AH Samsung Galaxy 2015 S6 Plus + Chris-5

Slower Upgrade Cycles Changing Carrier Revenues

March 28, 2016 - Written By Daniel Fuller

Not long ago, mobile technology was accelerating at breakneck speed, meaning there were things a newer phone or tablet could do that an older one just plain couldn’t. For example, before the widespread deployment of LTE that started in 2010, activities like streaming PC games or HD media to the phone in your pocket were a broken, battery-killing proposition at best, but were mostly just not possible. These days, however, almost any device you can buy will likely have a fast enough network, a fast enough processor, enough RAM and a good enough screen to meet most general needs. This means that people are holding on to their phones longer than ever before, which is causing a bit of a shift in the wireless industry.

Consumers tending to keep their devices for longer is causing no small amount of changes in the wireless industry. The movement is partly driving and partly being driven by the phasing out of the traditional two-year contract in favor of equipment installment plans or bring your own device (BYOD) options. The expenses inherent in certain wireless offerings, as well as how to optimize profit margins for lower-value customers, is becoming a cornerstone of knowing how to do business in the modern wireless industry. People are keeping the same device for longer than two years, putting a cramp on device sale profits. Some customers are even opting to unlock their current device and take it with them to other carriers, an ideal helped along by the likes of Google’s Nexus lineup, the iPhone and the sale of unlocked phones from outlets like Amazon and Best Buy. Some manufacturers, such as Motorola and ASUS, have even taken to targeting the unlocked market.

What this essentially means for carriers is a different way to look at and treat subscribers. For the two largest U.S. carriers in particular, it means a bit less money from device sales, one of their main revenue sources. In order to stay competitive, they may have to show some creativity in minimizing overheads on things like customer service, network buildout and general maintenance. According to analysts with Wells Fargo, this is actually a “mixed blessing” for the larger carriers; As Q1 2016 looks to be a “near record low” for device upgrades, which may mean fewer customers switching, since a new network sign-on often comes with the opportunity to score a new device. A status quo which will be of benefit to the likes of AT&T and Verizon in the short term. Although, T-Mobile and Sprint may begin seeing more subscribers coming to their lower-cost networks as their equipment installment plans begin to reach maturation.