Figures from Verizon and AT&T show why the U.S. smartphone market is struggling

Figures from Verizon and AT&T show why the U.S. smartphone market is struggling
When Verizon and AT&T both reported their first-quarter earnings earlier this week, the data that came out confirmed something that has been apparent for some time; U.S. consumers are no longer upgrading their phones every two years. This is one of the reasons for sluggish smartphone sales in the country, along with higher prices and lack of innovation.

BTIG analyst Walter Piecyk disseminated a pair of tweets (via The Verge) the other day pointing out that during the first quarter of 2019, AT&T's upgrade rate dropped to a record low 3.5%. That is down from the 4.3% rate it had during last year's first three months. Verizon's upgrade rate during the same quarter declined to a record low 4.4%, down from the previous year's 5.0%.

Speaking of Verizon, Bloomberg's Shira Ovide notes that the percentage of Big Red's contract customers purchasing a new handset during the January through March period over the last few years has been in a steady decline. That figure was 6.5% during the first quarter of 2014, holding steady during the first quarter of 2015 before declining every year to the current 4.4% rate.

Fewer Verizon customers are upgrading to a new phone at the beginning of each year

Fewer Verizon customers are upgrading to a new phone at the beginning of each year


The low upgrade rates in the U.S. could soon turn around once 5G service becomes more widespread in the country. Right now, AT&T offers 5G service in 19 markets through the use of the Netgear Nighthawk 5G mobile hotspot. Verizon has mobile 5G available in Chicago and Minneapolis and announced plans on Thursday to expand the service to another 20 markets. Currently available only on the Moto Z3 with the 5G Moto Mod accessory attached, the nation's largest carrier has started taking pre-orders for the Samsung Galaxy S10 5G. The device is priced at $1,299.99 for 256GB of storage (or $54.16 a month for 24 months). The version with 512GB of storage will cost $1,399.99 (or 24 monthly payments of $58.33). Apple is not expected to offer a 5G phone until late 2020.

Eventually, foldable phones could also provide a reason for U.S. smartphone users to upgrade. But as we see from the problems that Samsung is having with the Galaxy Fold, and the prices that these devices cost, it might take a number of years before this niche area of the smartphone market can give the industry a shot in the arm.

Verizon and AT&T had record low upgrade rates for the first quarter of 2019

Verizon and AT&T had record low upgrade rates for the first quarter of 2019

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29 Comments

1. iloveapps

Posts: 408; Member since: Mar 21, 2019

Two main reasons: Most people don’t buy products every year and apple products last for 6 years.

14. TBomb

Posts: 1133; Member since: Dec 28, 2012

all smartphones will last you 6 years if you don't sabotage it.

15. sissy246

Posts: 6959; Member since: Mar 04, 2015

LMAO I know people still using the note 4 , s3 and the person that bought my note 5, all still going strong. Oh , also the guy that bought my husbands HTC m7 still going strong. So try harder peaceboy

25. lyndon420

Posts: 6451; Member since: Jul 11, 2012

Apple products last for 6 years??! Except those that brick after a shoddy and poorly tested upgrade, antenna issues, bend, and 'pre-bent' right out of the box. Your blatant bias and blind loyalty to the brand is hilarious...keep it up!!

2. inFla

Posts: 45; Member since: Aug 17, 2018

Lack of innovation? How much innovation can you pack into a phone?

3. iloveapps

Posts: 408; Member since: Mar 21, 2019

Isn’t Samsung fold is innovation? Flip phones for the future.

18. superguy

Posts: 385; Member since: Jul 15, 2011

The issue we're at is most phones can handle just about any task we can throw at them these days. We've hit "good enough" for most people. Most phones don't offer a significant enough jump in performance or features to make people want to go buy a new phone. I'm willing to bet that there's more people replacing phones thru insurance than thru an upgrade. I was entirely happy with my OP6. Only reason I'll be getting a 7 is because my 6 got lost and likely was destroyed. Insurance gave me an S8 as replacement. My wife got an S10e only because her S8 was having problems and it was out of warranty. Otherwise it was just fine. Most in my circle are replacing if their phone dies or breaks. Otherwise, you don't hear people talking about or showing off the latest and greatest. We're all geeks too. Anecdotal, sure. It's a data point at least, and at least shows me the article is plausible. The Fold is innovation, but it's not going to appeal to everyone. That may change as tech and designs improve, but for now, it's a niche product. Big, bulky, and very expensive. Aside from that, though, the guts are more or less the same as the S10.

4. sun0066

Posts: 257; Member since: Feb 12, 2011

Besides of the processor the phones had not evolved e enough to upgrade for some people, so they remains functional for more time, also the new phones are too expensive and probably some people had realise it there are more pleasing things in life to expend their money than to buy phones every year

5. rebretz

Posts: 103; Member since: Dec 26, 2011

I think price is one of the biggest factors. Carriers don't subsidize the phones anymore but didn't lower prices either. Most customers have no incentive to upgrade anymore. Even when the carriers offer a buy one get one deal it's almost always only for new customers and most people are going to change carriers just for a deal like that.

10. libra89

Posts: 2221; Member since: Apr 15, 2016

Yep, I agree. Also with this tech, prices seem to have gone up. $1k phones are still not normal but it's present enough that we have people calling a $749 phone cheap. It just seems that way.

13. chris2k5

Posts: 221; Member since: Nov 17, 2012

Agreed. Before, a $1000 phone on a 2 year contract (subsidy) cost $399-599 which was palatable.

16. sissy246

Posts: 6959; Member since: Mar 04, 2015

Agree Prices are a big part of it.

19. superguy

Posts: 385; Member since: Jul 15, 2011

Anything over $750 is a hard sell for me. I have a hard time paying high-end laptop prices for a phone. At least for me, phone is for light tasking and doing things quicker than getting out my laptop and booting it up. Anything that requires heavy lifting or needs something bigger than a phone goes to a laptop for me. Couldn't get into tablets. YMMV, of course.

6. TadTrickle

Posts: 33; Member since: Apr 08, 2019

I'm still waiting for them to bring back removable batteries, that's why I'm still rockin the mighty note 4 (I know it's not happening) But seriously, this phone still does what I need it to. And I have yet to see a worthy successor. I'll ride this until the wheels fall off

7. obedchuni

Posts: 310; Member since: Jun 16, 2014

Luck with your ride with marshmallow on top of it.

17. sissy246

Posts: 6959; Member since: Mar 04, 2015

If the phone does what he needs it doesn't matter what is on top of it.

8. DFranch

Posts: 511; Member since: Apr 20, 2012

Phones are too damn expensive. People are keeping them longer. PC's were the same way. It used to be I upgraded my computer every couple of years, but it just got to a point where for most things a 3 year old computer is still fine (Gaming is the only thing still demanding the latest & greatest). Phones are about the same. Flagship phones all have good camera's and can run all the apps. Why spend $800+?

11. libra89

Posts: 2221; Member since: Apr 15, 2016

Truth! In the era of 1k phones, that's easier to do.

22. superguy

Posts: 385; Member since: Jul 15, 2011

I'm with you. I was the guy upgrading all the time back in the day. Now being 20 years into my career in IT and IA, I don't want to futz with another computer when I get home. We all have laptops. Most are mid-range in the $500-600 range and are used until they wear out. For gaming, I still have the MSI GT60 I bought back in 2013. I've added upgrades, including updating the graphics card to an Nvidia 970M (up from a 670M - thank you MXM!). And now Nvidia has the gaming cloud that works relatively well. For more every day tasks, I have an 14" Ideapad 720S that handles most everything. The MSI can still handle the beefier stuff with the upgrades I did, so I have everything I need between the two. I run some servers at home. They're all running on older hardware. I have a couple 1st gen Nehalem systems, and also an old Core 2 9300Q (quad core) . I don't need high performance since they're mostly a lab environment for me to keep my skills current. But even then, I don't get in there and futz with them more than I have to. My dad was a geek from the dawn of the PC days, and I always had the top end system of the day growing up He'd sell off our old stuff, often at profit (when you could do that back then), and we'd get the next thing. Eventually, he got tired of it and started buying Dells or whatever. I couldn't understand how he got to that point, but now that I'm older I can see it - stuff was just good enough for what he needed - in both quality and performance. So why go thru all the hassle? I think that's the bottom line - why go thru the hassle? My wife is even content keeping what she has - even if it has problems, because she doesn't want to go thru the hassle of moving everything to a new device. How many of us know people like that?

9. cncrim

Posts: 1558; Member since: Aug 15, 2011

Slow down because Innovation in smartphone had peak and price is another factor.

12. chris2k5

Posts: 221; Member since: Nov 17, 2012

This has nothing to do with innovation. Before on the 2 year upgrades, there was a subsidy that allowed you to buy phones at 50% off or more as long as you stay with carrier for 2 years. Carriers got greedy and didn’t want to offer that anymore. Now you pay full price just over a 24 month period. It no longer rewards loyalty which is why you see decline in subscribers and upgrades. They are losing money. Their own damn fault.

21. kevv2288

Posts: 269; Member since: Jul 30, 2015

I agree with what you said, except for the part about full price. There a lot of deals that if you do pay the phone over 18 or 24 months you get the phone cheaper than buying it outright. But that's the catch, they make you essentially sign a 2 year contract, because if you cancel service before the 24 months are up you then owe the full retail on the phone. Most people don't want this, so they don't buy from the carriers.

20. kevv2288

Posts: 269; Member since: Jul 30, 2015

I think a lot of people are not buying their phones from the carrier anymore. I bought mine from Google. The carriers now say they don't have contracts, but then they make you agree to 18 or 24 month installment plans in order to get a phone discount. People don't want that so they buy elsewhere and then won't be tied to any commitment.

23. D34ever

Posts: 210; Member since: Jul 14, 2018

5G is going to cost everyone an arm and a leg. So I can't see how that will turn things around for the carriers and device manufacturers.

24. tntwit

Posts: 82; Member since: Sep 11, 2012

Carrier subsidies were nothing more than marketing magic. The difference was built into the monthly bill. When we switched off of a Verizon contract plan, we still had lines under contract. Verizon said, no problem, and simply charged an additional $20 a month for those lines until the contract period was over. You were always paying $480 ($20 x 24 months) on top of whatever you paid up front with the subsidized plans. We always upgraded at 24 months because the monthly payment never went down and I knew (even though the carriers would never admit it) that we were paying for a new phone anyways, so why would you keep the old one? The $20 isn't built in anymore, so why upgrade? The phones are way too expensive. A phone shouldn't cost the same as a good laptop. Also don't understand why lower demand has somehow increased prices. That isn't how supply and demand works and would probably explain why sales are down. I guess that's just fine if the manufacturer's profits are still good, but I'm still going to wait for the sales when I need a new phone.

26. Sergpop

Posts: 5; Member since: Feb 21, 2019

Prices are crazy, not too many people can afford 1000 boxes just for the phone, you could buy Sofa and Chair from Costco for that kind of money. These phone Manufacture company are getting greedy day by day.

27. Crispin_Gatieza

Posts: 3089; Member since: Jan 23, 2014

Some here are blaming high prices for the decrease in sales. Some are pointing at lack of innovation and others are pointing at carriers not subsidizing anymore. Did anybody stop to think that phones are simply better than they were just a few years ago? Better processors, more RAM, more storage, HD displays and greatly improved cameras all account for folks keeping their devices longer.

28. Poptart2828

Posts: 309; Member since: Jan 23, 2018

Companies that are truly pushing the boundaries in terms of design and innovation do not do business in the USA.

29. droiduh

Posts: 94; Member since: Jun 04, 2015

Still have my Moto Z Force Droid. I bought a moto power pack mod to keep it going.

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