Contract and Subsidy Issues for iPhone Users Looking to Upgrade to iPhone 3G S

[MacRumors]

With the announcement of the iPhone 3G S yesterday, many current iPhone users have been looking to upgrade to the new model. Unfortunately, many users have been surprised and disappointed to find that their carriers are requiring that existing iPhone customers under contract are unable to immediately upgrade at the $199/$299 price point offered to "qualifying" customers.

It appears that many of these users had expected to be "qualified" for the lowest pricing despite being currently locked into a multi-year contract, as carriers such as AT&T permitted original iPhone users to upgrade to the iPhone 3G at the qualified price despite still being under their original two-year contracts. The key difference between last year's situation and this year's is that the original iPhone was unsubsidized by AT&T, and thus the carrier had no upfront subsidy to recoup through the two-year contracts its customers were on.

Customers on iPhone 3G contracts, however, received initial subsidies of several hundred dollars, meaning that carriers will require those customers to fulfill most or all of their contracts prior to qualifying for full subsidized pricing on upgraded models. This policy is not unique to AT&T, as upfront carrier subsidies quickly became the basis of Apple's iPhone business model throughout the world. As TechRadar notes, UK carrier O2 has also been receiving complaints from customers unable to qualify for fully subsidized pricing.

Speaking to Steve Alder, General Manager of Devices for O2 UK, he pointed out that it simply wasn't viable to let O2's iPhone customers upgrade early:

"Having subsidised much (or all - depending on tariff) of the price of a customer's iPhone 3G, we simply cannot justify invalidating that contract and subsidise a second device for the same customer.

"Much as we understand the desire of many customers to have the latest version, this would be a loss making deal for O2 and would be a distinct set of business terms for iPhone customers that don't apply to our other customers."

Confusion remains, however, over just what requirements are necessary in order for existing customers to qualify for subsidized pricing for a given carrier. Carriers typically permit users to qualify for partial or full subsidized pricing on handset upgrades several months prior to the expiration of their existing contracts in exchange for the customer locking in for an additional multi-year contract.

But AT&T iPhone 3G customers, for example, appear to be receiving varying information about when they will be eligible for subsidized pricing on the iPhone 3G S. One MacRumors forum member reports that an AT&T representative claims that this discrepancy stems from whether the customer purchased an original iPhone prior to purchasing an iPhone 3G, in which case the customer would qualify for subsidized pricing on the iPhone 3G S only 12 months after signing their iPhone 3G contract instead of the 18 months required for customers who had only purchased an iPhone 3G. A number of other forum members, however, claim that the pricing offers they are receiving do not reflect this supposed set of rules.

Because it remains unclear exactly how much of their contracts iPhone 3G users will need to fulfill before becoming eligible for subsidized pricing on the iPhone 3G S, customers looking to upgrade should anticipate additional clarification on this process from their carriers.

Article Link: Contract and Subsidy Issues for iPhone Users Looking to Upgrade to iPhone 3G S

[EgbertAttrick]

That's how it works everywhere and AT&T should not be an exception.

[iOrlando]

i really dont understand why this is such an issue. With any other subsidized phone...if a newer model came out....you wouldnt just go to att and say...oh i have the old version of that...i would like the new one...please give it to me at that subsidized rate....

why are people all of a sudden shocked at this practice?

[angemon89]

I went into an AT&T store this morning and asked the salesman what my upgrade options were for the 3GS. He told me that I could only get the unsubsidized prices for the 3GS if I wanted to get it on launch day. He also told me that I can only get the early upgrade pricing($399/$499) on or after July 11 (1 year after my purchase of the 3G).

He was looking at my account on his computer as he was telling me this.

[stuarty2003]

I got an iPhone 3G on launch day in the UK and signed an 18 month contract at £45 a month and got the phone for free as it was subsidised.

12 months later, I don't expect an upgrade or treatment different to other o2 customers. I do expect an upgrade in December.

An 18 month contract is an 18 month contract - get used to it.

[patrick0brien]

People love to blame others for their failures. In this case, not thinking ahead. This is SOP in the industry, love it or hate it. AT&T deserves no more ire than every other carrier. Apple deserve none of it.

If you stand on the tracks, don’t complain when the train hits you.

[Rhalliwell1]

Although i don't live in the US i feel it is almost time for a petition against ATT... all they seem to do is restrict the iPhone. I know this article isn't just about ATT but it is yet another thing on top of the delayed MMS and tethering... Come on Apple you can do better! Has anyone else had the feeling that ATT has been restricting possible iPhone features for the rest of us?

[kbmb]

Welcome to the world of subsidized cellular contracts. This is nothing new.

-Kevin

[twoodcc]

seems like a mess. hopefully i can find a loophole though

[nemaslov]

Has anyone heard of exceptions? I'm talking about early upgrade from a NOKIA-my son has NEVER had an iPhone. You'd think they'd want the higher monthly income...

A few months ago I went to the ATT store because my sim card died. I have an original iPhone, not a 3G. The guy at the ATT store it turned out used to work at an Apple Store so seemed to have much more experience than the typical ATT sales person. Anyway he saw that ATT had not remove a monthly text charge from before I had an iPhone so I was immediately credit about $150. COOL! But if I hadn't gone in.......??? OUCH!

Anyway I'm ready to upgrade to a 3GS for 199. but I also want to get my son his first iPhone. Online it shows he won't qualify until next April for the subsidized rate (from a Nokia).

Has anyone heard that if you go in the store and buy two they ever make an exception? It would seem since he never had an iPhone they would want the larger monthly bill. Im not talking about upgrading from a 3G or any other iPhone

Exceptions ever?

[leandromp]

I don't know what's the big deal anyways. If you really want the "3GS" so bad, just sell the "3G" and you won't have to put so much of a difference for the new one. I sold mine for 300, and i'm just gonna need 150 (including taxes/fees) and that's it.

No big deal.

[The Phazer]

The outrage in the UK isn't over those who are still in contract (well, some of it is, but not the part that really has a point).

It's that O2 have DOUBLED the price of an iPhone 3GS over the 3G at it's launch despite the US prices being exactly the same for people who aren't in any sort of contract.

And the crazy tethering prices.

Phazer

[jessica.]

Originally Posted by MacRumors

It appears that many of these users had expected to be "qualified"
...

Customers on iPhone 3G contracts, however, received initial subsidies of several hundred dollars, meaning that carriers will [b]require those customers to fulfill most or all of their contracts prior to qualifying for full subsidized pricing on upgraded models.

Expectations of being able to upgrade early are silly. However this news is wrong when it comes to AT&T. AT&T's answer to me on two different occasions during two different conversations was that they expect current 3G owners to fulfill 12 months of their contract before they can take advantage of the subsidized pricing.

[Cynicalone]

This mess is why I wish AT&T/Apple had given the option to buy the phone outright last year. Like they did with the first iPhone. Now the iPhone is in the same boat as any other cell phone.

[ojwk]

I've got a 2G iPhone and I was annoyed that O2 were prepared to give me any phone under the sun (incl. the iPhone 3G) for me to free provided I renewed my contract but were unwilling to budge on the upfront price of the 3GS even slightly.

They didn't subsidize my £269 aluminum brick!

[gnortenjones]

Look at it this way. When the next version of the iphone comes out, presumabely this time next year, the 3G users WILL be able to upgrade to it. I also suspect Apple has taken this into consideration since the 3GS was really little more than a spec bump. I'm wondering if the release of a totally redesigned iphone will be timed for when the 3G customers contracts are up.

Of course, all the people who buy 3GS's will be the ones complaining because they can't upgrade to the new iphone.

[DNewmski11]

I believe this link is a better explanation of who is eligable.

http://www.wirefly.com/upgrades/eligibility/att/


I bought my iPhone 3G opening day and have been billed more than $100 before taxes and fees every month. I have paid on time every month and the at&t site says I "may" be eligible for an up grade on or after 7.12.09.

[joshellis625]

As much as I hate AT&T, they are really doing the right thing on their part. We are just unhappy because we are whining and want our new iPhone now.

[jayman99]

so original iPhone customers (prior to 3G) should be able to update with the lowest priced iPhone 3G[S]?????

[DipDog3]

Glad I didn't upgrade to the iPhone 3G!

[AaronRC]

The problem has been caused by carriers insisting on 18 and 24 month contracts for iPhone users. I understand this is to give them enough time to recoup the cost of the subsidy, but for a product that is going to be updated every 12 months (or thereabouts), tying people to one device any longer than 12 months is unreasonable.

I would happily pay more for an iPhone if I could sign a 12 month contract with O2, but they don't allow it. I can wait 'till December/January to upgrade to the 3G S knowing a new iPhone is likely to be launched 4-5 months later, or I can use my 3G for another 12 months... I don't want to do either of those things.

[DipDog3]

Originally Posted by jayman99

so original iPhone customers (prior to 3G) should be able to update with the lowest priced iPhone 3G[S]?????

YEAP!

I can get everything at the lowest price an I am an owner of the 2G

[theheadguy]

Originally Posted by joshellis625

As much as I hate AT&T, they are really doing the right thing on their part. We are just unhappy because we are whining and want our new iPhone now.

Yeah... this is really good business. Obviously their superior business model is what has propelled them to success, not the fact that the iphone is locked to them as a carrier. Piss people off, that's the way to flourish and improve a battered reputation!

[bartzilla]

I'm honestly not sure why this is even considered news.

Really:
Phone company expects users to adhere to phone contracts

What next?
Water is wet
The sun tends to rise in the morning and set in the evening

[WickedRabbit]

This is a pretty standardized practice people and you shouldn't be shocked that you can't upgrade a WHOLE YEAR EARLY if you bought a 3G last year. People are shocked because this is just Apple fanboys wanting to be treated 'special' and that's all it is. People know the rules, but apparently if it's Apple they are buying then the rules mustn't apply.