We've been Steve'd

June 8, 2009 6:17 PM

AppleNerdFilter: What is with the upgrade pricing on the iPhone 3G S? Seriously? I can't think of a way that Apple wins on this one.

From Apple.com:

"For non-qualified customers, including existing AT&T customers who want to upgrade from another phone or replace an iPhone 3G, the price with a new two-year agreement is $499 (8GB), $599 (16GB), or $699 (32GB). "

I cannot begin to imagine a scenario in which this makes sense, other than the obvious one where Uncle Steve gets to swim in a pool of cash. Is there some angle I'm not seeing to this madness? The high prices will surely deter upgrades from current iPhone users (me included), will force users of other smartphones on AT&T's network to buy another brand, and may even push early adopters of the original iPhone (whose contracts are ending/going month-to-month just about now) to defect altogether for a Pre, BlackBerry or Nokia.

Does this mean AT&T is pissed at Apple about rumors that they want their handsets on other carriers? Help me make sense of this!

posted by littlerobothead to computers & internet (11 comments total)

It's because the iPhone pricing reflects a subsidy from AT&T that they expect to make back by gouging their customers over a 2-year contract.
"Non-qualified customers" are presumably those who AT&T think haven't already paid back a subsidy on a previous phone.
eg. imagine I bought an iPhone 3G a month ago and wanted a 3GS now. To give me the $199 price, AT&T would have to eat two subsidies in a relatively short time.
posted by nowonmai at 6:25 PM on June 8 [1 favorite]

Your pricing is wrong. I believe that is the pricing for uncontracted. Existing iPhone 3g users pay $399/$499 for the 3GS (as they aren't eligible for an upgrade)

That said, this is pretty standard for AT&T (as well as other carriers), you have to wait 18 months before you're eligible for upgrade pricing on a new phone. Earlier than 18 months means you pay more. Simple as that.

As for the upgrade to 3G, original iPhone owners got a 'free pass' - probably because the original iPhone was unsubsidized.
posted by wongcorgi at 6:36 PM on June 8 [1 favorite]

According to this, " If they are not currently eligible for an upgrade but are an iPhone 3G customer we’re offering an early upgrade price of $399 (16 GB) and $499 (32 GB)."

It looks as if ATT won't completely gouge the iPhone 3G customers, but they won't get the new customer $199/$299 rate. $499 is better than $699 but it still sucks.

ATT Sucks. MMS won't be available until the end of the summer. Tethering is rumored to cost as much as $70/mth.

Even if I could qualify for the subsidized rate, I'm not getting an iPhone 3G S. It just isn't worth it to me. Most of the stuff I want will be free with the OS3 software. The camera will be better but not $200-300 better. The faster 3G might be nice, but meh.
posted by birdherder at 6:49 PM on June 8 [1 favorite]

According to this link from Daring Fireball, current iPhone(3G) users will get the subsidized price if they wait the normal 18 month/2 year/whatever time period that AT&T requires before any subsidized phone purchase is made. I assume this is because of the double subsidy issue mentioned above.

Basically, AT&T/Apple (probably AT&T) already ate part of the purchase price of your fancy 3G when you bought it a year ago, and doesn't want to eat yet another hefty subsidy just because you can't wait 6 months for a newer shinier phone. Honestly, in my opinion people are being silly about this. On pretty much any major cell carrier, as I understand it, you can change phones whenever but can only buy a new phone at a subsidized price (whether it's a "free!" cheapie flip phone or an iPhone) at certain intervals. It's the same for the iPhone. If you absolutely must replace your 3G with a 3GS, you can, you just don't get the same deal you would if you wait. Hell, if you end up waiting a year, you'll probably get an even better iPhone. Perhaps this is just my bitterness as an owner of a 1.5 year old original iPhone speaking, but assuming AT&T's subsidies work the same here as they usually do (ie you're only eligible for a subsidy at certain intervals), this is not as big a deal as people are making it out to be.
posted by MadamM at 7:16 PM on June 8

nowonmai is correct.

I say this, rather than simply favoriting nowonmai, because this misunderstanding is hilariously rampant in online discussions of cellphone pricing.

AT&T drives the subsidy game, not Apple. Apple builds hardware and sells them for hundreds of dollars; AT&T reduces that up-front cost by locking you into a multi-year contract. The price of your cost reduction is covered by those contract fees.

Feel free to purchase a non-subsidy phone whenever you wish. You'll find they're all amazingly expensive. Yes, even the Pre (out of contract price $500-700 depending on where you look).
posted by aramaic at 7:22 PM on June 8 [2 favorites]

FWIW, eating the ETF ($175-$5/mo of service) and paying the new customer price is still cheaper than the $399/$499 (granted you got in on the 3G fairly early). I may do this if I can sell my 3G at a decent price.
posted by wongcorgi at 10:56 PM on June 8

Just FYI, in the link to the page MadamM posted, Gruber is also saying that "Contempt for AT&T is topic number one here at WWDC."
posted by Brainy at 1:07 AM on June 9

I just tried to order an iphone and although ATT couldn't complete the order for some reason, they did offer me the mid-tier pricing of $499 for the 32 gig 3Gs. I am a current ATT customer with over a year (I think) left on my current contract, so I was concerned that I would get stuck with the highest prices.
posted by TedW at 7:11 AM on June 9

When Apple and AT&T launched the original flavor iPhone, one of the most interesting things about the launch was the AT&T wasn't subsidizing the cost of the phone, but instead was sharing a portion of iPhone service revenues with Apple. When Apple released the iPhone 3G, they abandoned the revenue-sharing model in favor of a more typical subsidy. The carrier subsidizes the cost of the phone for its subscribers and covers the cost of the subsidy through the monthly service cost over the life of the phone. Because the original iPhones were not subsidized by AT&T, AT&T didn't care about earning back any subsidy, so iPhone owners could upgrade to subsidized iPhone 3G phones.
posted by andrewraff at 8:48 AM on June 9

AppleInsider reports that "one year" is the magic number:

"To qualify for the iPhone 3G S at the advertised $199 (16GB) and $299 (32GB) price points, existing iPhone 3G users will have to have remained customers for what appears to be a year following their purchase. That means current users who bought their iPhone 3G shortly after its launch last year will have to wait a year from their iPhone 3G purchase date to qualify for the new price."

They point to a news release from AT&T that nowhere mentions the one-year phrase, so I don't know where AppleInsider got that.
posted by DandyRandy at 10:52 AM on June 9

Whats up with the price its a lot of money and that what ATT is out to do make money. Apple wins by people that have to have the latest and greatest iPhone and have to much money and not enough brains. The price is ridiculous. The processor upgrade I think will be barely noticeable. The upgrade to the the 3mp camera and any of other upgrades to the camera can generally be done with 3rd party apps or jailbroken apps. In my opinion the 3gs is looking like a Windows Vista.
posted by antisocialiting at 5:47 PM on June 9