Smartphones today aren’t very different from the ones consumers purchased a few years ago. The speed, audio and visual quality, and general feature sets have seen incremental improvements, but for many people, expensive smartphones from Apple, Samsung, and others are simply up against the law of diminishing returns. We’ve seen this play out in the past decade as more and more consumers hold onto their phones for longer and longer. Wireless carriers like Verizon and T-Mobile are desperate to change that, however, primarily to subsidize the massive cost incurred by their continued 5G infrastructure rollout.
In fact, both Verizon and T-Mobile are willing to take customers’ old, damaged phones as trade-ins as part of a plan to provide more consumers with 5G devices that require signing up for premium plans at the carriers. In effect, the shiny, new 5G phones have become Trojan horses for carriers to get customers to pay more over the long-term.
To deploy new C-band frequencies for 5G, Verizon has committed to spend $10 billion over the next three years, and it’s expected to spend upwards of $3 billion by the end of the year. T-Mobile is pushing hard to become a leader in 5G as well, not only to stay competitive but because it could lose subscribers when it shuts down its old CDMA network.
AT&T, which has spent over $23 billion to win 1,621 licenses in the C-band spectrum, has been more conservative than Verizon, but the recent spin off of WarnerMedia should free up resources for greater 5G investment in the future. Since Apple launched the iPhone 12 last September, AT&T has aggressively pushed trade-in offers for iPhone 8 or later models, requiring that customers sign up for one of the company’s unlimited plans.
Big Wireless is at a crossroads and is investing heavily in a technology that many consumers haven’t seen the benefits of just yet. According to Interpret’s New Media Measure®, older consumers are the least likely to pursue a smartphone upgrade, as just 11% of those over 55 years old and 15% of those over 45 plan to replace their phones in the next three months. The telecom industry has a better chance with Millennials and Gen Z, but even with the younger crowd only about a fifth of the population is looking to upgrade.