Sure, network quality matters. But consumers are making cool phones a top priority when deciding on a cellular plan. Photos: Phones that sing
Since May of 2005, he has switched carriers twice just to get the phone he wanted. First, he dumped Sprint Nextel for Cingular Wireless so he could get the , a small candybar-style smart phone running the Windows Mobile operating system.
Less than a year later, he jumped to T-Mobile to get his hands on the JasJar QTEK 9000. This foreign phone came equipped with high-end screen resolution, video calling, a Qwerty keyboard, stereo external speakers, 3G and Wi-Fi capability, and Bluetooth wireless.
The new phone cost the New York City resident $929 plus the $160 fee to break his contract with Cingular.
Four months later, the bug hit him again when a smaller, sleeker foreign phone hit the market called the HTC Prophet (aka the i-mate JAMin). It cost $575. Again, the price didn't matter to Gordon. But this time he was already a T-Mobile customer, so he didn't have to jump carriers. He bought the new phone the first day it went on sale.
"My girlfriend is furious at me for spending so much money on phones," the 27-year-old Gordon wrote in an e-mail. "Am I an addict? Yes, and I love it. This is phone geek lust in its purest form."
For many people, cell phones have become an essential accessory that expresses who they are. Some, like Gordon, want the latest and greatest technology. Others, like the millions of consumers who went nuts for Motorola's ultrathin Razr phones, want the hippest designs.
But how many consumers are actually ? Analysts say the number of people who would switch providers and eat the cost of breaking contracts to get a cool new phone is relatively small. Still, a phone's design and features are becoming important factors in deciding to stay with a carrier once a contract expires.
"Historically in the U.S. market, phones haven't played a big factor in a customer's decision to subscribe to a certain service," said Iain Gillott, an analyst with iGillott Research. "But it's becoming a consideration. Still, the main reason consumers choose an operator is usually network coverage, reliability and price."
According to a survey conducted by The Yankee Group in April 2006, 20 percent of respondents indicated that network quality was the most important factor in determining which provider they chose when purchasing their plans. Only 3 percent said the model of mobile phone offered by the carrier influenced their purchasing decision.
But when consumers were asked what would keep them loyal to their current provider, 28 percent said more frequent handset upgrades would prevent them from jumping ship.
"While the phone may not be the main reason a consumer chooses a carrier's service, once they are with a particular carrier they want the opportunity to get better handsets more frequently," said Linda Barrabee, an analyst with The Yankee Group. "And if they don't get what they want, they can look elsewhere when the contract expires."
That's exactly what John Papadopoulos, a 25-year-old sales associate in Boston, is doing. Papadopoulos, who has been a Verizon Wireless customer since 1999, said he plans to switch to Cingular in November when his contract expires so he can get the , a small, slim phone he says has all the "fixin's" including a camera and MP3 music player. The phone Papadopoulos uses now is the , a 2-year-old model that he says is too big and renders poor picture quality with its built-in camera.
Papadopoulos, who said he is perfectly happy with the quality of Verizon's network, could get a new phone when his contract runs out. But he said even the new , which has many of the same features as the Samsung phone from Cingular, is too bulky for his taste.
"I want something that can fit in my pocket so it's not uncomfortable or noticeable," he said. "It just seems like Verizon has a policy to sell the ugliest, most nonfunctional phones."
Jeffrey Nelson, a spokesman for Verizon Wireless, said it's disappointing that one of Verizon's customers is unhappy with its phone selection. But he emphasized the wide selection of products Verizon offers.
"If it's an issue for one customer, it's an issue for us," he said. "But we do have the cool stuff. Just look at our lineup. We haven't had any problem selling Razrs and Chocolates."
Still, Nelson insisted Verizon Wireless's priority is the network.
"If you want the coolest phones, but don't have a great network, you might as well go to a toy store and pick up a plastic phone," he said. "Because all you're going to get is a nice-looking accessory anyway."
Analysts agree that network quality is crucial to attracting and retaining customers. But they warn that the networks are becoming indistinguishable, especially in urban areas such as New York, Los Angeles, Boston, San Francisco, Chicago and Dallas, where coverage by all four carriers is already ubiquitous and the quality is similar. As a result carriers need to think of new ways of attracting customers.
"I don't think the network is going to be what differentiates carriers in the future," Barrabee said. "The networks are becoming commodities. And consumers will be looking at other factors in making their decisions."
Consumers have already let it be known that design matters. In mid-2005, when the phone from Motorola was exclusively offered by Cingular, sales of the phone skyrocketed and subscriptions to Cingular's network jumped.
"We learned some important lessons from the introduction of the Razr," said Clay Owens, a spokesman for the company. "First of all, work with enough manufacturers to get the coolest handsets available. Secondly, make sure you have an exclusive--customers know their handsets and will choose their carriers based on 'cool.'"
But sales of the phone continued to soar after it was introduced on T-Mobile's and Verizon Wireless' networks, indicating that consumers were also willing to wait for their provider to get the phone they desired.
At least one new cell phone company, a mobile virtual network operator called Helio, is betting the farm that consumers will switch service providers for cooler phones. The company, which is bankrolled by EarthLink and South Korean operator SK Telecom, markets itself as a hip mobile service for the young, tech-savvy consumer. A big part of Helio's appeal are cutting-edge phones, similar to what's offered in Asia.
The company launched its service earlier this year with two phones: the , which costs $275, and the , which sells for $250. Each device features 2.2-inch, color liquid crystal displays, removable memory and a 2-megapixel camera with digital zoom and flash for capturing pictures and video. The Hero also comes with stereo speakers. Because Helio's subscribers are likely to view their phones as accessories, they can also sync their address books over the air to another Helio phone.
"Helio members don't want see their mom or their little brother with the same handset they're using," said Helio spokesman Rick Heineman. "They want something different, something that's designed just for them."
While style, form factor and the overall coolness of a phone are becoming important, most consumers still say the phone is only one aspect that plays into their decision-making process. Papadopoulos, for example, said he'd consider getting Apple Computer's iPod phone if it finally comes out and if it's offered on Verizon Wireless, Cingular or T-Mobile's network. But he stops short of subscribing to Helio just for the phones.
"Cool phones are one thing," he said. "But you need to balance that with a good network. And I know the Helio service uses Sprint's network. And I really don't like Sprint."