On The iPhone Upgrade Plans

So, Apple announced a new iPhone the other day, and everyone got excited. That is, they were excited until AT&T and O2 revealed their pricing plans for existing iPhone lovers to get their new upgrade. Apparently, heaven forbid, both carriers plan to <gasp> require that consumers complete their current contract before they will be eligible for discounted pricing on this new phone.

For those of you who think that AT&T and O2 are being evil, let me explain something to you, as someone who has been in and around the mobile industry for nearly 10 years. There are 2 prices for every phone sold through a carrier. There’s the subsidized price, and the full-retail price. The subsidized price is usually a few hundred dollars cheaper, and requires that you sign a contract, usually stating that you’ll maintain active service with the carrier for 2 years (though some are one year, others are 3). The full retail price does not require the contract – you buy the phone, just as you would buy a computer or a home stereo system.

So, when you bought, for instance, your iPhone 3G, you only had to pay $200 (instead of the ~$600 no-contract price) because you promised AT&T that you would pay at least $70/month (for the iPhone Plan) for 24 months. If you read carefully, that’s about all the contract really requires – it doesn’t promise any specific level of service from AT&T, unfortunately.

So….you got the iPhone 3G for a hefty discount because you signed a 2-year contract. If you cancel that contract early, you rightfully have to pay an ETF, which stands for Early Termination Fee, of $175. This is also spelled out explicitly in the contract that you signed, but didn’t bother to read. As such, you cannot reasonably expect to now, a mere 12 months or less into your 24-month contract, get ANOTHER new phone, discounted. This is because you still have 12 months or so on the contract you’re already in.

It doesn’t matter how cool the new iPhone 3G S might be, or what snookery AT&T or O2 have done in the past for you – the contract is clearly spelled out, and you voluntarily signed it. You’re legally stuck with it. Complaining or petitioning is silly. Next time, perhaps you’ll more carefully read a contract before you sign it.

Edit: fixed the price of the monthly plan (not that it really matters for the sake of this post, but for accuracy, anyways). There’s some confusion as to whether the iPhone 3G plans were in effect before or after AT&T initiated its pro-rated ETF. Again, it doesn’t really matter for the purposes of this post, but whatever.

  • http://ymb.jaiku.com Mike Bradshaw

    nicley put (saves me having to write this up, i can just point people here eh ;)

  • http://ymb.jaiku.com mike

    nicley put (saves me having to write this up, i can just point people here eh ;)

  • http://www.nokiacreative.com/ James Burland

    I think most (contracted) iPhone owners realised the math behind this issue, but we were hoping for, at least from O2, was it little but of flexibility.

    In my example of have 6 months left on the contract, I have to pay 6 x £35 to end the contract. That’s fine, but if I had regularly spent £50 a month in the last 6 months O2 would gladly waive that fee. The thing is I *have* spent well over that in the last 6 months because I have 2 iPhone contracts (mine + the wife) equalling £70, but at the moment they won’t take that into consideration, because the computer says no.

    Here’s another idea. They could also start a new band of contracts for early iPhone up-graders whereby you pay a bit a more each month on a *new* contract starting on the 19th in order for O2 to recoup the cost of previous subsidy… The more I think about the more I can think of any numbers of way that both AT&T and O2 could help out iPhone owners, especially as it’s pretty clear now that this is going to happen every 12 months.

    As for me, I’ll probably go PAYG this time. The 3G S looks to be a smart upgrade, but I wont make the final decision until I’ve seen some actually video capture footage.

  • http://www.nokiacreative.com James Burland

    I think most (contracted) iPhone owners realised the math behind this issue, but we were hoping for, at least from O2, was it little but of flexibility.

    In my example of have 6 months left on the contract, I have to pay 6 x £35 to end the contract. That’s fine, but if I had regularly spent £50 a month in the last 6 months O2 would gladly waive that fee. The thing is I *have* spent well over that in the last 6 months because I have 2 iPhone contracts (mine + the wife) equalling £70, but at the moment they won’t take that into consideration, because the computer says no.

    Here’s another idea. They could also start a new band of contracts for early iPhone up-graders whereby you pay a bit a more each month on a *new* contract starting on the 19th in order for O2 to recoup the cost of previous subsidy… The more I think about the more I can think of any numbers of way that both AT&T and O2 could help out iPhone owners, especially as it’s pretty clear now that this is going to happen every 12 months.

    As for me, I’ll probably go PAYG this time. The 3G S looks to be a smart upgrade, but I wont make the final decision until I’ve seen some actually video capture footage.

  • http://www.nokiacreative.com/ James Burland

    ^^^ Sorry about my poor spelling in the above post. What a doofus! ^_^

  • http://www.nokiacreative.com James Burland

    ^^^ Sorry about my poor spelling in the above post. What a doofus! ^_^