Enrollment in smartphone upgrade plans among U.S. consumers has more than quadrupled since September 2013, going from 7 to 31 percent by the end of the first quarter of 2014, according to a new report from the NPD Group. The report is yet another data point indicating a major shift in how Americans pay for their cell phones.
AT&T Mobility forecasted sharply higher postpaid subscriber additions for the second quarter than it had in the year-ago period, and also said it expects more customers than ever before to buy smartphones via its Next handset upgrade program.
Verizon Wireless made changes to its Edge handset upgrade program that require customers to pay off 60 percent of a device's costs before upgrading, up from 50 percent before. The changes come as analysts are predicting that more devices will be financed in the U.S. in 2014 than previously expected.
Sprint wholesale partner nTelos Wireless felt that it needed to follow larger carriers by offering a device installment plan, but the company intends to make its offering compelling in terms of price and value, according to an nTelos executive.
Sprint wholesale partner nTelos Wireless plans to launch an equipment installment plan later this summer similar to offerings from larger carriers, but the financial and competitive impact of the launch is still not clear.
The shift away from the traditional U.S. model of a subsidized smartphone in exchange for a two-year contract appears to be accelerating and is likely going to continue to do so for the next few quarters. However, the shift might not be in the best interests of carriers, handset makers or consumers in the long run.
AT&T CEO Randall Stephenson said that the model that has prevailed in the U.S. wireless industry for years of customers getting subsidized devices in exchange for signing two-year contracts is radically shifting.
LAS VEGAS--I've asked almost every company I've met with so far here at the 2014 Consumer Electronics Show the same question: How would a shift in the U.S. market from device subsidies to device financing affect your business and the wider market? The responses I've received, mainly from handset companies, tended to indicate that if such a shift does take place, the onus will be on OEMs to provide value, either in terms of price or innovation--or both.
Although Apple is the world's No. 2 smartphone maker and, for now, the most popular U.S. smartphone producer, the company's position could be eroded as carriers in developed markets shift away from providing handset subsidies, according to a financial analyst.
Huawei is not giving up entirely on the U.S. market, even if it has concluded that it's not worth it to pursue a substantive network gear business amid continuing security concerns. Instead, the Chinese vendor will focus on building up its handset business, and it may benefit from an ongoing shift away from device subsidies.