Why don't they just go one step further and do what we do over here in the UK. Pay for the contract monthly (usually 12 months) and get the phone free.
6 months back, one of the iPhone rumours was that Apple was worried about undercutting itself. A "free" phone isn't really free (it's paid for by the contract), but people would choose the "free" phone over an iPod... bad for the iPods. Also, some people pay nothing for their phones and don't care too much if they're wrecked, then complain that they can't get another free phone to replace it. Apple wants to have people realise the value they're getting.
Where would Cingular/AT&T make their money? The last six months of the contract aren't much. They'd hope that most of the customers continue with them?
Cell phone providers present contracts that integrate (hide) the payments which pay off the phone, at present. If you have your own phone, the cell companies can afford to give you a better deal (though they often do not do this!!). There is plenty of money making still.
I think Telstra here tried something similar - pay full price for any phone, but have great voice/data rates. People left in droves... why pay $400 for a phone on Telstra when it's "free" on Vodafone. Apple needs tight control to avoid this.
When phones are subsidized, subscribers are paying for the phones indirectly through higher rates on their service contract -- the money is coming from somewhere. Instead of subsidizing the service, Cingular should just offer cheaper service. That should be the true advantage to paying the cost of the phone up front: you are only paying for your service after that, not for your or someone else's phone. If they subsidize the service for 18 months (or whatever), it'll be cheaper than it should be for a while and then more expensive than it should be thereafter. Cut through this nonsense and just charge for the service.
Agreed.. pay high for the phone, then have real prices for the calls/data for as long as you have it. However... if they did this, customers could buy from Cingular then go straight to a competitor. If it truly is subsidised then it makes the plan more appealing.
If there's any kind of "unstandardized thinking" (to use the terms from a previous post) it should be that wireless carriers need to stop charging ridiculous prices for data.
Yes, this is another area where the carriers charge too much. Having a realistic charge would be great! (not free data, which is VERY hard once 3G phones are released, but paying an amount that makes a profit for cingular but doesn't charge us too much)
We pay 25c/sms in Australia.. not much good for frequent use of the nice iChat/SMS thing the phone has. How about bringing that down to 1c/sms?
Makes more sense to me to subsidize is for the length of the contract so that payments are the same and there isn't sticker shock right at the 19-month mark ... but either way it turns so many people into customers.
Better to have a sticker shock at 19months, than a sticker shock the moment people are off contract.
That said... if the phone is paid for upfront, and Cingular weren't losing money on the deal, why would they start charging more at 18months? This only makes sense if the $599 subsidises the plan (rather than the plan just being cheaper because it's not subsidising the phone). Hopefully a combination of subsidising the contract, and then moving to a contract that is based on the real cost (not subsidising the phone).
