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We're Holding Onto Our Phones Longer, Even as Prices Drop

by Amar Toor on September 28, 2010 at 06:15 PM

old cell phoneConventional economic logic would suggest that, as the prices of new cell phones drop, we -- as rational, price-taking consumers -- would abandon our older models for shinier, more cost-effective alternatives. According to a new survey from J.D. Power and Associates, though, we aren't.

As PC World reports, consumers now hold onto their mobiles for an average of 20.5 months -- 17-percent longer than they did in 2009. In fact, users are now keeping their cell phones for longer than they have at any point since 1999, when J.D. Power first conducted its series of customer satisfaction surveys. At the same time, however, cell phone prices continue to drop. In 2010, for example, the average price of a mobile phone was $76, compared to $81 in 2009. Moreover, 42-percent of cell phone users reported having received a free phone as part of a wireless plan.

Kirk Parsons, senior director of wireless services at J.D. Power, theorizes that consumers may be less willing to purchase new phones because of the "general economic downturn, in which the expense of purchasing a new device could outweigh the added benefit of owning it." While exogenous economic conditions may indeed play a role in mobile consumer decisions, the phenomenon is probably more complex.

For one, the overall quality of phones -- and smartphones, in particular -- has evened out across competitors in recent years, making product differentiation increasingly more difficult. And, as Engadget points out, users are probably more reluctant to purchase the latest smartphone to hit the market when an upgraded, more tricked-out version of the same phone is always just around the corner. By the same token, this constantly changing product market may make it difficult for customers to commit to a long-term service plan with a particular carrier, when a different carrier may come out with a game-changing device in just a few months.

The combination of these demand-depressing factors, then, would help explain the corollary decline in cell phone prices. The global economic downturn, of course, has very likely played a role in deflating demand for mobile phones, as it has across virtually all consumer sectors. But to sweepingly attribute these trends to more expansive economic conditions would ignore the systemic peculiarities that make the cell phone market decidedly unique.

Tags: business, cellphones, economics, economy, FinancialCrisis, JdPower, MarketNews, smartphone, study, survey, top

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