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As with computers and other newer technologies, the feature set on phones is growing all the time. For the consumer, this translates into a desire to have a new phone frequently. However, if you've ever tried to ask your carrier for a new phone, you've probably run into trouble getting it for anywhere near the price you see in the ads.
This seeming paradox (new customers get better pricing than existing ones) occurs because most carriers spend considerable amounts of money to gain new business (see page 46). Since it takes the better part of a year for a carrier to start making a profit on a new customer, it would be economic suicide to give out a new phone annually.
This situation leads to a high defection (churn) rate in the industry, as consumers with limited loyalty can (and do) switch carriers as their contract ends in order to get a new phone. This is particularly true in a world with number portability, which is one reason why we are seeing more two-year contracts and more linked pricing (see box below).
While some carriers are beginning to change their thinking in this area, with discounted upgrade programs for long-term customers, the situation is still far from ideal.
Remember MCI's program Friends and Family of a few years back? It was a brilliant strategy to build loyalty, by getting MCI's customers to recruit other members. Many of the wireless industry pricing strategies that we have seen of late, including an increased emphasis on family plans, the introduction of “walkie-talkie” service by some of Nextel's competitors, and free mobile-to-mobile calling, all have one thing in common — they require multiple subscribers to take full advantage of them.
This linking makes it more of an effort for users to switch to another service, and so it is a subtle way the carriers are using pricing to reduce defections.
Getting a Replacement Phone
Once you are a customer of a certain carrier, you usually won't be able to take advantage of the phone deals you see online or in stores unless you are adding a new line of service. This is true even if your contract has expired. Even the offers on the carrier sites themselves are generally reserved for new customers. With that in mind, your replacement phone options boil down to these:
Easier to do these days with number portability (assuming you want to keep your number), but can be expensive if you are still under contract. The good news is that there are plenty of free or very low-cost phones available with new service; if you haven't upgraded your phone in the last year or two you are likely to be surprised at the range of features you will get for very little money.
Buy a New Phone
Call or visit a retail store of your carrier and find out the price for one of their current model phones. Try negotiating for a better deal from the one they first offer. It never hurts to ask. Your chances of success will depend on how much leverage you have. If you are no longer under contract, if you have been a long-term customer, and/or if you are a high-revenue customer you might be able to cut a deal. Note that in most cases you'll have to sign a new contract or extend your existing one. Alternatively, you can buy an “unlocked” version of a GSM phone from an independent retailer that you can then take to your GSM-technology carrier for activation.
Buy a Used Phone
Try an auction website. However, that can be a bit tricky. You'll need to know whether or not the phone is locked or unlocked and what technology it uses. You should check with your carrier before you acquire a replacement phone from a third party to confirm it can be activated on their network.