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New Wireless Plans Raise Questions for Carriers and Phone Makers

For years, U.S. cellular carriers have helped drive enormous demand for smartphones by heavily subsidizing retail prices of what would otherwise be costly devices. So what could happen to smartphone sales now that carriers are moving away from that approach?

New plans introduced over the past year or so by most of the major carriers change the longstanding wireless pricing model in the U.S. by separating out the cost of devices from the wireless service costs.

Consumers signing up for these plans from AT&T and Verizon Wireless and others can pay less for service if they sign up already owning a phone or if they agree to pay the full cost of a new phone—$600 or so—over time through installment payments.

AT&T and Verizon introduced these plans in response to even more aggressive changes by the fourth biggest operator, T-Mobile USA, which has been trying to grab market share by simplifying its plans and cutting prices. While T-Mobile’s customer growth has sharply improved, investors have been worried about the impact of the new plans on industry revenues, and telecom stocks have been weak over the past year.

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Still, more used phones are coming into the U.S. market — and not only from carriers selling product they take back from early-upgrade customers. Gazelle said it had seen a 14 percent increase in its domestic retail channels, such as eBay and Amazon, between 2012 and 2013. Gazelle said it would focus more on the domestic market this year.

Jessica E. Lessin and Binta Niambi Brown commented on this article.
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Used smartphones could cannibalize 8 percent of total new smartphone sales by 2018, according to Sanford C. Bernstein analyst Toni Sacconaghi.