I buy a new laptop about every 18 months. This has been the case since my Dad bought me my first laptop in 1998 (an IBM ThinkPad 310ed, it was a great computer). It is almost like clockwork that I need a new laptop to be the most effective at my job with an 18 month life-cycle. I think I have had six personal laptops since 1998.
As mobile phones become more integrated into my workflow, I am noticing an even shorter life-cycle. The technology is just changing too fast. This is not unreasonable since my laptops have cost between $1,000 and $2,500 whereas my most expensive phone has been my current Treo (which I think was around $450).
This year the mobile handset market has grown by leaps and bounds due in no small part to the release of the iPhone and the increased use of SMS in the US. The current business models are not holding up with this increased pace and it has everything to do with hardware subsidies by the cellular providers (which is why Apple is not allowing hardware subsidies with the iPhone; they want people to buy new hardware every 12-18 months).
So, let’s say I wanted to move to a new BlackBerry instead of my Treo. Both the 8830 and the soon to be released 8130 are compelling. When the (probable) 8330 comes out in Q1 2008 it is a more than compelling transition. However, due to me being “in contract” coupled with the expensive nature of these phones and the deep subsidies that are available to new subscribers, it is cheaper for me to pay the early termination fee and start a new contract than to just buy the phone outright. If I go to a 3rd party reseller I can get an even better deal.
Let’s take the 8830 as an example. If I buy it from Sprint under my current plan it would cost me $549. If I cancel my Sprint contract and buy the same phone through amazon.com it would cost me a $200 early termination fee and $89 for the phone for a total of $289. That is a savings of $260 (close to 50%). Once I pay the early termination fee, I have no lock-in with Sprint and can look for the best hardware/plan on any carrier. AT&T has the 8820 which is like the 8830 but with WiFi. I can get the 8820 from Wirefly for $289 plus the $200 early termination fee for a total of $489. That is still cheaper than buying the 8830 from Sprint under my current plan. This is creating a business environment for Sprint where they can’t compete to keep their current customers.
I don’t know how much truth is in the old adage “it is cheaper to keep the customers that you have than to get new customers”, but Sprint must not believe it. It is definitely cheaper for me to change carriers than to do business the way they want me to do business.
I would think that as a customer who uses a lot of minutes and is a heavy data user who is wanting to upgrade to their nicest phone that they would want to work with me. Instead they want to penalize me. I just don’t understand the business sense of that. The market agrees with me too:
Sprint Nextel’s quarterly profit fell 77 percent as its mobile service lost subscribers, and it withdrew its 2008 profit growth forecast, sending shares down 3 percent yesterday.
UPDATE: March 25, 2008
For those that are interested, I am now using an AT&T blackberry 8310. I called Sprint’s retention department first, but they didn’t want to keep me by offering a reasonable price. You can read more about that transition in these two posts:
Goodbye Palm Treo, Hello Blackberry Curve
Goodbye Sprint, Hello AT&T
UPDATE: May 12, 2008
Sprint is Still Losing Customers
