Wireless Industry Spurs Upgrade Trend

New cell phones with advanced features are likely to turn up on holiday wish lists as J.D. Power and Associates finds that wireless subscription prices are dropping and demand for new units is growing. The 2003 study reveals that 42 percent of current U.S. wireless subscribers are considering a new cell phone purchase over the coming year — a 14 percent increase over 2002, when 37 percent had purchasing intentions.

Kirk Parsons, senior director of wireless services at J.D. Power and Associates, believes that the upgrade trend comes as a result of incentives from wireless service providers: “The number of customers who report receiving a free cell phone when they subscribe to wireless service has doubled — from 18 percent in 2000 to 37 percent in 2003. However, since most of the aggressive cell phone promotions are subject to customers signing up for long-term contracts (typically two years), wireless providers are recouping the rebate cost with guaranteed monthly service fees.”

Those monthly service fees have dropped significantly for subscribers. In 1999, the firm found that an average monthly wireless bill ran $128 — significantly higher than the average $88 per month that subscribers are paying in 2003.

Device churn coupled with dropping monthly rates already seems like a winning situation for manufacturers, providers and subscribers, but it gets even better: customer satisfaction with phones that are less than a year old is significantly higher than among those with older models.

Newer mobile phones include many cutting-edge features, such as colorful displays, polyphonic ringers, data and messaging capabilities, and integrated cameras. J.D. Power and Associates found that when manufacturers exceed customer expectations it substantially raises the possibility that subscribers will not only buy the same brand the next time they are in the market to replace their mobile phones, but also that they will upgrade to a higher-priced model.

Factors Contributing to Overall
Mobile Phone Satisfaction
Features 27%
Durability 23%
Physical design 19%
Battery function 16%
Operation 15%
Source: J.D. Power and Associates

In-Stat/MDR found camera phones to be a hot seller. In the first quarter of 2002 alone, worldwide camera phone shipments totaled 7.8 million units, while 2002 shipped 18.2 million units for the entire year. Furthermore, shipments of handsets with an integrated digital camera will show a compound annual growth rate of 53.2 percent through 2007.

Research from Canalys reveals widespread growth in integrated camera shipments in the EMEA (Europe, Middle East and Africa) region, measuring a 166 percent increase from the first quarter of 2003 to the second quarter. In Q1 2003, EMEA imaging phone shipments totaled 1,443,310, and grew to 3,843,940 in Q2.

“The fascination with integrated digital cameras began in Japan and has now come to Europe,” said Canalys senior analyst Andy Buss. “The U.S. trails the rest of the world in this regard and this is bound to influence the product designs of U.S.-led companies. A mobile phone is a fashion statement, not just a functional piece of telecoms equipment. Phones with add-on cameras may be functional, even flexible, but they are simply not as stylish as the leading integrated models. The Asian and European companies realized this early on and are seeing the benefits.”

In-Stat/MDR Senior Analyst Neil Strother comments on the drawbacks of camera phones, citing their need for better image sensors, more on-board memory for picture storage, longer battery life, and network improvements to make picture sharing easier and interoperability a reality. Privacy concerns are also plaguing the market.

Camera phones are causing concern in Japan where young users are making a habit of photographing information in magazines and newspapers, and reading the articles on their PCs instead of buying the publication. According to a Nepro Japan survey of more than 6,000 individuals, 60 percent said they think “digital shoplifting” is immoral; 26 percent said they considered the act a crime; and 14 percent said it is permissible.

The survey further revealed that 14 percent indicated that they had actually carried out, or contemplated carrying out such an activity. Of those who engaged in digital shoplifting, 14 percent took photos of recipes, 13 percent took restaurant reviews, and 10 percent took photos of fashion news articles.

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