Is There A Move From Contract To No Contract Phones?

US wireless carriers experience a drop in subscribers.

 
After many years of generally reporting gains for contract cell phone plans in the US, there was a drop in the 1st quarter for contract subscribers for the larger wireless carriers. While some may say that it is too earlier to say this is a trend, it could well show a shift which people are now willing to take given just how fast new phones are being released. It seems that just about everyone has a cell phone and some people have more than one and a tablet on top of that. Given how many there are, are we at a saturation point? In an Associated Press article, they have put together the information regarding the decline. But they have not drawn any conclusions from the information.

All Things D has taken the report and gone a step further by putting together a chart showing how the wireless carriers have done since 2006 and it is an interesting view. While it shows that this is not the first time that wireless carriers AT&T and Verizon have seen a decline, this comes at a time when they should be seeing increases in contract subscribers. This is because there are a number of great phones on the market and more seem to be showing up every other week. So, with all the great smart phones showing up, it makes one wonder why there has been a downturn.

It is a known fact that a percentage of contract cell phone owners use little of the allocated minutes for voice and tiered data plans. It is that group which subsidizes those users who consistently push up to the allocations for their contract plans for voice and data. In recent years, the data portion has been seeing over use as smart phones become faster and contain far more features. Add in 4G LTE, and some of the heavy users are tearing up the airwaves with their streaming video activities.

The idea of a no contract phone has been catching on, even though it has been slowly. Many do not need to have the large number of voice minutes or data plans which are part of the normal contract plans offered by the carriers. While you do get the phone at a reduced price, you are paying for that reduced price a little at a time each month of your contract. Under the no contract model, you pay a much higher price for the phone up front, but then you are not locked into a contract, but rather prepay for minutes for voice and amounts for data usage. This is a much different model than what many are used to.

But with all the changing of wireless plans to the tiered data plans and rumored increases in plan fees, people are going to start looking at some other options for their smart phones. I am on a grandfathered unlimited data plan with Verizon Wireless and today there has been a lot of talk about them working towards eliminating unlimited data and that is a concern. No, not really, as I do not use that much data that it would make a huge difference. But there are many who do and they are going to be concerned.

It is people like me who are not abusing the data plans and am concerned about getting locked into a 2 year contract. I have written about the need to return to 1 year wireless contracts because of how fast new phones are being released. The annual roll out of a new iPhone as an example would make 1 year contracts a great deal. Right now, the early termination fees force many to stay on their current 2 year contract and wait. That is because at the moment, the no contract options have not been showing up with the latest phones.

But the phones have slowly been getting better. If the no contract phones begin to arrive with some of the latest phones, there may well be a shift to the no contract model and away from the 2 year contracts wireless carriers stick people with today. If the wireless industry suffers a 2nd quarter decline as well, then one can assume that the shift has begun. We are half way through the 2nd quarter already and there are continuing reports of declining sales for the iPhone and probably others. It may only be a matter of time.

Do you believe we are going to see a shift to no contract phones?