How annual upgrade programs could change the game

This article may contain personal views and opinion from the author.
How annual upgrade programs could change the game
We're in the middle of a change in the way that we all buy smartphones that could ultimately have a major impact on the way manufacturers design and build the devices that we use every day, and it all started because T-Mobile wanted to have a buying option for consumers that distinguished it from other carriers: it's JUMP! annual upgrade program. Pretty soon, other carriers followed suit and offered similar programs that switched customers to monthly payment options for devices and allowed for upgrades faster than the usual two-year cycle.

Now, Apple has become the first manufacturer to offer an annual upgrade plan directly to customers and this is where things really get interesting, because suddenly we're not only talking about a shift in the average upgrade cycle for consumers, but there is also a shift away from carriers as gatekeepers to new devices. Both of these changes can potentially have a major impact on the mobile ecosystem as a whole. 

Carrier breakup


The first change is in how users view their relationship to their mobile carrier, because two-year contracts for wireless service are quickly becoming a thing of the past. Sure, there are still two-year contracts for device payment plans, but ending that early just means you finish paying off your device. Then, you can up and move to any carrier you want. And, we're finally to the point where that statement can be used without caveats. 

Major carriers and MVNOs are all on LTE networks, and the top three (Verizon, AT&T, and T-Mobile) all have overlap in support for LTE bands 2 and 4. Every device sold by Verizon is unlocked, and if you have been on another wireless carrier and fully pay for a device (and the device is locked), that carrier will unlock the device for you. If you're leaving Verizon, chances are your device supports GSM; and, if you want to switch to Verizon, chances are your device supports LTE, so you should be able to make the move without issue. 

There may be trouble with LTE band support, especially if you're dealing with Sprint or US Cellular, but ultimately it has never been easier to leave your current carrier. And, it's even easier because of all the deals available for users who want to switch: Verizon and AT&T both offer up to $300 on device trade-in plus $100 for switching to them; and, T-Mobile or Sprint will cover the remainder of your device payment plan and your early termination fee. 

People will always have to look at issues of pricing and local performance for each carrier, but at this point, lock-in with a carrier has a lot more to due with human nature and the psychology of change than ever before. The last strands of carrier lock-in are with device payment plans (although those are thin because of the carrier switch deals mentioned), but manufacturers are poised to break that as well. 

Manufacturer rise


At least, there is a chance that manufacturers can break that last lock. For better or worse, Apple is in the best position to start the push both because of Apple's loyal fan base, but more importantly because of its footprint of Apple retail stores and prominent displays in other stores, like Best Buy. This gives customers better access directly to Apple devices and lessens the need to deal with carriers at all in the device purchase process. Add in Apple's new annual upgrade plan and the easiest path for carrier freedom now comes from Apple. 

It seems likely that Android manufacturers will follow suit, especially since some already have the setup to directly sell to users in place. Motorola has the easiest path and just needs to add an annual upgrade plan to MotoMaker, but Motorola doesn't sell many phones, so that wouldn't move the needle much. The same would go for Google, which could easily offer a Nexus annual upgrade plan very similar to Apple's plan, although Nexus phones never sell too much compared to titans like Apple and Samsung. (Still, full disclosure, my order for a Nexus 6P is pending, and I'm honestly annoyed that I can't do a monthly payment plan and trade-in for a new Nexus next year. The only Nexus phone I haven't owned was the Nexus S, and I'm a bit tired of having to sell my old phone to subsidize the new one.)

Most Android manufacturers, including the reigning leader Samsung, don't have that direct sell infrastructure in place and would need to work with stores like Best Buy to offer such plans. Some may argue that dealing with Best Buy for a device purchase plan isn't much better than dealing with a carrier, but it's not hard to imagine Amazon getting in on this game. Amazon doesn't sell many phones in general, but it has solid customer service and if direct annual upgrade phone sales pick up steam, there is an audience that trusts Amazon for that purchase. And, any company that is going to offer such a plan would need to have the ability to resell the devices that were traded in. Amazon could quite easily handle that as well. 


Expectations change design


But, there is another, possibly unintended, consequence coming for manufacturers that get into any annual upgrade system - customer expectations are going to change. Customers have traditionally been upgrading every two years and are used to a certain level of change when moving from one device to a new one. Similarly, manufacturers have taken advantage of that cycle. Apple is the most blatant example of this with its so-called "tick-tock" upgrade cycle, which had the overall design of the iPhone staying the same for two years, while the "S" versions of iPhones have been more about refinement and performance upgrades than major feature additions. Apple seems to have already taken on the challenge of a new yearly upgrade cycle with the iPhone 6s, which was more of a substantial update than most "S" year devices. 

It could be that users will learn to deal with more incremental upgrades on a yearly cycle rather than the level of change over a two-year cycle, but it could also happen that the mobile ecosystem, which has felt a bit stagnant, could see a bump in creativity. There's not a ton of room for making processors or cameras much better on a yearly cycle, so we may end up seeing more interesting changes in design, like the curved screens Samsung has been experimenting with, or software features. 

This doesn't just affect manufacturers, and could put more pressure on Apple and Google to make sure that each year's upgrade of iOS and Android feels more substantive. Having an upgrade like iOS 8 or Android Marshmallow, which is more about under-the-hood refinements than outward features, might not be enough to keep users interested. Of course, a yearly upgrade cycle would also be a boon for Android, because it would greatly reduce troubles with slow manufacturer and carrier updates of the OS, and get more people on the newest version of Android faster, so that may mitigate some of these issues. 

Conclusion


No matter how you look at it, we're in the middle of a very interesting time for the mobile ecosystem. Power is shifting away from carriers. Customers have more freedom and choice than before. And, manufacturers and retail stores have an opportunity to benefit from these changes. It could well cause ripple effects that we don't expect, but it is exciting to see what is coming. 

It will be good for manufacturers and retail stores because anyone who isn't trading in regularly is giving money for no reason, and it's a more consistent revenue stream. And, it can actually be good for customers as well. Sure, you won't really own a device ever again, but it's your choice to go to an annual upgrade plan. If you value a constant warranty and a new phone every year, then not owning the device probably won't matter to you. But, if you want to actually own your device and not be constantly paying, that option will still exist. It's not an either/or scenario. It's just a new option to make faster upgrades easier for everyone. 

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55 Comments

50. aahmed215

Posts: 169; Member since: Jun 18, 2012

Verizon has the worst financing program. Since you can only upgrade at 75% of the cost of the phone paid, it would only make financial sense to do a trade-in versus buying out the phone and selling it yourself if the value of your phone is no more than $175 in the market (assuming it was originally selling for $700). An originally $500 phone would have to have a present market value of $125 or less for a trade-in to make sense. Even a Galaxy S4 can be sold for at least that much these days. T-Mobile has the best leasing program, but too bad their service isn't that good. You can pay $5 a month for an iPhone 6s 16 GB version (a $650 phone) and upgrade up to 3 times a year. You don't pay taxes or have to pay off a certain percentage of the phone to be eligible for an upgrade.

51. elitewolverine

Posts: 5192; Member since: Oct 28, 2013

depends on area, where I live, I get 60Mbps on a 2yr old non tmobile device on tmobiles network. There is dead spots, yes, but combined with wifi calling it can really counteract weak homes. And I do use it for my father in laws home which gets 1 bar no matter the carrier (att Verizon tmobile, unsure about sprint). Their leasing program is probably best in the business.

53. aahmed215

Posts: 169; Member since: Jun 18, 2012

I tried T-Mobile for a month. The service at my house was about the same as AT&T, but less than Verizon. But I don't care about the house that much because as you said, there's Wi-Fi calling. The connection in my city was about the same if not better than AT&T, but once I started going to the urban areas, there was no service. I travel a lot for my job and personal reasons, so I need a reliable network. It's a shame, because I would go to T-Mobile in a heartbeat. They have good pricing, the best leasing program, unlimited data, unlimited music streaming not counting against your data quota, etc.

61. elitewolverine

Posts: 5192; Member since: Oct 28, 2013

This is true, though I would look at the map again, their lte12 band is expanding into pretty much every 2g network place they had.

41. natypes

Posts: 1110; Member since: Feb 02, 2015

Getting rid of subsidies killed my side gig of buying phones off of craigslist and selling them for a profit.

27. technitude

Posts: 263; Member since: Dec 19, 2013

This is all around great, especially for those of us that travel internationally. Maybe we will be able to buy SIM chips and use our devices abroad.

38. tomn1ce

Posts: 248; Member since: Mar 12, 2012

All you have to do is have the carrier unlock it. I know Tmobile unlocks your phone if you're travelling. I have a sim card from back home for whenever I travel. I have a OG Moto X just for that purpose to use it over there and just put away my verizon phone. I know that verizon phones come unlocked for GSM network but I prefer to use a 2ndary device than use my main device abroad.

24. Bernoulli

Posts: 4364; Member since: Sep 01, 2012

I wonder if apple is also capable of blacklisting their devices. If no I see apple losing a pretty penny here.

29. technitude

Posts: 263; Member since: Dec 19, 2013

Apple builds their devices for under $200. Their monthly fee is $32.41 ($388.92 annually - and if you don't get a new phone, then its $777.84 to pay off the last phone you bought). Apple's not losing.

36. tomn1ce

Posts: 248; Member since: Mar 12, 2012

I think he meant if someone buys the iphone and looses it and than who ever finds/stole it sells it. Will the new owner be able to get it to work.

49. elitewolverine

Posts: 5192; Member since: Oct 28, 2013

Yes they can deal with it weekly

23. Fuego84

Posts: 357; Member since: May 13, 2012

Why even upgrade if you device payments go higher. If the device payments wouldn't go up it would be OK but right now it's like this you pay $17 device payment per month with note 3 for 24 months you then get note 4 and your new monthly device payment is $28 then you get note 5 and wow you now paying $32 monthly device payment.

21. Elfmonster unregistered

New Chinese phones and 1-year-old, used major brand phones. No contracts or payments. That's the solution. I heard a tech guy do an interview where he said China advances twice as fast as America and four times as fast as Europe, because of the near-slave labor and lack of regulations, I suppose. This sucks morally but since all phones are made in China (or is there an exception), a Chinese phone is a Chinese phone. Be an early adopter and ditch the overpriced Apple Samsung brands, I say. (And yet, I love the look of that Sony premium....)

22. roldefol

Posts: 4745; Member since: Jan 28, 2011

Americans are very brand-focused. It took years for Samsung and LG to be taken seriously as electronics brands here decades of Japanese (Sony, Sharp, Panasonic) dominance. Ditto Hyundai and Kia for cars. It'll take similar time for companies like Huawei, Meizu, and Xiaomi to break through here.

25. Bernoulli

Posts: 4364; Member since: Sep 01, 2012

Well, everything in my BlackBerry Passport says made in Mexico, plus they have their own brands such as Zonda, but so does India so not all phones are made in china. Are you American by any chance?

19. fyahking

Posts: 1146; Member since: Jan 28, 2015

Once a year upgrade? Lol

14. joey_sfb

Posts: 6794; Member since: Mar 29, 2012

I prefer the SIM only plan. I can buy my own devices. After comparing the SIM only plan and contract phone plan, i realize it more expensive to get the phone from carrier.

48. elitewolverine

Posts: 5192; Member since: Oct 28, 2013

How so? Would love to see the price points. Then again we would most likely be comparing different carriers etc...but always good to see this math. Only difference I can see is insurance cost.

58. ILikeBubbles

Posts: 525; Member since: Jan 17, 2011

This is exactly what I do :)

9. Cheezwiz

Posts: 500; Member since: Dec 29, 2014

Consumers really don't realize the full value of a device unless they keep it for a significant period of time. It's a shame they've just been conditioned to renew and replace at such an unnecessary pace. "Keeping up with the Joneses" is alive and well.

10. roldefol

Posts: 4745; Member since: Jan 28, 2011

I get what you're saying. If you're spending $600 on a device, why aren't you expecting to get 3+ years of use out of it? You wouldn't replace a laptop or a TV that quickly. But phones just seem to break down and die after a couple years.

31. Ordinary

Posts: 2454; Member since: Apr 23, 2015

Well my S3, S4, S5 and Z2 are still running like the first day I bought them. Only battery lost it cycles so battery life is not like in the beginning.

32. snowgator

Posts: 3630; Member since: Jan 19, 2011

I have had a run of bad devices. I paid top dollar for an HTC One M8 for Windows, and three bad screens later I just sold the refurbished one and took the loss. I bought that one because My Nokia 920, just over a year old, refused to keep or hold a charge anymore. I am now on a Samsung ATIV Neo that is running well, but I bought it new for pennies on the dollar. I do want a shiny new phone, but I am to the point that getting a new one isn't the thrill it used to be because I do pay for them out of pocket. I want 2-4 years out of a device, which is why that M8 was so depressing. I paid a nice sum for a bad phone. It is a big crap shoot.

35. tomn1ce

Posts: 248; Member since: Mar 12, 2012

You're right. Than again there are plenty of people who buy unnecessary stuff all the time. What bothers me is those people who can't afford to buy a brand phone every, go out and do just that and then complaint that they don't have any money for more necessary things. Those are the worst. I usually keep a phone for two years or until it becomes unbearable to use. Not because I can't afford a phone every year but because I don't see the need of upgrading a phone that is working perfectly fine.

5. roldefol

Posts: 4745; Member since: Jan 28, 2011

With annual upgrades, will my phone start sucking after one year instead of two?

6. yyuu1000

Posts: 260; Member since: Jul 26, 2012

wouldn't be a surprise

18. 47AlphaTango

Posts: 748; Member since: Sep 27, 2015

Yes. As long as there's a brand new phones with new features & additional bonus. Then your new phones will look like old ones.

20. roldefol

Posts: 4745; Member since: Jan 28, 2011

I mean the phone just won't work like it used to. Internal batteries lose their ability to hold a charge, antennas mysteriously stop working, OS updates slow things down, that sort of thing. Planned obsolescence.

26. ILikeBubbles

Posts: 525; Member since: Jan 17, 2011

I've heard the rumors of your complains but have never experienced them... I felt like modern battery technology kind of defeats the battery problem.. And the antenna thing I have no idea what you're talking about. But I doubt those two specifically will be an issue unless you're trying to keep your phone for 3+ years. Which is your own choice, but with the upgrade cycle on phones being so much faster pace than cars, computers, tvs, each year is worth 2 or more of the others. While I'm not specifically a fan of the annual upgrade within carriers... I still appreciate the ability. I like how at least when someone pays off their device they're not forced to buy a new one. And the idea of a separate payment for the phone vs the service when you DO pay off your phone your monthly payment goes down to just the service again. Which was previously impossible before in the states because the phone subsidy was built into the service. Also the term "new phone" is relative.. I've been using an m7 by choice since 2013 when it came out. But soon I think I'm going to switch to an og nexus 5.. Which for me will be "new" but isn't technically new. These open ended options to provide your own phone works wonderfully with swappa.com for users who aren't interested in a phone that was released months ago but still want something new. But it also allows me to save up and wait for a phone that I actually want when it comes out and buy it without carrier involvement at all. Isn't that the point though?

47. elitewolverine

Posts: 5192; Member since: Oct 28, 2013

Indeed, the fact it is not forced on customers on my carrier is big. They want to buy their own? Like I will with the 950xl in a month, then be my guest, do it. But the program allows for minimal input for customers who most likely will be buying a new phone every year. Does it matter cost up front? nope. Now put that Nexus 5 from certified preowned with a 3month warranty and they go for 200 on my carrier. Put 8 buck a month insurance. Or use jump. You will pay 200 but still have the option to trade it in after 100 is paid off, for another phone. Can be used, can be new. The point remains...a good deal for people who don't want to sell it for them. I like bubbles too

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