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Don’t Be That Person Who Buys a New iPhone Every Year

Rob Pegoraro
Contributing Editor
Yahoo Tech
People in lawn chairs in line for the new iPhone

In line already for the iPhone 6. (Business Insider)

Later this morning, Apple will introduce at least one new iPhone, which means that people who bought 2013’s new iPhones will soon face a cruel dilemma.

On the one hand, pulling the trigger on a phone upgrade after only a year is an expensive habit. On other, sticking with last year’s model can mean being reminded of its technological inadequacy every time somebody else pulls out a factory-fresh iPhone — especially if they then do something you cannot, perhaps paying for things with NFC or making high-quality calls over LTE wireless.

And that can feel crummy. Oatmeal cartoonist Matthew Inman memorably satirized it in his comic “What it’s like to own an Apple product.”

Who upgrades when?
Raw averages suggest that most Americans don’t upgrade their phones that often and are in fact taking longer to do so: The average upgrade cycle for all phones — smartphones and less-capable “feature phones” — has stretched from 18.7 months in 2007 to 21.7 months in 2010 to 22.4 months last year, according to Recon Analytics.

Considering that smartphones show their age faster than feature phones, and that their market share is increasing — the Pew Research Center found that by the spring of 2013, more than half of Americans had become smartphone owners — you might expect the trend to run the other way.

But Recon founder Roger Entner noted that behind those figures, many owners remain on a yearly-upgrade treadmill: “Roughly 45 percent replace every year, 40 percent every two years, and 15 percent whenever it breaks.”

Cracking the screen on your phone may not leave you much choice about when to replace it. But early upgrades are a matter of choice.

Contracts and costs
Yearly upgrades are a financially horrible ritual for those under the traditional two-year mobile contract. Buying too soon exposes you to the full, real price that carriers normally subsidize (actually, they hide it behind inflated monthly rates). Even once you pay your $650 for a new iPhone instead of the advertised $200 price, you can find yourself paying rates that assume you got that subsidized price.

You’re less of a patsy if you buy your phone on an unsubsidized plan, where the total equipment price is the same no matter how often you trade up. But not all unsubsidized plans treat you fairly.

Only T-Mobile’s completely separates the cost of service and hardware; you can buy a new phone every six months if you want, and your service will cost no more or less. AT&T’s Next, Sprint’s Easy Pay and Verizon’s Edge deals give you a partial discount if you don’t have an on-contract phone, but it’s usually just $15 at AT&T, $20 at Sprint, or $10 at Verizon. These discounts still yield total two-year costs above your expenses on a subsidized handset plan.

Even factoring in the absence of activation fees on these unsubsidized-phone deals, you’re basically paying extra for the privilege of being a more ardent smartphone customer.

(Those three companies’ unwillingness to split service and hardware pricing also complicates shopping for non-compulsive upgraders. I did the math on their offerings for The Wirecutter’s guide to wireless service, and weeks later my head still hurts.)

A saner way
The rate of improvement for smartphones has slowed in recent years. The iPhone 3GS represented an enormous advance over the original iPhone, but the 5s did not constitute an equivalent upgrade over the 5. On Android, the Nexus 5 wasn’t enough of a boost over the Nexus 4 to persuade many people, like me, to upgrade.

Buying every two years or so gets you a better return on your investment and encourages phone manufacturers to work harder to earn your upgrade dollar. But even if you’re positive your iPhone 5 has served you well and earned a retirement, please don’t camp out on a sidewalk to buy its replacement. That’s just tacky.

Email Rob at rob@robpegoraro.com; follow him on Twitter at @robpegoraro.