Piper Jaffray says iPhone 3G's real cost to users: $407 - Page 2

OK - but then why can't you sign a 2G contract with it? It's half the price remember?

And that's being perpetuated by Apple not AT&T- why is everybody bitchin' about AT&T?
AT&T hasn't tried to con you with the 3G rate as costing you less than the 2G. Why all the complaining on AT&T- they been very upfront about it.
Their customer service and reception still sucks but that's beside the point.

But will they also loose any sales due to false advertising? Goodwill?

I am sorry but this is not correct at all.

Carriers do not subsidize phones anymore. We may call it subsidizing but that is nothing more than a marketing term, the proper name for it is financing.

I lived in the UK for many years where "subsidizing" handsets has always been the norm, and back in the mid to late 90's when we all started getting our mobiles it really was subsidizing, but it has not been for quite a few years. What the carriers do now is nothing more than financing. Take the cost of a new Nokia, say $600, divide by 24 months equals $25 per month, ad a few points on for finance cost, combine with a $30 a month tarrif and hey presto a new Nokia phone for $0 upfront on a $60 a month contract.

This is not subsizing, and if you really think that you are getting the phone for free then you are a fool!! Same as you are not getting an iPhone for $199 regardless of how deluded you are.

Two ways this can be proven easily enough..

1 - in the UK where paying nothing up front for any phone has always been the norm, when you reach the end of your contract and your handset is now legally your own (because you have paid off the HP or finance) You are usually offered a new handset "free of charge" if you renew your contract. But if you keep your own handset you can negotiate a much lower cost on what is effectively the same tariff.

2. In Australia on Optus they don't even bother trying to hide the fact there is no such thing as subsidizing. On the lowest tarriff you pay $19 per month and the 8GB handset costs you a separate $49 per month finance for a 12 month contract. In this arrangement Optus are slightly subsizing the cost of the handset, but not by very much. You are still paying $600 for the handset. ( US and AU dollar are pretty much close to even at the moment).

In Australia you can actually buy the iPhone on a pre-pay model. So effectively you are paying for the iPhone upfront in exactly the same way that the 1st generation was bought. It cost $729 for the 8GB.

Carriers used to subsidize phones and take a punt that the revenue they claw back from you will easily cover the cost and more. But now there is really no such thing as a phone bill, you get bundles that are so neatly matched to your own usage that people rarely ever go beyond their usage and therefore rarely ever get a bill that is higher than their tarrif cost. Subsidizing does not work in this model, therefore the real cost of the handset is always included in all the tarrifs.

So yes indeed all this rubbish about the iPhone costing $199, and how it was half the price of the last model is of course all bullshit. If you really think you are getting the iPhone for $199 then you are really kidding yourself and even possibly quite naive.

Everybody is paying the real cost of the iPhone in one way or another and my best guess would be that is around the $600 mark.


If you buy a $5000 LCD TV tomorrow on 5 years interest free with no payments until July '09 for a $199 downpayment you have have not got a TV for $199! You have still spent $5000 on a TV whether you like to think you have or not. Would you really tell people you got it for only $199?

What if Sony were advertising in the press that their new TV's were only $199 (no small print to explain) would this be good honest marketing ?

Ahhh...the apologists have arrived. Now a major market analyst has said the exact same thing I have. But it doesn't matter. We should pay more, and Apple/AT&T are right. Gotcha.

Actually, they've changed quite dramatically. I get sick of the "apple is so expensive". Our Dell laptops cost us more than our MacBooks both in up front price & service costs, plus the MacBooks blow them out of the water on performance (except for M$ office for Mac, which is garbage).

Do you own a 2G iphone and are you getting the 3G?

Don't forget that the old phone had revenue sharing in place too. This shored up final price Apple received for the hardware.



We know that, but why spend $200 or $400 more for the handset if you are just going to keep it on EDGE? Since all iPhones will have v2.0 does that price really justify 25% longer 2G talk time, GPS, and possibly better reception? I'd rather add a Mophie Juice Pack for 16 hours of talk time and a much lower price than you'd have to pay for a 3G iPhone.



!) How can I arrrive when I have never left.
2) Common sense is not an apology.
3) AT&T's eligibly program is not something new for the iPhone.
4) Such policies are with all carriers that offer subsidized phones.
5) Subsidized means to pay part of the cost, to think that AT&T or anyone isn't expecting you to have a contract in return is absurd.
6) YOU ARE NOT REQUIRED TO PAY ANYTHING MORE THAN WHAT YOU ARE NOW. YOU HAVE A CHOICE. YOU DON'T HAVE TO USE AT&T. YOU DON'T HAVE TO HAVE A 3G iPHONE. I DON'T LIKE THE PRICES FOR SMS SO I DON'T USE THEM. IF YOU THINK AN ILLEGAL PRACTICE IS GOING ON BY APPLE CHARGING MORE FOR A NEW PHONE, BY AT&T CHARGING THE SAME FOR DATA AS IT'S OTHER SMARTPHONES, OR BY THE CARRIER LOCK-IN THEN DO SOMETHING LEGAL ABOUT IT.

Sucks, too, if you pay the extra $200 as a current ATT customer not eligible for an upgrade. Because even though you pay $200 more for the phone, you still have to pay the $10 more 3g monthly plan.

I do get what all this bitching s about. Everyone has to pay the higher price monthly dues for new contracts. These are data rates that are now the same as their other smartphones, yet we know people are using their iPhone for data much more than any other phone. That surely won't become less with 3G and the new App Store.

As for the price, At least you're not being required to pay the full retail price of $599/$699 for the device. If you want to be eligible, cancel your current ineligible account first. It's not rocket science to understand which one is cheaper.

The article is confusing. Clarify Piper!!

hmmmm, I have a choice in gas?! what's the use of choice when all gas stations charge you the same?!
However, you missed the point. He was complaining that Apple said the iPhone is not half the price of the original iPhone after you add in you monthly cost during the contract. Regardless of your carrier you will pay close to $1800 for the 2 years period. Similarly, regardless of where you fill your car with gas in the US you will still pay close to $4 a gallon. Well, Maybe you'll get it

nope, you don't get it.
Do Verizon and At&t have a contract WITHOUT a mobile phone -capito !
you DO pay for the phone as a significant part of those monthly payments pleeeeease get it already !

No, not always. I have an old unlocked phone, which I bought long time ago, that I used with AT&T GoPhone line. When I added that phone line to my family plan, AT&T signed me into a 2 year contract for that line without buying a new phone. So, you do get into contracts without buying phone.

By the way, we are not talking about unlocked iPhone here. We are talking about the cost of owning an iPhone.

with the same monthly payments- i doubt it !!?

I only have to pay $9.99/month for the additional line. And they told me if I wanted a data plan for the new added phone then I have to pay another $30/month for the data plan in addition to the $20/month I am paying for my 1st gen iPhone data plan. Regardless of whether you have a subsidized phone or not, you will still be paying for the same monthly fees.

I am going to upgrade my iPhone and my wife's phone to 3G iPhone. I will only have to pay $40/month more ($10 more for my phone and $30 more for another data plan) while keeping the same voice data plan. if you do the math ($119/month X 24 months = $2856 + $499 (cost of both iPhones) = $3355). That's less that owning 2 iPhones on two individual plans ($3710). Does that means AT&T lost money by selling me the iPhones? I don't think so.

Apple remains more expensive as I would not use a MacBook in a business setting, but rather a MacBook Pro. You are speaking with someone who has had so many Macs, since 1984, that I do not even care to add-up the expense. However, I never bought my Macs based on price.

It's Apple that's stating it's half the price @ $199, not anybody else- Apple the manufacturer. Are you implying that Apple lies?

Apple, the manufacturer states that it's "half the Price"- don't you get it?
LG, Samsung , Blackberry never make a similar claim with their products. If the phone is subsidized it is clearly stated. What is so difficult to comprehend?

did you read what I said earlier?!

Some people mix the cost of the iPhone or any phone with what AT&T charge for their services. What worst is that some people think that AT&T is charging $10 more for the data plan to make up for the cost of the iPhone!!!!! This is ridicules since that is what the AT&T charge you whether you buy and iPhone or BlackBerry and whether you sign a 2 year contract or not. You will pay a minimum $30/month for a data plan period. Based on some people logic, if I give my friend a smartphone as a gift and he used AT&T voice and data plans (say $30 data plan + $39 voice plan) without a contract then the cost of the phone I gave him as a gift over 2 years is (69 X 24 = $1656)!!! I guess some people just don't get that the monthly fees have nothing to do with their phone. The monthly fees are for the voice and data access you get from AT&T.

I am not defending AT&T nor Apple here. I am saying this because few years ago a friend of mine talked me out of getting a free phone with 2 years T-Mobile contract based on this argument (monthly fees X contract period = the phone true cost). Guess what?! I stayed with T-Mobile for more than 2 years and wish I had gotten that phone since the monthly fees are the same with or without a contract. I hate to see people misinformed the same way I was.

I am sorry but you clearly do not have a clue what you are talking about.

I have been buying mobile phone since 1996, I have spent many years working with mobile carriers and operators.

Did you read my post? When you have your own handset you can negotiate cheaper monthly costs for what are really the same tarrifs, this is because the carriers are not having to factor in the price of the handset. If you cannot do that with AT&T then you have a problem with AT&T. But say for instance in UK if you finished for contract and wanted to continue using your phone you will get a reduced cost if you ask for it. Of course they are a business and here to make money so they are not gonna advertise the fact are they.

Look at Optus for their iPhone plans in Australia. They start at $19 per month, but all their plans do not include the iPhone, you have to buy that separately and it will cost you $600 to buy, but they will fianance it for you so on a 12 month contract the 8GB will cost you an extra $50 a month on top of your tarrif.

The iPhone is costing users around $500-600, Networks do not subsidize handsets anymore, they simply finance them.In Australia the customer price for a pay as you go 8GB iPhone is $729!!!! That should tell you everything you need to know about the real cost of the iPhone.

If Apple said $199 then yes, they were misleading customers. What they should have said was $199 down payment.

We were talking about AT&T and Apple in the US. I cannot talk about the rest of the world because I have no idea how things work there. In the US, AT&T is not charging the 3G iPhone users more than what they usually charge for any other phone. If you disagree (regarding AT&T) please show me the link were AT&T is offering reduced price of their plans for people without contract. Otherwise, you are the one who have no idea what you are talking about.

But with other phones AT&T also do things the same way, you pay a portion of the phones worth upfront and the rest of the cost of the phone in hidden in your monthly payments.

Why do you think they make you sign a 24 month contract? It is because they need to make sure you pay them back the money they have spent on the handset.

In other countries they are much more transparent about all of this, most consumers fully understand they are not really getting a cheap phone, they know they are paying the full amount but just spread over the cost of the contract. It aint rocket science, it is just business.

I just looked at a Blackberry Curve on AT&T, $399 retail but they are selling for $149 on a 24 month contract. Do you really think they are selling a $399 BB for $149?


The truth of the matter certainly lies in the much more transparent sale of an 8GB iPhone on Optus in Australia. They do not insult the intelligence of their customers by even trying to pretend the iPhone is free or cheap. They are selling it for $600 on a 1 yr contract with $19 per month tarrifs. Increase your tarrif's and they will then start to "subsidize" the iphone slightly, but overall you will still be paying your $600 no matter which way it is hidden.

It all depends on the market. In other countries competition and market capacity might force them to go this way. The reason, at least in the US, they discounting phones for 2 years contract is to increase their network efficiency and make sure they have steady income for the contract duration.

This example was by my economics professor more than 10 years ago. If a wireless company have a capacity of 100,000 subscriber and the operation cost for running the network is $100,000/month. If they have 1 subscriber then they need to charge the user $100,000 to cover their operating cost. If they have 100,000 subscriber then they need $1 from each subscriber. Got it?

There are more than 300 million people in the US. AT&T, Verizon, T-Mobile, and other US carriers want more subscribers because then they can score more profit and be able to reduce what they charge for their services if they have to. Based on what they charge for the BB and the iPhone plans ($69 X 24 = $1656/contract min.) they can afford to trim their gross revenue per subscriber by $200 to $400 if some decide to stay with them after contract expiration.

And how many times to I have to say this "WITH AT&T YOU PAY THE SAME MONTHLY FEES WHETHER YOU SIGNED A CONTRACT OR NOT". I don't know what is so hard to understand here.

Anyone? Anyone? Beuller?

:-)

I don't expect to pay that much. I'm waiting for the AT&T exclusivity to expire to get my phone through TMobile. Probably subsidized as well but I'm more than happy to extend my contract with them since they've kept me happy for over 4 years now.

I'm quite sure TMobile won't be the only carrier to get the new iPhone. I hope a lot of carriers do. More iPhones sold. Point is that if people really do not want to deal with AT&T they just need a little bit more patience. Things are about to change soon.

I'm looking at the GPS mostly since I'm always on a motorcycle and love it. And the battery life is already being reported as quite bad with 3G. This was expected. 2G is just fine with me. The increased Wifi reception is also yummy to me.

I really don't think Apple can tell carriers what to charge customers. They did their part to lower the price.

Because of the channel differences and the rumour that the contract is for 5 years I don't see T-Mobile USA getting the iPhone from Apple. And I don't see a CDMA coming either, sooner or later.

But the aussies also have the most complex plans to obscure your so-called transparent handset price. Even the most intelligent people are having a hard time trying to understand the plans ---- and people are putting up spreadsheets in order to do so.

Any time they are doing monthly payment of handset --- they are not telling you the financing rate. They are selling you a $50 plan with a call value of $300 --- that's insulting people's intelligence. That's like buying a diamond ring for $1000 but the gem certificate says that it has a "replacement value" of $2000.

Offering an product that is in some way financed isn't done to insult customers, it'd done to make it more immediately affordable to more people. How many nice cars would people drive if they had to pay for them in full at the time of purchase. The subsidy for cell phones works the same way, but I think the few people here that don't understand how it works are drowning out everyone else who understands the financing behind it.

You misunderstood what I was saying.

I know exactly why a phone is financed and why it is such a good thing for consumers. What I was saying is that at least in Australia you know your iPhone is costing you $50 per month for the handset plus your calling plan on top. Nobody here is laboring under the misconception that they are getting a free iPhone.

The comment before about Apple not dictating sales prices and at least they have done the right thing by cutting the cost makes no sense unless Apple really is selling the iPhone to the carriers for less money that before.

Not only was I once the sales director of a mobile phone retailer I have also worked for 2 different mobile phone networks.

MY whole point is that no the iPhone is not costing you $199 and by saying it was now half price is very misleading. The iPhone is $729 with no contract in Australia, and even allowing for the tiny difference in exchange rates and tax this is still a $500-$600 dollar phone in the US and you are paying for it regardless of your down payment being only $199.

I agree that Aussie calling plans are useless, stupid gimmicks designed to fool people into thinking they are getting more value. But this is different.

On Optus the price of the iPhone is not hidden in the calling plans, you pay two different charges to Optus when you take out a contract for the iPhone. On the lowest tarrif you pay $19pm for your call plan, this is on a 12 month contract. Then the second charge is for the iPhone itself, $49 per month for the same 12 months.

So for year 1 you pay a total of $68 per month for the 8GB iPhone. After 12 months are up you will then only need to pay $19 per month as your iPhone is paid for and now yours. So you have paid $600 just for the iPhone.

Are Apple making less money for the iPhone 2.0 then? Do we know this is a fact?

I gotcha, but I don't think it's misleading. One of the major issues was the high initial price. it seems many people can't and most people prefer not pay for items up front. In the US, if you buy an iPhone at AT&T for any price between $199—$699 you still get the same service plan. There is no service agreement discount for having paid the full retail price for the iPhone so buying it at $199 is half the price it costs to walk out of the store with an activated iPhone 3G. The prices AT&T is setting has no relevance since it's the same no matter what you pay for a 3G iPhone. Since you say people realize that what a subsidization is (though I have my doubts after reading AI articles over the last 2 months) then they should know that they aren't getting tricked as there is no way to buy the device without being made aware of the contractual obligation. It's in the contract, the CSR will inform you and both AT&T and Apple have it plastered on their websites.

Now, if you want to talk TOC, the iPhone 3G is more than the iPhone 2G on AT&T or last month. However, I think that even activating an original iPhone on AT&T will require you to get the $30 month data plan with no included SMS. I'd even like it to be law that the TOC for contracts to be clearly given to customers at the time of purchase.

From a consumer's point of view --- they shouldn't care if the $600 handset price is obscure. They should really care about the $1400-1800 monthly plan that has obscure pricing.

The US system has 2 advantages:

(1) AT&T doesn't create another set of price plans for the iphone --- it is the combination of a regular priced voice plan with a regular priced sms plan with a regular priced PDA data plan. There is nothing non-transparent about the AT&T iphone plan.
(2) buckets of minutes is a lot more easier to compare prices among carriers. There is no need for spreadsheets.

I found your view to be penny wise and dollar stupid. This is about cheap razor and expensive razor blades. Cheap inkjet printers and expensive ink.

I find it interesting that all of the people bitching and moaning and using words like "outrageous", "con", "illegal monopoly", etc haven't commented ONCE on my last post where I clearly layed out the logical nature of the iPhone's pricing, subsidy, and contract plans. Apparently, people just want to vent emotions instead of actually debating with facts and rational arguments..

There are also rumors that the contract was closer to two years.

Channel differences won't stop the iPhone from going to other carriers at all. It will be done.

How is that an issue? How much did people pay Apple for the old iPhone and how much are they paying Apple now?

But the 5 year timeframe seems more likey as it's what a Verizon exec stated. The 2 year contract is more likely a confusion about the user contract length with AT&T and Apple's contract length with AT&T. It may be shorter or longer than 5 years but 5 years seems the most likely with the evidence at hand.


You do know this requires a UMTS HW and firmware update, right?

No proof either way. Although 2 years is the most popular rumor. A Verizon exec isn't privy to AT&T and Apple negotiations.



You do realize that Apple wouldn't dream of limiting it's potential customer base to just one carrier for too long don't you? Whatever it takes it will be done. Too many limitations on Apple's potential profit to be available just on AT&T here for much longer.