AT&T Subsidizing iPhone 3G for $325?

[boomchip]

I don't get all this hoopla. I am a long-time ATT customer, and am coming up on an eligibility to upgrade on 8/4/08. I do not currently own an iPhone as you can probably tell by my upgrade date.

So my plan was to upgrade to the 3G on 8/4/08...but then I see conflicting arguments and posts that state people who don't own an iPhone right now will be in a world of hurt. Sounds like empty threats to me. The price is $199, as stated by Apple (before ATT mentioned any price point). I don't get how it would be worse for someone like me because I don't have the old gen phone. Don't they (ATT) realize that most of the people who buy an iPhone this time around will be new people who didn't buy the first round that came out, thanks to the scary pricing structure?

I saw a very educated post on here commenting on one of the first articles talking about the price woes, I can't find it now, but I saw this person was talking to what appeared to be an ATT rep who knew that the pricing structure was $199/299, no matter WHO bought, and no matter WHEN they bought it. Yes I know that's only one man's word, but it sounded like the rep knew what they were talking about.

 

[Silverfist]

Notice the careful wording...

Here is my conversation with the Apple Rep. She said that the iPhone's price is set by Apple and not subsidized by AT&T.

Hi, my name is Cheryl. Welcome to Apple!

Cheryl: Good afternoon.

You: Hello, I'm hoping that you can clear up a question that I have?

Cheryl: I'm happy to assist with that.

You: Is the iPhone 3G discounted by Apple, or is it being "subsidized" by AT&T?

Cheryl: We will release this for sale on July 11th.

You: I know what day it comes out, but why are people saying that the $199 price is chosen by AT&T?

Cheryl: The price for the iPhone 3G is an apple price for the iPhone.

You: Ok so AT&T currently has NOT done anything to the price of the iPhone 3G correct

You: It's not subsidized by them yet?

Cheryl: The price is set by apple.

You: Thank You.

Cheryl: You're welcome.

Note that she didn't actually say NO... she was very careful in her response. My bet is that the price is set to $199/$299 by Apple; any phone company wanting to sell the phone has to subsidize the remainder of the cost...

.

 

[arn]

If you go and pick it up at an apple store, how should they know what you are and are not eligible for? I 100% believe that the iphone is being subsidized by all the cell companies around the world. What I am struggling with is how apple has made no mention themselves except of the 199 and 299 price points.

Ya, it's a logistical nightmare. I wonder if Apple and AT&T are still working out the details about how this is going to happen.

arn

 

[boomchip]

Ya, it's a logistical nightmare. I wonder if Apple and AT&T are still working out the details about how this is going to happen.

arn

Well....I wouldn't be surprised if they are, due to the gaps of releasing information (by both parties). There is going to have to be some kind of activation system going on at the Apple stores, especially if they really are knocking out the at-home activation processes. It could be as simple as them checking the phone number, even prior to asking for more information. ATT has a utility like that on their online account access now where you can enter the number to see if said number is an ATT line. Perhaps ATT could build on that and also notify the Apple Rep if the person is eligible for upgrade or not. Or perhaps this will all go to the wayside and Apple will freely allow the upgrade to go through. Who knows, thanks to all the shady details!

 

[radiogod69]

Here's directly from the AT&T memo to managers:

Quote:
Upgrade Eligibility and Qualified Upgrade Pricing
Upgrade eligibility will be determined based on standard upgrade eligibility rules. Customers must be upgrade eligible to receive the qualified upgrade pricing. However, not all customers will be qualified upgrades. AT&T has not determined the price of the 3G device for non-qualified upgrades.

To me this seems like they are beating around the bush because they probably know stuff like this will be leaked. Second if its just a memo, its just a memo, not an official press release. Also this is what I found in the official press release that was provided in a link from another user

• With a two-year contract, the price of an 8GB iPhone 3G will be $199; the 16GB model will be priced at $299.

• Unlimited iPhone 3G data plans for consumers will be available for $30 a month, in addition to voice plans starting at $39.99 a month.

• Unlimited 3G data plans for business users will be available for $45 a month, in addition to a voice plan.


In the near term, AT&T anticipates that the new agreement will likely result in some pressure on margins and earnings, reflecting the costs of subsidized device pricing, which, in turn, is expected to drive increased subscriber volumes. The company anticipates potential dilution to earnings per share (EPS) from this initiative in the $0.10 to $0.12 range this year and next, with a 2008 adjusted consolidated operating income margin of approximately 24 percent and a full-year 2008 wireless OIBDA margin in the 39-40 percent range. As recurring revenue streams build without any further revenue sharing required, AT&T expects the initiative to turn accretive in 2010.

This seems pretty cut and dry to me by analyzing this press release and seems to confirm what att reps are saying is true. $199/$299 for everyone. What do you guys think?

 

[monkeyrun]

If there is another "unsubsidized" price, they should've said it in the press release.

 

[know-it-all5]

This seems pretty cut and dry to me by analyzing this press release and seems to confirm what att reps are saying is true. $199/$299 for everyone. What do you guys think?

I think that Apple more than att will have a lot of explaining to do if suddenly there is gonna be a catch that disables some from the 199/299 price point. They made no mention at WWDC of any prices other than 199/299.

As much as we like to believe that Apple has now adopted the "accepted" business model for selling cellular phones, they haven't.

See reasons why apple is "different" (the following applies in america):

-The iphone is the only phone that is sold directly by the company that makes it, that is locked to one network (in the US).

-Every company that makes phones for cell carriers tends to make tons of models, and puts different types of different models on different networks. Apple sells 1 iphone with 2 "size variations" to be locked on one carrier.

-The iphone is one of the most anticipated phones ever. This is exponentially more popular than any other individual phone on att.

-When they talk about apple taking market share from other phone manufacturers, Apple does it with one phone, while other manufacturers have tons of different models. Think if apple had 10% of the world market share and blackberry had 10% (not real numbers), apple would be doing it with one phone, while blackberry would have a bunch of different models on different networks to gain that market share.


The point i am trying to make is that one can't confuse the subsidizing by att of the iphone, to att's subsidies of its other phones. None of its other phones will sell close to what the iphone will. With a phone that will sell so much, one should think that att would be willing to take a bigger loss on it, at first, while watching it make att money over time. Even if that means subsidizing it for current att customers.

Just to assure that I have no bias or hope for att customers, you should know that I am currently on sprint and will be out of my contract July 1st and will happily purchase my subsidized iphone 3g on july 11th. The reality is I couldn't care less about whining att customers who currently are under contract with subsidized phones, and aren't eligible for upgrade. The reality is you can't make everyone happy. I just think that the reality is that it would be a dumb business decision on att's part to prevent the purchase of the iphone by anyone (I consider a raise in price of over 100$ to be preventing many from buying it) because it means that they would be forfeiting huge profits in the long run. They may get hit hard when people buy them, but the reality is "an iphone in every pocket" is not just gods gift to apple. Its a gift to att aswell.

In simple terms: Subsidize it for everyone att, no matter what their upgrade situation, cause you will make more money in the long run.

 

[Type121]

This seems pretty cut and dry to me by analyzing this press release and seems to confirm what att reps are saying is true. $199/$299 for everyone. What do you guys think?

You can believe the memo to managers or not. I don't see why they'd lie there. One way or another, I'd put money down that there will be people not eligible for upgrades that get quoted a significantly higher price.

Upgrade Eligibility and Qualified Upgrade Pricing
Upgrade eligibility will be determined based on standard upgrade eligibility rules. Customers must be upgrade eligible to receive the qualified upgrade pricing. However, not all customers will be qualified upgrades. AT&T has not determined the price of the 3G device for non-qualified upgrades.

 

[freediverdude]

new hypothesis

You know what, the more and more I read about this, and the less and less Apple and AT&T say about each other and carefully word their statements, it leads me to a weird hypothesis:

It almost sounds like, what if Apple and AT&T have already parted ways in terms of the sharing revenue deal? It kinda makes sense, doesn't it, if you think about it. Apple could be just selling the phones to AT&T and letting them use whatever rules and restrictions they want in selling them in their stores, while Apple is sitting back and saying "well, we're just gonna sell them at $199/299, and we'll keep providing the iTunes tether to people who want that, but we're not going to worry about what happens to them after leaving the Apple stores. You can do what you want in your AT&T stores."

This would explain a whole lot of what is going on.

 

[skellener]

You know what, the more and more I read about this, and the less and less Apple and AT&T say about each other and carefully word their statements, it leads me to a weird hypothesis:

It almost sounds like, what if Apple and AT&T have already parted ways in terms of the sharing revenue deal? It kinda makes sense, doesn't it, if you think about it. Apple could be just selling the phones to AT&T and letting them use whatever rules and restrictions they want in selling them in their stores, while Apple is sitting back and saying "well, we're just gonna sell them at $199/299, and we'll keep providing the iTunes tether to people who want that, but we're not going to worry about what happens to them after leaving the Apple stores. You can do what you want in your AT&T stores."

This would explain a whole lot of what is going on.

I think you're right freediverdude!

 

[Sun Baked]

Still expect that the subsidy of $200 still reflects the estimated price subsidy.

Sort of expected that Apple wasn't passing along all the money that AT&T was sending Apple upfront for each phone sold.

We pocket $125 and give the customer a $200 credit. And they'll think it's a smoking deal.

 

[babyj]

Note that she didn't actually say NO... she was very careful in her response. My bet is that the price is set to $199/$299 by Apple; any phone company wanting to sell the phone has to subsidize the remainder of the cost...

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I thought the same - she never said the price wasn't subsidised by AT&T (or Apple), simply that Apple had set the price. Not that I think it really matters if it is or not or by whom, all that matter is what you end up paying for it.

I can't help but wonder what kind of influence the App Store has had on the iPhone 3G price. With the success of iTunes for music and video, I'm sure Apple and the mobile phone companies are assuming there will be a lot of sales generated by it.

Plus as smaller apps can be downloaded over the mobile network I would assume that the mobile phone companies are getting a share of the 30% that Apple take - in fact, I reckon there is no way they would let Apple keep it all.

 

[know-it-all5]

You know what, the more and more I read about this, and the less and less Apple and AT&T say about each other and carefully word their statements, it leads me to a weird hypothesis:

It almost sounds like, what if Apple and AT&T have already parted ways in terms of the sharing revenue deal? It kinda makes sense, doesn't it, if you think about it. Apple could be just selling the phones to AT&T and letting them use whatever rules and restrictions they want in selling them in their stores, while Apple is sitting back and saying "well, we're just gonna sell them at $199/299, and we'll keep providing the iTunes tether to people who want that, but we're not going to worry about what happens to them after leaving the Apple stores. You can do what you want in your AT&T stores."

This would explain a whole lot of what is going on.

No it wouldnt.

att has specified through a press release that they are subsidizing the iphone in order to achieve that price point. Thus it is completely crazy to assume that apple is selling att 525 and 625 dollar iphones that can be subsidized for the customer at att stores (to achieve the 199/299 price points), while at apple stores they are selling the general public 199 and 299 phones that are not being subsidized.

apple and att are very much together right now. I suspect, like arn said, that they are still debating how they will be sold and activated etc.

 

[freediverdude]

know-it-all5, there's really nothing about that, that would not make sense. Apple could be selling the phones to AT&T for $500 for all we know, and then AT&T is having to subsidize them to sell them for the same price as Apple. Meanwhile, Apple could be sitting back and selling them for what they want to, the $199/299. I would not put it past Jobs to do just something like that, if things got heated during the re-negotiations. But, of course, we really don't know. But it just seems to make sense given all these carefully worded statements.

adding: Also, I don't think AT&T is going to make any more statements. I think they've clearly spelled out what they're going to do in their stores. The only question that remains is how far the Apple stores are going to go. It sounds like they will offer to activate the phone if you want to, and that's about it.

 

[captainjasons]

Called AT&T today...

I recently joined (May 22nd) AT&T after being told by a salesman that I would be able to upgrade to the new iPhone 3G with no problems. Though NOW it has clearly been illustrated that is NOT the case. I called and spoke with a representative for about an hour, and firmly and patiently stated my case. They were very helpful and forthcoming with information. They said I was still within the buyer's remorse time period, and I had the right to return the phone I purchased to cancel my account, at the store I purchased it from. THEN when the iPhone 3G rolled around on the 11th of July, I could purchase it at its 199 price point with a 2 year contract. I explained that I had already paid for a rather pricey activation fee, and I did not wish to have to endure that cost again, and they kindly credited my account for said activation fee. Though I'm quite displeased that my girlfriend has to do without a cell phone for about 3 weeks (as I'm out of town for the summer), I'm glad they were able to work something out to my somewhat satisfaction at no real extra cost to myself, save for a possible 15 dollar restocking fee for the phone she used for the past month.

 

[know-it-all5]

know-it-all5, there's really nothing about that, that would not make sense. Apple could be selling the phones to AT&T for $500 for all we know, and then AT&T is having to subsidize them to sell them for the same price as Apple. Meanwhile, Apple could be sitting back and selling them for what they want to, the $199/299. I would not put it past Jobs to do just something like that, if things got heated during the re-negotiations. But, of course, we really don't know. But it just seems to make sense given all these carefully worded statements.

Do you think att is stupid? If att had any clue that they would be spending 500 (or whatever) for iphones while the general public got them at apple stores unsubsidized for only 199/299 they wouldnt bother buying them from apple at all. The iphone is restricted to att's network. It doesnt matter what happened in negotiations, cause for the next few years apple is locked in america to selling the iphone for use solely on att's network alone (hacking and unlocking put aside). There is no reason for att to sell the iphone at att stores if they are getting ripped off by apple... They may as well just let it get sold at apple stores alone, if that was the case. They would still get the revenue from the contracts anyway. In other words... Your theory is wrong. I do agree that there have been some gaps in the statements from apple and att, but that is simply because we have a few weeks till the iphone 3g is released, and their are some details that still are being ironed out in negotiations.

Apple and Att are two huge companies with big money contracts. Apple can't just change terms overnight cause they feel like it. That would be voiding the contract.

 

[AndyFL]

I love how everyone believes that the CSR they spoke to or the rep they chatted with or the memo they got from their mgr has given them 100% factual information that will hold fast for another 3 weeks until the release.

Unbelievable.

Take a step back, put down the bottle, and let's just wait until the week of the release when the details should be much clearer and from a reliable source (ie. the horse's mouth)

 

[freediverdude]

know-it-all5, well that's what I am saying, is that one or both sides probably wanted to renegotiate at this point. And you bet your bippy that Apple could have taken that phone to any carrier at this point, with just a small cellular chip swapout to make it compatible anywhere. Other cell phone manufacturers easily make versions for different networks- I wouldn't be surprised if Apple already had a CDMA version worked up as a contingency plan, that's just details to CEOs. Apple has an incredible amount of leverage now, much more so than when they were first shopping the phone to US carriers only. Anyway, it's just a theory, but it does seem to fit what is happening.

 

[trumpetfool04]

Note that she didn't actually say NO... she was very careful in her response. My bet is that the price is set to $199/$299 by Apple; any phone company wanting to sell the phone has to subsidize the remainder of the cost...

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Thank you! That's what I've been trying to say so when AT&T says they are "subsidizing" it, maybe they mean that they are going to take even more off of the 199/299 price as O2 or Tmobile are doing.

 

[know-it-all5]

know-it-all5, well that's what I am saying, is that one or both sides probably wanted to renegotiate at this point. And you bet your bippy that Apple could have taken that phone to any carrier at this point, with just a small cellular chip swapout to make it compatible anywhere. Other cell phone manufacturers easily make versions for different networks- I wouldn't be surprised if Apple already had a CDMA version worked up as a contingency plan, that's just details to CEOs. Apple has an incredible amount of leverage now, much more so than when they were first shopping the phone to US carriers only. Anyway, it's just a theory, but it does seem to fit what is happening.

Haha! Wow!!! You don't seem to get it. Apple has an exclusivity agreement with Att, that is valid for the next few years. In other words Apple CANNOT make an iphone compatible with any United States networks, other than Att. It doesn't matter what leverage Apple has... A contract is a contract. If Apple voided the contract, they would receive severe consequences. There is no possible way in the world that Att would agree to void a contract that makes them the only cell company compatible, with the most popular phone on the market.

As much as you would like to believe that companies are like people, they aren't. Apple and Att, may very well be at each other's throats. The bottom line is that, not only do they need each other, but they are contractually bonded. Att being the sole american cell company for the Iphone, was Apples give, so Att would take a chance on the Iphone. Att agreed to a very "Apple friendly" business model for the first Iphone.

Remember, Verizon turned down apple's terms for the iphone... Too late now!!!

 

[know-it-all5]

Thank you! That's what I've been trying to say so when AT&T says they are "subsidizing" it, maybe they mean that they are going to take even more off of the 199/299 price as O2 or Tmobile are doing.

While I want to believe that, the fact that on ATT's website the prices that are listed are 199/299, put that idea to rest. Lets be honest, if they were subsidizing it to an even lower price, that price would be the one listed on Att's website.


see here:
http://www.wireless.att.com/cell-phone-service/specials/iPhone.jsp

 

[maceleven]

thats a deal

 

[AndyFL]

Hey, maybe they want to surprise us with a better price when we show up on July 11th. As if the surprise front facing camera wasn't enough.... LOL.

While I want to believe that, the fact that on ATT's website the prices that are listed are 199/299, put that idea to rest. Lets be honest, if they were subsidizing it to an even lower price, that price would be the one listed on Att's website.


see here:
http://www.wireless.att.com/cell-phone-service/specials/iPhone.jsp

 

[know-it-all5]

Hey, maybe they want to surprise us with a better price when we show up on July 11th. As if the surprise front facing camera wasn't enough.... LOL.

Haha, I WISH!!! Somehow, I am getting the feeling that surprises will be more unwanted negative ones, rather than good ones.

 

[Silverfist]

Thank you! That's what I've been trying to say so when AT&T says they are "subsidizing" it, maybe they mean that they are going to take even more off of the 199/299 price as O2 or Tmobile are doing.

Err, actually, I was supporting the topic title that AT&T may very well be subsidizing more than the $200 rumored, and definitely NOT trying to suggest that the price would be any lower.

Someone earlier in the thread had mentioned that the phones couldn't possibly be subsidized since it's being carried by multiple phone companies worldwide; my belief is that ALL companies are having to eat the extra cost to some extent to be able to sell it at Apple's mandated global max price. Hence, subsidizing.

.