I remember back to my days at school and learning about consumable and non-consumable products. It seemed relatively simple. A consumable product is one that will be used up over a short period of time. Something that is capable of being consumed. We learned that milk; bread; petrol etc. were all consumables and utilities – such as water, electricity and telephone services – were also consumables. Non-consumables were items that, while they may deteriorate over time, were primarily utilised without altering them substantially. Refrigerators and ovens in a household were examples of such products and cars and buildings were further illustrations.

When I connected Dubbo’s first mobile phone on 26 July 1990, it was pretty easy to determine which category a mobile slotted into. That phone was a handheld NEC P3 and was sold for over $5,000 (the equivalent of almost $13,000 today). Customers purchased a phone with the expectation they would keep it for years. It was more common for customers in 1990 to buy an installed car phone – mainly due to the lower price tag of around $3,000 – and the phone would often be removed and installed in the next car purchased. If a car was categorised as a non-consumable product, and a car phone outlasted the car, then it was pretty easy to drop a phone into the category of non-consumable.

Fast forward and the categorisation is not quite so easy.

It was 2011 when the world of mobile phone purchases made a seismic shift. It was in the UK where the first carrier offered a mobile phone leasing program whereby the customer didn’t own the phone. The monthly payment for the telephone service had a phone bundled in with the plan and, after 12 months, the customer could hand the phone back in for the latest model and just keep paying the monthly telephone bill. With 28 per cent of Americans identified as strong early adopters, the American carriers jumped onto the same concept in 2012. Carriers found it worked particularly well with iPhone users who were keen to upgrade their phone in September each year when the latest product was unveiled to the world. The CNBC All-America Economy Survey found that half of all Americans cut back on other expenses just to be able to afford new technology. Who needs food when you can have a new smartphone!

By 2014, with the big-name carriers like Verizon and AT&T pushing the leasing concept, nearly 25 per cent of all new smartphones in the US were ‘purchased’ with financing plans. Of all iPhones sold, only 8 per cent are directly through Apple but in 2015 the company introduced a new initiative called the iPhone Upgrade Program. This allows a customer to finance an iPhone with monthly instalments and upgrade to the newest iPhone each year. As an added bonus, the phones also come with AppleCare+, Apple’s extended warranty and technical support program. This program has only been rolled out in the US; UK and China at this stage.

This is all great if you live in the US or UK, but what is happening here in Australia? After seeing the success overseas, Telstra introduced Australia’s first leasing plans on 8 November last year called Go Mobile Swap plans. With 19 per cent of Aussies identified as early adopters and using research from years of success in similar markets, the target market was the tech enthusiast where having the latest technology is not a want it is a need. You might think of a well-paid professional millennial in this category but with the Swap plans typically being $10 per month cheaper than the traditional plans, they have attracted a whole range of different customers. iPhone enthusiasts of all ages are all over the plans; customers with a history of damaging their phones are adding Mobile Assure for $10 to give them peace of mind and even the environmentally conscious customers are taking up the option as they like the idea that their old phone will be re-utilised. With options to upgrade a phone, even a damaged one, after just 12 months, it is redefining the mobile market.

When you consider that your monthly mobile plan can now come bundled with a phone that you never own and you have constant access to the latest device, I wonder if mobile phones have now made the jump from non-consumable to consumable? I might need to look up some old high-school teachers and quiz them on this one…

Mathew Dickerson

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