Why Apple and AT&T now have legions of disgruntled iPhone customers
This may be my last iPhone/AT&T post of the day and week, maybe even month or year.
I bought an iPhone 3G in January from an AT&T store. The helpful AT&T salesman told me, when I asked him point-blank, that I would be able to upgrade to a new iPhone handset if one debuted during my contract period, without paying a marked-up price.
I wanted to believe him. I did, in fact. But really, he was just a sales guy -- his word was not bond. Not when big corporations are involved. And deep down, there was a little voice, which I muffled and ignored, which kept saying: Fat chance, Sentementes. You're gonna pay...and pay again.... and again.... and again.
Fast forward six months: Yesterday was a banner day for Apple. They introduced new MacBook Pros, a new Safari browser, some new functionality to MobileMe, highlighted the new iPhone OS 3.0, and of course, the new iPhone 3G S.
Loyal customers of Apple can buy every single one of those products for the price listed by Apple. Except for the new iPhone 3G S. For this new handset, if you're a current iPhone 3G customer with an AT&T contract, you have to pay at least a $200 premium to get the new phone.
This is the reality of wireless economics -- since AT&T has to buy each new handset from Apple for something like $600 a pop, and then subsidize it to attract new subscribers. I get it. There are apparently millions and millions of early- and late-adopting iPhone 3G customers who are going to have to "get it", too. Though across the Web's social networks, the vehemence that many are showing toward AT&T and, to a lesser extent, Apple, which sets the price of the handsets, is pretty deep. (Here's a Twitter petition to sign if your hackles are still up.)
If you're a cheery optimist, though, you might say that this is the kind of dilemma that most companies could only dream of having: consumers clamoring for product and demanding better pricing. Better than not clamoring at all, right?
But what bothered me most was that the millions and millions of iPhone 3G customers had to essentially find out that via word of mouth and on Twitter -- or in the very fine, faint print on Apple's website -- that they would have to pay the loyal customer premium. Or perhaps they logged in to their AT&T account online to discover the news. (I can't give AT&T my $199 until September 2010, my account says.)
New iPhone 3G S/AT&T customer: you get it (the 16GB version) for $199.
Loyal/current customer: you get it for $399.
This pricing approach was not mentioned by Apple at their big developer's conference yesterday (where, incidentally, developers booed AT&T every chance they could, according to the LA Times.) Indeed, the pricing for current iPhone 3G customers wasn't even an asterisk or footnote in the day's festivities.
This pricing approach also was not mentioned in the press release that AT&T sent over to me yesterday. An AT&T spokeswoman emailed me the pricing for existing customers in response to my email query.
We're all adults here. Why is it so difficult to be upfront right out of the gate with these costs? Especially to customers who are already paying some of the highest wireless costs around for the privilege of using Apple's iPhone?
Furthermore, in an era now where smartphones seem to be developing radically new features every few months, does this type of business model offer the best solution for consumers and companies?
This is an archived version of the technology blog. For updated coverage, see the current baltTech location: baltimoresun.com/balttech
Comments
Yeah, I was deadset on getting the 3GS.. not so much anymore. I bought the 3G the day it came out and AT&T shows a price of $399 for the 16gig 3GS and $499 for the 32gig 3GS.
Ridiculous.
I'm an Apple fanboy through and through, but I don't feel like paying an extra $200.. I don't see why they don't just tack on an extra couple of months to my contract.
Maybe Apple and Jobs will offer another store credit, the way they did last time (and which I confused today as being a new offer. Duh.) -gs
Posted by: Paul | June 9, 2009 11:17 AM
I'm not sure why people don't understand "subsidized prices." Are all iPhone users new cell-phone buyers!? Seriously, the deal is the same with every cell phone out there, why do people expect the iPhone be different? I realize that the first generation was different, it was not subsidized (and it was $599, the same price people are now complaining about).
I bought a first generation iPhone and know that I have the opportunity to buy any new AT&T phone that I want without re-paying a subsidy. I purposefully did not buy a 3G because I wanted the new, better one without having to pay a fortune for it and I know that I'll have to wait another 2 years to get the next one the cheap.
People, you signed a two year contract on a subsidized phone. AT&T gave you that phone cheaper because you agreed to use it and pay for the plan for TWO YEARS. If you want to skip out on that deal, you pay the subsidy back by paying the inflated price on the new phone of your choosing.
I can't believe that the media is reporting this like it is a big conspiracy (or big news) - The cell phone industry has been doing this for years, what makes you think that Apple (or YOUR outrage) is going to change things in this situation.
Get your emotions in check and use your brain. If you thought the sales person was wrong, get them to put it in writing and get their supervisor's signature.
The original 8GB iPhone was $599, the current 32GB is $499 (but AT&T will give you $200 off if you have completed your contract or a new customer) - Seems like a great deal to me!
Posted by: FRANK | June 9, 2009 11:39 AM
One advantage perhaps overlooked by many disgruntled is Apple's ability to preserve customer investment value. By upgrading the feature set of its phone lines continuously thoughout its lifetime, an iPhone maintains a longer usable service life than traditional smartphone offerings. While you may not get the latest in hardware, any iPhone, be it the original from two years ago or the 3G hardware update from a year ago is capable of upgrading to contemporary features without the user having to shell out one thin dime, unlike the traditional model where new phone purchases were required.
Other vendors are coming around, but thus far, only Apple has successfully executed any kind of futureproofing ability in the real world.
That's a good point, Darryl. I am looking forward to the OS 3.0 update, which seems like it'll help give our "old" iPhone 3Gs some new feel and functionality. -gs
Posted by: Darryl | June 9, 2009 10:12 PM
Gus -
Here's two points ...
First, this is never ending problem with people who adopt new tech early. If you just bought an iPhone 3G, you shouldn't expect the same cherry pricing on the new generation. All cell providers do the same thing if you haven't fulfilled your two years. Even at $399, the iPhone is a great piece of tech.
Second, the secondary iPhone market (as with ALL phones) is remarkably strong. Look up first gen 4GB iPhones on ebay. They are STILL selling for $150-200 in good used condition. The 3G will likely fetch $50-100 more. If current users are upset about the unsubsidized price, sell the 3G you have and it's a wash.
I don't think Apple or AT&T should do anything.
But I wouldn't complain if Apple decided to kick out a $50 or $100 gift certificate to us unlucky recently-minted 3G owners. ;-) -gs
Posted by: Jeff S | June 9, 2009 10:31 PM
I needed a new phone this spring, and decided to get an iPhone. I did my research and combed the internet rumor mill and learned enough to decide that I should wait until the new generation 3G iPhone and until then, get by with a $30 "just for now" phone off ebay. I think that most iPhone users should be tech savvy enough to realize this. Original iPhone 3G owners had their super-cool phones for many months before me, and will be able to buy the next generation iPhone at the subsidized price. I assume that there will be something new for Christmas, (there always is) and I won't be getting it. I'll just have to wait. The 3GS is plenty good enough for me now (I don't care is MMS ever shows up, since I knew it a "future" capability when I signed up), this year, and next year. If it wasn't, I wouldn't have signed a two-year contract. If you absolutely NEED the latest of anything, you will pay for it. I don't hear 2009 Prius owners asking for a handout because the 2010 Prius gets better all around fuel economy.
Posted by: A | June 22, 2009 12:24 AM
I spoke to Toyota because they released a new model of my car before my warranty was up. I asked them if I could get a new car instead of the old one since my warranty wasn't up. They wanted the FULL PRICE for the new car! What the hell man? I paid for a product a year ago and they're telling me I can't get the next model for free? Seriously I'd like to live in the land you live in because you signed a 24 month contract for an iPhone 3G, not a 3GS. Your fault for not reading the fine print.
Some of us weren't expecting free, just the same price as the $199 folks -- for the wonderful opportunity to sign on for another two years with AT&T! -gs
Posted by: Erin Guinan | June 25, 2009 11:11 PM
"Legions" of disgruntled customers? Get real. Got any evidence of that?
Anyone smart and informed enough to be writing a tech blog was well aware, at the time of his purchase, that he was signing a 2-year contract. What, did you just not read the full year's worth of stories about customers trying to time their upgrades so they wouldn't have to pay the full price rather than the subsidized price for their next iPhone? You just magically missed all that, but remained clueful enough to be writing a tech blog? Let's be honest. There's no need to delve into "very fine, faint print on Apple's website" to have known this. We all knew it going in. You've been buying cell phones for about ten years, I bet. Were you somehow unaware of how phone prices are subsidized? No, you knew all about it. Did you expect all these things to go out the window when you bought the most sophisticated and expensive handheld around? I think not.
Methinks thou dost protest too much. Far, far too much.
Posted by: Jeff Fields | June 27, 2009 7:38 PM