewer and fewer consumers are upgrading year after year. Obviously, this is not so good for the business and the big players in the US know it, so they decided it was time they took action.

First it was T-Mobile USA who announced their new plan called T-Mobile Jump. It entails an upfront payment for a smartphone followed by a period of monthly payments. This action can be done twice a year and the down payment amount is quite decent – $146 for an iPhone 5.

AT&T followed with their AT&T Next, a plan that encourages customers to upgrade their phone once a year instead of every two years. They’re proposal is more of a phone rental than a phone purchase – there will be no upfront payment, just monthly installments for a year that vary based on the device. In the case of “renting” an iPhone 5, the customer would pay zero upfront, followed by $32.50 every month for a year. Once the period is over, the customer can upgrade to a new smartphone.

Verizon is said to be coming out with the VZ Edge, a plan that supposedly allows the users to upgrade their phone once they’ve paid off at least half of the cost of their current device. Basically this is not at all time limited, because as soon as they manage to contribute more than 50 percent to the cost of the phone they can move to the next one.

Sprint took a different approach – perhaps because of a need to compete with the market dominance of Verizon and AT&T (the two largest cell-phone service providers account for two- thirds of the market). Sprint targets the heavy volume users by guaranteeing a life data plan if they sign up for the unlimited one. It’s not known yet if the price for this data plan will stay unchanged forever.

The most common way to get an iPhone 5 until recently was to pay $200 upfront, wait two years and after that have the option to pay another $200 upfront for the new one. In consequence, upgrading to a new iPhone in less than the contractual two-year period would have cost the full price of the phone, about $650. With the new plan from AT&T the buyer would only pay $390 over the course of a year. Will this make you up your upgrade pace and purchase new devices as they are launched?