Shark Bait

Knowledge Centers

Operating Systems

Networking & Internet

Mobile & Wireless

Security

Storage

Business Intelligence

Servers & Data Center

Computerworld Reports

Industry

See your link here

Seth Weintraub

Apple versus Google

Defending AT&T's $200 iPhone 3GS upgrade pricing

83 comments

TAGS:AT&T, iPhone 3GS, priing, upgrade
IT TOPICS:Macintosh & Apple, Mobile & Wireless

Let's get one thing straight before I defend AT&T. I think their service is poor and their voice plans are over-priced. Their telephone support is awful as well.

That being said, all of this pooh poohing about the iPhone 3GS upgrade pricing is just silly. AT&T is charging those who've had their contract less than a year (most iPhone 3G users) a $200 fee for upgrading to the new 3GS. That is on top of the iPhone 3GS's $199-$299 price tag.

The iPhone is a subsidy sale. AT&T's prices reflect the costs they have to pay Apple every month to sell the iPhone.

AT&T's price on an iPhone is probably close to $600 (Retail is $700-800, AT&T probably gets $100 off in bulk). Apple sells it to you for $200 and foots AT&T with the bill for the rest. That $400 is broken out over 24 months that you're obligated to pay for your iPhone. Without getting too fancy with interest and amortization tables, that's around $200/year of your bill going toward the purchase price of the iPhone. This is part of the contract you agree to when you buy an iPhone.

The problem is that if you stop paying and want a "restart" with a newer, more expensive iPhone and plan just like some guy switching over from Verizon, AT&T is out for those months you aren't paying for the previous iPhone. That is a couple of hundred bucks that AT&T already has in their books for you that you want to walk out of.

The $200 is a fair fee.

AT&T isn't totally free and clear on blame for this outrage, however. They could break out the monthly cost of the initial iPhone purchase on monthly bills and even let the customer know how much of their iPhone was paid off every month, just like mortgage companies provide to homeowners.

Apple isn't 100% innocent either. A 16GB iPod Touch costs $299. How does the extra phone and camera hardware double the price of the device? In reality, they can charge whatever they want for the device ... but, by that logic, so can AT&T.

Whic hbrings us back to the bill. AT&T have many other incidental charges broken out. Why not put the cost of the iPhone on there so the customer knows how much of the bill is going to Apple?

The reason why they won't put that on the bill is simple. They want you to continue to pay the higher monthly fee once you are done paying off your phone. The mobile companies make too much off of people who continue to "pay off" their phones long after the contract has run out.

As for that $200? That is the only thing fair about AT&T's iPhone plan.

Email this

Digg this

What People Are Saying

Add new comment

clueless

Submitted by Anonymous on August 8, 2009 - 2:27 P.M.

you guys are clueless, if you dont like it dont buy it, simple as that. over 1 million people thought that the phone and company were worth it in just the first weekend...

Reply | Report this comment

the author has wrong info!!!

Submitted by Anonymous on July 17, 2009 - 3:15 P.M.

You must not have been a ATT customer on iphone.
Different from your article saying that ATT will charge you extra 200$ if your contract is less than 1 yr old (out of 2yrs)...
The truth is that it's 1.5yr...(18 months) into the 2 yr contract before you can get the full $200 off the iphone 3gs retail pricing.
18 months... that's when ATT milk enough money on your account that they are more than break even...
My phone is already pass 1yr contract and I still have to wait 6 more month before I can get a small $200 discount on a 2 yr renewal which I would have paid almost $2000 dollar already on sub-par service.
Because of ATT's use of their monoploy power, I am stuck with this bad phone company due to apple's greed.
I hope the Gov sue both apple and ATT so that I can have my iphone on other network like verizon (for service area) or sprint (for speed) or tmobile (for price).
Also apple should be sue for not allowing pre to work with itune which they monopolized the digital music market. if Microsoft had done the same on the o/s to not allow apple software/device to install or connect to PC...you guys will be yelling all over the blog already.

Reply | Report this comment

very nice!

Submitted by Crystal on June 25, 2009 - 10:20 P.M.

i really like this post.. thanks!!!! Angel Blue Eyes ;)

Reply | Report this comment

iPhone 3G S Upgrade Pricing

Submitted by Peter Amirault on June 22, 2009 - 8:10 P.M.

I understand that everyone needs to be paid, but then why can't we pay the $600-$700 for the phone and not have the contract. Dump question since I know the answer, Apple and AT&T are greedy. Having bought both of the earlier versions of the iPhone, the day they were released. As much as I'd like the new one and I'm an Apple guy going on over 20 years and have every "i" thing you could imagine, I'm not about to continue throwing money away. What everyone should do is write AT&T and let me know they plan on switching phone carriers the day the iPhone is released. I would gladly pay the early termination fee as well. Of course if I was sure I could unlock the phone and not have any problems, I'd do so and cut AT&T out of the picture all together.

Thanks for listening!

Peter

Reply | Report this comment

You can if you are an

Submitted by Anonymous on June 25, 2009 - 10:22 A.M.

You can if you are an existing ATT customer. $599 and 699 ATT stores only. Not sure about new customers.

Reply | Report this comment

Quit bitching

Submitted by iPhone Playa on June 18, 2009 - 12:32 P.M.

Whenever you have a gadget, toy, gizmo, whatever, that people want...They will buy it. If it's $1000.00 or $600.00. Doesn't matter. The one's who bitch about it are the ones who can't afford it or don't want to afford it. If you're taking the time to complain about shoddy service this and low bandwidth that, then odds are you shouldn't be buying the phone anyway. Fact of the matter is that Apple has the power, plus they have what we as consumers want. That gives them the "demand" in the age old equation. AT&T had the balls, albeit they bit off more than they could chew, to take on the iPhone. I doubt that AT&T is concerned about people complaining considering people are inhaling iPhones faster than Apple can make them. Now here we are at the next stage of iPhone evolution and there will be people like me who will just go out and buy it. I have the iPhone3G and I love it, simple as that. New one comes out, i'll have that one too. When the monthly bill comes I'll know that i'm paying for something I truly enjoy and when it comes right down to it, you get what you pay for. Peace.

Reply | Report this comment

Right you are...

Submitted by Kirby on July 17, 2009 - 7:48 P.M.

It's just supply and demand. You can afford whatever Apple chooses to price their phones at so you buy them, and whoever can't afford them should "quit bitching". And then, when demand drops off because enough people are sick of outrageous prices, the iPhone will disappear from the market, and it'll be AT&T and Apple and folks like you who will be the ones who'll have to "quit bitching".

The consumers have all the power, not the companies. Piss off enough of them, and your product goes by-by. So maybe people should think a little deeper than just about their own immediate interests.

Reply | Report this comment

Is the $200 extra upgrade fee fair?

Submitted by Anonymous on June 17, 2009 - 2:25 P.M.

OK, here is one way to look at it:

Currently I have an iPhone that is just under a year old.
If I was to CANCEL that phone/service, I'd pay an early termination fee of $120 ($175 - 11 months * 5 per month).

Then I could buy a new iPhone for $299.

My total cost: $419.

Or I could have them upgrade it for $499 + 18 "upgrade fee".

So, as a loyal customer, I get to pay $98 more!

Thanks ATT!

Reply | Report this comment

Get rid of exclusivity

Submitted by Robert Nicholson on June 15, 2009 - 7:44 P.M.

Get rid of exclusivity agreements and make the providers compete on price. Only then will service improve and customers not be abused. As it is now AT&T are taking advantage of their monopoly by not offering the iphone 3GS to existing customers who would be prepared to pay an additional $100 + 2 year re-up. Because they are not offering that they are taking advantage of existing customers who they believe will pay the premium to upgrade mid contract.

Reply | Report this comment

To the People are

Submitted by Anonymous on June 15, 2009 - 11:45 A.M.

To the People are complaining about the cost of updating to the 3GS.....DON'T UPGRADE!!

Uh, the latest time I looked, the people still had the POWER to WALK AWAY and REFUSE TO UPGRADE!! If enough people refused...the company would be forced to make some type of change in order to move the phone.

Anyone who continues to support a company with poor service, no support, and overpriced plans, and then agrees to pay the extra $$ for latest/greatest iPhone...deserves what they get.

Reply | Report this comment