24-month mobile phone plans could soon be killed off

The two-year phone plan is dead and phone upgrades in the United States have slowd by 25% over the past four years.

In Australia many of us are still locked into the mindset of upgrading our phone with our plan every two years, but in the United States that pattern of behaviour is dead.

Americans now take an average of 29 months to upgrade their mobile phone, up from 22 months just four years ago.

In January this year, the last major American carrier, AT&T, finally killed off its two year subsidised phone contracts. This followed the lead of rivals, Verizon and T-Mobile.

Instead the trend in the United States is to replace the subsidised phone plan with separate service plans and phone payment plans - and this is making consumers hold on to their phones longer.

The primary reason for this outcome is referred to by Americans as  "smartphone sticker shock."

Under the new separated pricing structure, the "sticker" or price tag of the device is now more transparent. And once they caught a glimpse of the real price of the devices they use - as opposed to it being hidden in a subsidised phone contract - American consumers have decided to hold onto their phones just a bit longer.

VoicePlus managing director, Michael Giffney, believes Australian carriers will inevitably head down the same path and there are benefits to enterprise business in purchasing their smartphones upfront.

"It makes sense for the carriers to move in this direction as they make little to no profit out of hardware.

"It also makes sense for some business customers. It often comes down to a choice of 'pay now or pay more later,'" says Giffney.

He explains the benefits in purchasing devices outright can include:

• ability to negotiate a better price for devices
• availability to choose from a wider range of devices
• no hardware ETCs which are imposed when a contract ends prematurely due to staff movement or device loss
• ability to negotiate with the carrier a casual plan negating the risk of contracted plan ETCs
• simplifies mobility management tasks
• enhances flexibility to change carriers or plans
• CapEx rather than OpEx decision

"The only constant in the mobility space is change. I have no doubt that the structure of contracted phone plans will change in Australia as it has in the United States. It's just a matter of time," says Giffney.