How Long Do You Keep Using a Mobile Phone?

For the first several years after mobile phones became more common, mobile carriers subsidized the purchase of a new phone and amortized that expense over a customer’s 2-year line contract. The 2-year contract was key, as was the monthly line charge that was inflated to pay for the phone subsidy. The phones were “locked” to a carrier, and technical variations in their networks made using a phone on a competing network difficult, if not impossible.

Line charge price competition among mobile carriers and manufacturers selling unlocked phones made the 2-year subsidy model obsolete. The new equipment sales and line charge model offered greater transparency, with consumers paying the actual price for a new phone - though almost always spread over two years of interest-free installment payments. The nominal cost of a monthly line charge dropped, as it no longer included the cost of a phone subsidy. Most customers were probably paying about the same amount, but they finally understood what they were doing.

The demise of the 2-year phone purchase subsidy fundamentally changed the lifecycle of mobile phones. With 2-year contracts, customers overpaid for their mobile line after their 24-month commitment ended. They could get a new phone at a low subsidized price, and continue paying the same line charge, so it was clearly time to upgrade. Diminishing battery life and enticing new features on the newest models made the decision easy. 

After carriers stopped subsidizing new phones, for several years iPhone buyers kept their phones for increasingly longer periods of time. The trend seemed to have reversed last year, possibly due to the increasing trade-in value of relatively new used iPhones, which could encourage earlier retirement of phones still in use. Recent data shows a return to the prior trend.