Strategy Analytics predicted operators will have to reinstate device subsidy offers in order to bring pricey 5G handsets within reach of consumers, or else face slower uptake of the next-generation technology.
In a new report, the analyst company said 5G smartphones will be the most complex and expensive devices ever, with wholesale costs of more than $750 and retail price tags of $1,000 or more. Those costs will be slower to come down than 3G and 4G device prices, it added.
However, operators can use subsidies as a tool to reduce the cost and make 5G phones more accessible to the mass market.
“It requires magical thinking to expect that consumers are going to rush to buy 5G smartphones that are bigger, and more expensive than any phone that they’ve ever bought before,” Ken Hyers, director of emerging device technologies said in a statement. “Slower uptake is a real threat unless someone closes the gap to 4G performance.”
For years, US operators offered devices at a reduced cost for customers who signed multi-year service contracts. However, the practice largely faded by 2016, as operators dropped subsidies in favour of device payment plans which stretched the full price of a phone out over 18 or 24 months.
But rising 4G flagship costs are already putting pressure on consumers, pushing operators to extend those payment terms.
AT&T offers both 30-month and 36-month payment options. T-Mobile US also announced plans to roll out a 36-month installment plan for premium tier devices including the Samsung Galaxy S9 and Note 9; LG G7 ThinQ and V40 ThinQ; and the iPhone XS, XS Max, and XR.