Friday, February 3, 2012

Would You Consider Leasing A Cell Phone?

With cell phones launching more and more frequently, it is becoming increasingly difficult to stay current. Keeping a phone that isn't considered outdated is almost impossible, unless you're willing to pay a small fortune.
Generally, when people here in the States buy a new phone through a wireless provider, they are signing an agreement that says they will hold a continuous line of service for the subsequent two years. Because of this, the device is heavily subsidized, dropping the price from roughly between $500 and $700 to somewhere in the $200 to $300 range.
In other words, when you sign your contract, you better be sure that's the device you want to carry for two years, else you will face paying full retail pricing to get a new phone. Selling the phone you bought on-contract is possible and can certainly put a little cash in your pocket. But the mounding issue with reselling carrier-locked devices is resell value, which can plummet just months (or even weeks) after you purchase the phone.
This is the model we've been working with for many years in the US mobile market. But what if you could have the latest and greatest mobile devices without ever owning them? While perusing my timeline on Twitter the other day, one of the people I follow, Corey Herscu, Editor-in-Chief of thecellularguru.com, tweeted:
He continued to expound on his tweet, explaining that customers could lease a phone in small increments – three, six or nine months – and give the phone back to the carrier after the lease term is up. We exchanged a couple tweets back and for, and then the cogs in my head started turning.
In search of a little more information on this, I did a little digging and quickly found the source of the brilliant idea. Ryan Kim of GigaOM ran a story titled Why buy the latest smartphone when you can lease it? on Wednesday, further explaining the logistics of how the first mobile device leasing program in the US would work. Kim says the Mobile Device Lease xChange, administered by a subsidiary of TMNG called MDLx, a carrier would be able to:
"offer their top customers the ability to lease a phone for 12 months at about $20-30 a month for the device. They would need to pay for voice and data plans separately and the device would need to be covered through an insurance plan, either though the operator or by the customer themselves. The amount of the payments would vary based on the value of the device and the carrier has the option of waiving the insurance plan, accepting a deposit instead."
The idea here is to cut the customer's commitment to a single device in half, allowing them to upgrade to up-to-date devices more frequently and to get said customers to actually enjoy or like their contract. Unfortunately, to keep costs and risks down, carriers would only realistically be able to offer device leasing to the top eight to 10 percent of post paid customers. The extended benefits of this program, however, would grant carriers the ability to purchase a previously leased device from MDLx at market value and resell it at a decent price, without subsidy.
The ability to lease a mobile device instead of own definitely has its appeal, especially to folk like me who don't like to spend more than a few months with a device. In this instance, Corey's idea of even shorter three to nine-month lease terms sound much more appropriate than a year-long lease. This would keep me from having to purchase a phone at $600 or $700 and trying to adequately buy, sell and trade devices to keep from losing too much money on a single device, just to keep up with the latest devices.
That said, I have my reservations. For instance, if you are not actually owning the device, by law, you cannot tamper with the software – meaning, you could not root or jailbreak the phone you are leasing. (Of course, you could always root or jailbreak and restore the device to its stock software before the lease term is up. But I'm talking about what is legal., not what is or is not possible.) Also, by leasing a device, you're just throwing money to the wind and not actually paying toward something. Instead of paying $300 upfront and using a device for two full years, you would be paying between $240 and $360 – double, triple or quadruple that for families – to "borrow" a device for 12 months. At the end of the term, you have nothing to show for it. To some, this if just fine. I, however, am not certain I could pay $240 (plus the wireless bills) just to use a device for a year.
There's also the question of which carriers will be willing to jump on board with the program. Will they settle for just $20 or $30 per month? Will they be able to use their weight and bump the price $5 or $10 per month? If so, the prices would still appear reasonable for a per month rate ($25 to $40), but the minimum price after 12 months would jump to $300 and the maximum would be $480.
All of these are fairly reasonable concerns.
I definitely agree with Kim in that there needs to be more subsidation options available to wireless customers. Just a single offering of a two-year agreement or forcing customers to go with a steep no-contract device is a bit uninviting. A viable one-year option like this would appeal to many. But personally, I'm not willing to pay a couple hundred dollars in and walk away with nothing to show for it. (I don't mind this when it comes to, say, multimedia services like Spotify or Netflix. But when it comes to physical devices, it doesn't sit well with me.) Not to mention, a year is still a long time in this market. If there were shorter terms, it might be a little more reasonable.
What about you, ladies and gents? Does the ability to lease a device instead of owning it appeal to you? Is a year-long term too long? What about the pricing? Is $20 or $30 too much to ask? Sound off in the comments below!

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