What's even more depressing is that people are allowing themselves to be roped into long contracts by purchasing subsidized handsets. This is a double-edged sword for the carriers. "While these longer contracts help wireless carriers recover the costs associated with offering subsidized cell phones, customers tend to hold on to their current cell phones longer to avoid termination fees when switching service, which may ultimately lead to lower renewal rates," said Parsons.
The drop in average handset prices underscores the fact that people are buying cheaper, less-advanced phones.
The price a customer pays for their wireless mobile phone has dropped from an average of $103 in 2002 to $93 in 2007. The decline is primarily due to discounts given by handset providers and wireless service carriers to incentivize sales. Currently, 36 percent of customers report receiving a free mobile phone when subscribing to a wireless service -- up considerably from 28 percent in the 2002 study.
Over one-third of Americans opt for the cheap-o free phone. So does that mean advanced phones like the iPhone, or BlackBerry Curve (which retail for $500 and $200, respectively) have a future? Only in certain circles, it appears.
The subsidization model has deceived Americans about the real cost of cell phones and actually set the bar lower for the entire industry. With one-third of people choosing the free phone, it's obvious that they don't expect to have to pay anything for a phone. Heaven forbid carriers move away from the subsidization model (like Korea has done, and Japan is doing). People won't know what to do with themselves if they have to actually fork over some cash for their phones.