iPhone Early Cancellation Fee $175

[MacRumors]

Boston.com is reporting that iPhone subscribers will have to pay $175 to break their two year contract.

Even though AT&T isn't subsidizing the iPhone's hefty price -- $499 to $599, depending on the storage capacity a customer chooses -- the company will charge a $175 termination fee for iPhone users who want to break their two-year contracts.

Early cancellation fees are typical for mobile phone contracts in the U.S., but the article points out that these fees typically help cover the phone subsidies that mobile carriers offer on new phones. The iPhone, however, has been heavily rumored not to benefit from these retail discounts. Regardless, AT&T spokesperson Mark Siegel justifies the fee by noting that

"There are certain fixed costs we incur in serving every customer who establishes service with us."

[atari1356]

But... does it use a standard SIM card? Would someone with too much money (not me ) be able to break their contract and use their iPhone on T-Mobile? or another carrier?

[oscuh]

This is certainly disappointing, but I think that once people start using the iPhone, they wouldn't want to break their contract unless there were serious service issues or something with at&t. I think the product will be considered just that good.

Maybe at some point they'll subsidize the thing? Maybe THAT is what they're hiding?

[theheadguy]

Whatever the reason, it's certainly not greed.

/sarcasm

[Mac-Addict]

I just hope it comes out as sim free or locked Pay As You Go in the UK because that what will make or break the iPhone out here.

[hamholio]

$675 for a touchscreen ipod!! !

[arn]

I don't think this is any real surprise.

This is simply the "required" part of the 2 year contract required. "required" means it's required unless you want to pay a cancellation fee.

arn

[SheriffParker]

You could always just use it as a really sweet iPod, and surf with wifi when available. That is if they don't have some way of preventing you from using the non-phone functions without a SIM.

[Fatassthing]

are cancelations always this high? arent they usually around 100 bucks?

[Sandfleaz]

Not a big shock, cell phone contracts from any carrier are as convulated as any agreement. Certainly wouldn't keep me from getting an iPhone

[Poff]

My guess is we'll start seeing $800 iPhones on eBay very soon..

[jklps]

This policy is from the cell phone carrier and I'm obviously not surprised, it is just how they operate.

[daveschroeder]

Argh, why do people keep on asking whether it uses a SIM card??

YES, it uses a SIM card, and YES, it is user-accessible. This has been thoroughly confirmed and proven, and I'm not going to waste my time linking articles and proof here: it's all out there for anyone who wants to search.

Also, it seems almost positive that Apple Retail stores and apple.com will be selling iPhones WITHOUT activation. Obviously, it will need to be activated on AT&T if you want to use it, and activation looks as if it will happen via iTunes, according to other numerous hints (such as Apple's email saying activation REQUIRES an AppleID/iTunes account), but that doesn't mean people can't just buy the phone and not activate it. And we already know the price is unsubsidized, so it is what it is.

However, the phone is almost certainly NOT "unlocked", meaning that ONLY AT&T SIMs will work in the phone. This is extremely typical of US GSM phones. Granted, again, it was mostly used to manage subsidies and keep people on a particular carrier, and it remains to be seen if AT&T will unlock phones at customers request (e.g., for traveling, etc. to use prepaid SIMs internationally - their policy on this is that the person has to be a customer for 90 days). But in this case there is the catch-22 that you have to be an AT&T customer before you can even get the phone unlocked.

Then, there is the (very unlikely) possibility that iPhone is simply an unlocked phone, but the only carrier that "supports" it is AT&T. Unlikely, but possible, given how different everything is with iPhone (no subsidies, activation process, etc.)

AT&T is of course looking to get new customers, so it appears that activation will be required IF you get it at an AT&T store, but even that isn't confirmed, given that it appears certain that Apple will be selling WITHOUT activation. Even so, the second you activate, you'll still have the cancellation fee regardless.

[jk8311]

I bet this high cancellation fee points to relatively low service fees. They're probably hoping to get a full two years out of every contract and are simply protecting that with a higher-than-normal cancellation fee to make sure they get all 24 months.

[slackpacker]

Lets say this .... Guy who wants to just buy the phone to sell it on ebay is on line before you.... or lets say 20 guys are on line before you looking to sell it on ebay....

****GOD Bless the $175 cancellation fee****

[ajhill]

Okay, this is just typical cell phone b.s. Still, the voice/data plan rate remains the big question. And, below the radar is the REALLY big question, what is Apple's cut of the monthly bill.

[daveschroeder]

Originally Posted by slackpacker

Lets say this .... Guy who wants to just buy the phone to sell it on ebay is on line before you.... or lets say 20 guys are on line before you looking to sell it on ebay....

****GOD Bless the $175 cancellation fee****

But it appears almost 100% certain that Apple retail stores and apple.com will be selling WITHOUT activation. So you won't get the benefit of the cancellation fee. But, there isn't likely to be a big eBay market for these phones (except for idiots, which there are bound to be some in the first few days/weeks), since anyone will simply be able to get it at the normal retail price from Apple if they so choose, *probably* without activation (see my previous post for more). I suppose some international folks might just want to get their hands on one, especially if it turns out there is a some way to unlock the phone.

[daveschroeder]

Originally Posted by jk8311

I bet this high cancellation fee points to relatively low service fees. They're probably hoping to get a full two years out of every contract and are simply protecting that with a higher-than-normal cancellation fee to make sure they get all 24 months.

No. This cancellation fee is typical. It's usually $150-$200 to cancel on any carrier, and sometimes less in the second year.

[jmerchlinsky]

Cancellation fees are usually reimbursement for the cell phone subsidy. ATT pays $200 of the cell phone cost and needs that money back if you cancel your service. The fact that the cancellation fee will apply to the iPhone is evidence that a "subsidy" payment is still occuring. However, the $200 isn't going to the cost of the phone, so where is it going? Apple's pocket.

[notsofatjames]

175 dollars is less than 24months of 100 dollars! its even less than if the price plan was 8 dollars per month!

[daveschroeder]

Originally Posted by jmerchlinsky

Cancellation fees are usually reimbursement for the cell phone subsidy. ATT pays $200 of the cell phone cost and needs that money back if you cancel your service. The fact that the cancellation fee will apply to the iPhone is evidence that a "subsidy" payment is still occuring. However, the $200 isn't going to the cost of the phone, so where is it going? Apple's pocket.

No. It's going into AT&T's pocket. While there may be some behind the scenes dealing going on, and since the iPhone launch is very unique and obviously will be handled differently from other AT&T phones (e.g., possible sale without activation through Apple, activation through iTunes, etc.), sure, we don't know what kind of things are necessarily going on.

But there is absolutely no traditional subsidy on this phone. Even this article confirms that, and it's been confirmed numerous other times (e.g., in the AT&T employee Q&A which says, plainly, that the iPhone is not subsidized). Further, since Apple will be selling the iPhone at the same price, probably without activation, that's further confirmation the phone ISN'T subsidized. This money is going straight into AT&T's pocket, not Apple's.

AT&T is looking to get customers with iPhone, not have people come into their stores, buy the phones, and then cancel for $0.

[slackpacker]

[quote=daveschroeder;3796870]But it appears almost 100% certain that Apple retail stores and apple.com will be selling WITHOUT activation. So you won't get the benefit of the cancellation fee.QUOTE]

How did you arrive at you 100% - I think this is wishful thinking. People who buy this for $599 just for the ipod functions are .... well I won't say it.

[notsofatjames]

Originally Posted by slackpacker

How did you arrive at you 100% - I think this is wishful thinking.

100% is a bit over the top, but lots of forum members have asked about in store activation, and lots of apple store staff have said that it wouldnt be activated in store. Doesnt mean its 100% true. I think apple store employees get the same information about new products that we do. Nothing.

[daveschroeder]

[quote=slackpacker;3796892]

Originally Posted by daveschroeder

But it appears almost 100% certain that Apple retail stores and apple.com will be selling WITHOUT activation. So you won't get the benefit of the cancellation fee.QUOTE]

How did you arrive at you 100% - I think this is wishful thinking.

1. The fact that no Apple retail stores are equipped to handle activations for AT&T. Apple wants ZERO to do with AT&T activations or customer service. Absolutely zero. (Except via an automated process, i.e., iTunes.)

2. The fact that since Apple says an AppleID and iTunes is *required* for activation, one can assume that, well, iTunes is required for activation. I.e., iTunes is being used for self-activation.

3. Because of 2., one would assume that iPhones ordered via apple.com will be sold and delivered to the customer WITHOUT activation, for self-activation.

4. If the Apple online store process works like that, there is no reason to have Apple retail stores doing activation for customers because of 1., and because the entire self-activation process has already been built.

So yes, it appears almost (you conveniently ignore a word, there) 100% certain that iPhones will be available via Apple without activation, with self-activation happening via iTunes. I don't know why people find this so difficult to comprehend.

[daveschroeder]

Originally Posted by notsofatjames

100% is a bit over the top, but lots of forum members have asked about in store activation, and lots of apple store staff have said that it wouldnt be activated in store. Doesnt mean its 100% true. I think apple store employees get the same information about new products that we do. Nothing.

...which is why I said almost 100%, not 100%. And it's just a figure of speech. Nothing that hasn't happened yet is 100% certain, but since every single fact we have points to what I just said in the immediate post above, well, I think logic hopefully dictates what's going to happen here.