Study finds consumers feel stuck with obsolete smartphones

By Andrew Eisner

If you could upgrade your phone right now without paying a penalty, would you go ahead and get that new iPhone or Android smartphone? If you answered yes, you wouldn’t be alone, in fact Retrevo recently discovered that a large number of U.S. phone owners say their phone is either currently out of date or will be soon. The fact is, consumers are justified in feeling their phones are obsolete and frustrated by the fact that they can’t upgrade them more frequently than every two years.

Manufacturers are flooding the market with new phones at a very fast rate. Retrevo counted more than 120 new smartphones from major vendors over the course of about a year. The problem is that most carriers require you to hold onto a phone for two years before you can upgrade which has created a condition where new phones appear much faster than consumers are allowed to buy them.

Retrevo’s Technology Life Cycle analysis engine looked at smartphones from March 2010 to March 2011and found that smartphones increased in power and added new features that moved many of last year’s phones one phase over from new to mainstream. At the current rate, we expect to see new smartphones with higher resolution displays, faster processors, and other new features displace the current phones by this time next year.

The Retrevo study found that almost two thirds of U.S. smartphone owners perceived their phone to be obsolete now or will be obsolete before their contract runs out. The problem is the phone carriers don’t want your old phone and don’t want to subsidize a new one sooner than every two years.

When the Retrevo study asked smartphone owners whether they would consider changing smartphones before their contract was up, 48% said they would if the terms were favorable while only 20% said a two year contract on their device was fine with them. Others were not sure or might buy an unlocked phone.

We’re sure the carriers have valid business reasons for sticking with a two year contract, but as phone buyers we have to ask wouldn’t a shorter contract be more in sync with the pace that new smartphone technology arrives which begs the question, “would consumers pay more for a one year contract?”

When we asked smartphone owners if they would be willing to pay extra for a shorter contract we found most buyers would not however some owners would pay extra and $100 seems like the most popular price point.

We wondered if any of the carriers make it easy to upgrade a phone before the contract is up and found little definitive information and lots of comments like, “you can sometimes negotiate with representatives.” Verizon recently scrapped their New Every Two program and currently does not offer any early upgrades before 20 months.

AT&T offers a discount after 20 months but that is practically 2 years. Sprint has the most attractive arrangement. Any Sprint customer paying more than $89.99 for a contract can get a fully discounted new phone after one year along with a contract extension. We feel this is a model other carriers should adopt and could help give consumers more peace of mind when purchasing a product in such a fast paced market. Unfortunately for consumers it appears there is virtually no practical way for most phone owners to replace their phone before the contract is up.

If smartphone owners are frustrated buyers of new devices and vendors are bringing new products to market faster than consumers are allowed to buy them why isn’t anyone complaining? We don’t imagine any government regulation could change this situation after all, consumers can always pay the early termination fee or buy an unlocked phone but just maybe if enough consumers made their frustrations known the carriers might make it easier to change phones sooner than every two years.

Data for this report came from a study that was conducted online recently with over 500 Retrevo users responding, distributed across gender, age, and location in the United States. Responses were weighted based on reported demographics to gain accurate estimations of gadget ownership and usage within and across demographics. All data is therefore reported as weighted data in which most responses have a confidence interval of +/- 4% at a 95% confidence level.

Read more at http://www.retrevo.com/content/blog/2011/04/are-you-prisoner-your-phone-carrier . (Eisner is director of Community and Content for Retrevo.com, a site that does research on electronic shopping).