Faster upgrade plans like AT&T Next could be new frontier in wireless

Main targets of new plans are the young and tech savvy, who want latest phones sooner

AT&T's Next smartphone and tablet upgrade and no-contract plan, announced Tuesday, competes with a similar plan called Jump! from T-Mobile and another expected soon from Verizon Wireless.

Verizon is reportedly working on a no-contract plan called VZ Edge that would allow customers to upgrade to new phones once they've paid off half the balance of their current phones. The website Droid-life reported that VZ Edge will launch Aug. 25, although Verizon wouldn't comment.

All of these approaches, and possibly another coming from Sprint, are tactical responses by the carriers to fundamental, ongoing changes in the wireless industry. As the major carriers spend $20 billion over five years to upgrade their networks to faster LTE and related technologies, they must rely on an arsenal of tactics, such as more frequent device upgrades and no annual service contracts, to keep their customers from leaving.

Behind that reality is that all the wireless carriers also want to attract their future base of the most highly coveted customers -- those tech-savvy users under 35. They make up the biggest demographic group most interested in using the latest smartphones and having network access for plenty of available data. As those heavy data users age over time, all the carriers want to be first in line to serve them.

"This is going to be interesting. It's a new frontier," said Bill Menezes, an analyst at Gartner, referring to the carriers' recent moves.

Those customers wanting more frequent upgrades than the traditional one-device- every-two-years are in the minority, five analysts agreed. They tend to be early adopters of technology and mostly under 35.

The upgrade plans also tend to favor users keeping to a consistent smartphone operating system, like iOS or Android, Menezes said. Users will want to keep the apps they acquired with a specific OS on a new device running on that OS, he said.

But in coming years, carriers may work out ways to make those apps portable to most any OS as customers store more apps in the cloud, Menezes added.

IDC analyst John Weber said that until now, about 54% of consumers have waited 24 months or longer before purchasing a new smartphone or tablet, most likely because of the two-year contract model. Otherwise, they are breaking the contract and must pay a penalty of up to several hundred dollars.

"All the carriers knew things had to change, and T-Mobile drove their hands," said Patrick Moorhead, an analyst at Moor Insights & Strategy. "The entire U.S. telco system is maturing and carriers are scrambling to meet the more diverse needs of consumers."

To generalize, Moorhead said, the plans either cater to consumers who want to retain devices longer and pay lower monthly fees or the tech savvy users who "love devices and want new ones more than once every two years."

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