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Lucas Mearian

To Tell the Truth

Why the iPhone is a ripoff

79 comments

IT TOPICS:Macintosh & Apple, Personal Technology, Storage

I love whiz-bang technology. I love it so much that when MP3 players first came out, I bought one as a voice recorder for business interviews when all my reporter counterparts were still buying reel-to-reel mini recorders or digital recorders with a one-tenth the memory and no file-manipulation capabilities. And, I love my cell phone because I can send and receive messages in a meeting, take photos on the fly, shop on it and perform Google searches no matter where I am -- and it was free with my cellular service plan. So why would I ever pay $500 for a cell phone? I don't think I'm alone here.

Market research firm Isuppli Corp. today released a research report stating that the iPhone will generate more than a 50% gross margin for Apple -- nothing unusual for them. That basically means that Apple is pocketing $250 for every iPhone it sells. Compare that with the average gross margin of 10% to 20% for handsets and you'll see where Apple is really relying on fan loyalty to gouge.

In a recent interview, Steve Ballmer chortled when asked about the iPhone. Not that I would normally take anything seriously that a Microsoft executive would say about an Apple product, but in this interview posted on YouTube, he makes two very good points: 1) $500 for a phone is outrageous when you can get the same features on another cell phone for less than $100; 2) The iPhone has no keypad, so it's not business/text-message friendly.

Then you have to consider iPhone's competition. In 2007, it's estimated that there will be 835 models of music-enabled phones introduced by various Apple competitors. iSuppli estimates that 14 phones already shipping -- from Nokia, Motorola Inc., Samsung Electronics Co. Ltd. and LG -- have features comparable to what the Apple iPhone will have when it ships in June.

But Jagdish Rebello, a PhD, and director and principal analyst with iSuppli, says Apple knows its market and is good at displacing competitors.

People just love the iPod. Why, I don't know. There are plenty of cheaper MP3 players with the same functionality on the market, but hey, it's Apple. Apple equals anti-establishment, and therefore, it's cool. So I have no doubt that Apple will sell the 8 million iPhones it's aiming for this year. And, with a total of 1 billion handsets being sold every year, those 8 million iPhones are only a fraction of the marketplace. So why the rant?

It's the principle. It's like Boston Red Sox tickets. The team wins one World Series, and they go about gouging their fans. Apple gets a big win with its iPod and it believes it can gouge the consumer on a follow-on product.

It's very likely that when Cingular begins selling the iPhone, it will subsidize a portion of the cost -- so the consumer won't have to foot the full $500 bill -- at least that's the hope. But until I see it, I won't be running out to buy it.

The iPhone is cool technology -- you can't help but ogle the interface -- but like PS3, you'd have to be out of your gourd to pay that kind of money for something that's basically whiz-bang with no more substance than other cheaper, comparable products.

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AT&T iphone data plan is a ripoff

Submitted by US_unix_sys_admin on June 22, 2009 - 2:18 P.M.

OK, so my comment is 2 years out from the original article but the points made still have some validity and the iphone ripoff continues...

I received an iphone for Father's Day from my wife & kids. After the initial comments on its coolness, reality set in: the initial cost is doable for the 8GB iphone 3G -- $99.

However, AT&T locks users into a year $30 per month iphone data fee with every iphone. AT&T assures users that every iphone on the AT&T network requires the $30 per month data fee. No lesser service and lower cost data service option is available for the iphone.

In short, the $30 per month iphone data fee was a deal-breaker for me. I'm now in the process of exchanging the iphone for a Nokia E71x. I don't need the monthly data service but can add it or remove it and choose several data service options below the $30 mark as I desire.

So, the inflexibility of AT&T and perhaps Apple, have made my choice something other than Apple iphone.

You see, in the real world, outside AT&T and Apple advertisements, $30 per month on a 2 year contract adds up to $720 -- alot of money for middle class Americans living in uncertain/dangerous economic times. And that $720 is in after-the-income-tax-witholding but before the monthly government fees/tax dollars.

In order to spend $720 in data fees over 2 years, I have to earn about $1000. That's too much for a truly non-essential capability.

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Just buy an ipod touch which

Submitted by Anonymous on June 9, 2009 - 9:51 A.M.

Just buy an ipod touch which is better as an ipod than iphone, then get a contract phone for half the price of the iphone which will probably still have a better camera and is easier to use. I'm in the UK and everything about apple is a rip-off, that's why i bought my ipod touch from the US coz it was around $50 dollars cheaper than over here even with the bad exchange rate at the time. PLus songs are about 40% more expensive here than in America, and it costs the equivalent of about $900 dollars for the new iphone on pay as you go, now that is what you called over-priced seeing as my ipod touch was about $250 dollars and my contract phone is around $30 dollars a month

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Kind of agree

Submitted by iPhone on January 9, 2008 - 6:26 P.M.

I kind of agree with you, yet to my mind no other phone comes close to the iPhone in terms of user friendliness and good looks :) That's why I still think the iPhone is worth spending my money on..

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the iphone is an ipod a

Submitted by Anonymous on September 28, 2007 - 6:59 P.M.

the iphone is an ipod a digital camera it has a key pad its sooo worth it for all those thngs seperate its like 1000 dollars

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Did you do any research?

Submitted by Anonymous on December 28, 2007 - 10:27 A.M.

I own an Archos 605 wifi. It cost me 300 dollars and is essentially the iPhone without the phone. It plays music, video, photos, it has a touch screen thats larger than the iPhone, it's wifi enabled and you can surf the web with it, you can stream content from your home computer, the browser is Flash-capable, it supports way more codecs than the iphone like DivX and Xvid in an AVI container, WMV, WMA, etc... For an extra 100 dollars you can buy a DVR station that lets you record TV shows. It has a PDF viewer. With a plugin, you can transfer VOB files directly from a DVD to the Archos (if you own the DVD, or else its illegal), which saves the time of converting, which can run to over 5 hours per movie.

Considering all this, Apple is obviously gouging you, since the Archos costs $200 less than the iPhone, or $100 less if you want the DVR station.

PS: CNET did a prizefight between the iPod touch (iPhone with less features) and the Archos 605 wifi, and the Archos won. Check it out at http://reviews.cnet.com/4370-11399_7-312-101.html

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Apple is a ripoff in

Submitted by Anonymous on September 8, 2007 - 3:36 P.M.

Apple is a ripoff in everything they do they charge twice as much for computers that have half the ram and cpu speed of a normal pc plus ONLY 400$. As for anything apple all your paying for is name, and expecially for mac, there is not near as much software support besides the programs apple makes like i ilife as there is for pc with its world of hardware and freeware programs. Apple acts like what they do has never been done before. IT HAS. with a lot better software and hardware support at less than half the price.

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So true! Do you know Steve

Submitted by Anonymous on March 29, 2008 - 12:02 P.M.

So true! Do you know Steve Jobs invented the wheel??? I'm so tired of the media acting as if every thing Apple does is so perfect. I had to use Macs for 5 long years, all the while people telling me it was sooo much better than PCs for graphics. I was even told that it had "more colors" than PCs. Such lies! People who put down PCs never touched one and had no clue what they were talking about! I spent a lot of time with Macs re-booting and waiting for print jobs because they couldn't multi-task. I wish people would quit drinking the Kool-Aid and just use a real computer! If you want an Apple product, fine. Just quit acting like it's the only, or the first option! Thanks!!! It's so good to hear a contrary view out here in "Apple is God La-La Land"!

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Your observation that Apple

Submitted by Anonymous on October 3, 2007 - 7:50 P.M.

Your observation that Apple is a ripoff in everything that they do is an example of the type of reasoning that those who truely don't understand the difference between Apple products and others. In looking at relative price, one can make the claim that a Mac has half the RAM of a cheap (normal?) PC. And the CPU speed argument, now with Apple using Intel chips is irrelevant. However, even prior to that time, comparing clock speeds of an Intel Pentium vs. a Motorola PowerPC was not a valid comparison because they were not like chips. A truer test would be operations per second, in which case the PowerPC chip was at least equal or superior to the Pentium. As far as software, do not confuse quantity with quality. Just because there is more software available for PCs doesn't mean that it is better software. Apple doesn't claim that a lot of what is does hasn't been done before only that it hasn't been done as well as they do it. I have worked in a mixed Mac and PC environment and I have a Mac at home. Why, because IT WORKS. It WORKS WELL right out of the box. As for hardware support, what hardware does the Mac not support that you need? Apple Tech Spport is rated #1 and Apple Hardware is rated as more reliable than ANY PC manufacturer. (Source, various articles in Computerworld) It is true that Apple doesn't make a bargain basement Mac. However, several leading PC magazines have priced Macs against comparably equiped PCs and found that for a comparable price you got more with the Mac. And that Mac OSX, is still the standard for operating systems that Windows Vista is still trying to reach. Learn more about Apple and their products before throwing out decades old arguments against them.

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After 24 hours waiting for

Submitted by Heirich Freitag on August 1, 2007 - 2:12 P.M.

After 24 hours waiting for the ATT billing dept to receive my data so I can finalize my activation process and use iphone I am feeling frustrated.
Steve Jobs should have teamed up with Sprint.
I still like my iphone, it has the same status as a BMW 1 series.

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I agree with the positive

Submitted by Anonymous on July 7, 2007 - 12:57 A.M.

I agree with the positive comments regarding iPhone. Most cellphone web surfing--if it can be called that--"stinks" [browser pages are either half-rendered or some compromise of full-rendition]. So, why would someone pay $600 and more (including rate plans, contract termination, etc) to get a full browser experience, email, phones, iTunes, and Dashboard-ish "feature" buttons? The same reason that chickens cross roads.

There's another side--whether it is Columbia or Orangeburg!

And, since this iPhone is really a handheld "Mini-Mac", can document-editing, and other apps be far behind?

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