At&t will give in and kill early upgrade fee - opinion

[eezing]

50,000 users? Proof?

Right now its just a very vocal minority. 50,000 iphone users roughly equals 5 million dollars in revenue, which, if this was a legitimate issue, would be 5 million dollars in lost revenue. ATT Mobility (wireless) made 10.5 Billion dollars in just DATA services revenue in FY08, and on top of that, sold like what 20 million iPhone 3g's also in 08 (but I can't get a firm number, someone correct me if they find a figure).

"50 thousand" users accounts for about 1/400 of sold 3g's. 5 million accounts for 1/2100 of the overall revenue from data.

Considering these users probably won't jump ship, I'd say ATT has better things to worry about.

I'm speculating here... Not everyone who is upset by this is a twitter user. In fact I think it is safe to say that the majority of iPhone owners upset by this don't twitter.

This is a simple short term vs. long term situation for At&t. Me personally, because of the extra charge I will not upgrade. At the end of my term I will then decide what the best phone is for me... it could be an iPhone or it could be something else. One thing is for sure though, I wouldn't have to make that decision if I were to upgrade to the 3Gs now... I wouldn't want to pay an early termination fee and therefore At&t is guaranteed me as a customer beyond next year.

 

[Rodimus Prime]

If Apple is opening up to Verizon, etc in the next 12 months, then yes I agree they'll probably change their tune. Better to lock people in an extra year than watch them take off when their contract is over next summer. Otherwise, they're losing money and I wouldn't count on it.

"Grass is always greener on the other side of the fence"

I can promise you if Apple went with Verizon instead all the bitching about ATT would be exactly the same wiht Verizon replacing ATT.

 

[GfPQqmcRKUvP]

CALCULATION TIME

Even with the 3G being subsidized, I don't think the profit margins are so small that At&t will take a significant hit by allowing free upgrades, or at least get hurt.

Let's say ATT does what you want them to here. We'll simplify the problem to make it easier for doing calculations.

Let's say two million people upgrade from an iPhone 3G to the iPhone 3GS 16GB and they pay $200 (this is what you are proposing). The retail price is $600. We'll say ATT gets them from Apple for $500 (for the sake of argument).

For each person who buys that iPhone 3GS, ATT has an upfront cash disbursement of $300. Remember, taking a $300 dollar hit right up front on each unit isn't just $300; it's forgoing the rate of return ATT could get investing it other places. We'll peg that at 5% per year compounded monthly.

If 2 million people got that upgrade, ATT would be taking an upfront loss of $600,000,000 (six hundred million dollars). Take that rate of return of 5% and defer those cash disbursements one year into the future to when they would have offered those 3G owners a reduced upgrade when their line became eligible anyway, and they're out out $630,697,138.7 (six hundred and thirty million, six hundred ninety-seven thousand, one hundred thirty-eight dollars...and seventy cents).

So you tell me, do you think they're going to lose over six-tenths of a billion dollars in business by not letting 3G owners upgrade early considering they already have those users locked in for another year?

 

[eezing]

I have come to despise the contract/subsidy model that America has become addicted to. Yes I agree most people do not understand the monthly service fee they pay has built in their subsidy over the contract. I wish those hidden costs were EXACTLY laid out to the customers.
An equal amount of blame lies with the carriers I believe. For instance, AT&T covers $400 of the iPhone price for us that is "supposedly" spread out over 24 months - roughly $15/month. Sooo what we're saying is data should be $15/month right? And AT&T adds in the extra $15 to recoup the phone. So then, when the 24 months is up and I chose to continue using the same phone then my data price will drop to $15? Nooooo?? Well why not if AT&T has now covered their cost? Because the carriers are trying to have their cake both ways, that's why.
Let the equip manufacturers compete with each other head to head on hardware and the carriers on service/price. THEN and only THEN will us consumers win. FCC, hello, anyone home?

Well said!

 

[anjinha]

I'm speculating here... Not everyone who is upset by this is a twitter user. In fact I think it is safe to say that the majority of iPhone owners upset by this don't twitter.

This is a simple short term vs. long term situation for At&t. Me personally, because of the extra charge I will not upgrade. At the end of my term I will then decide what the best phone is for me... it could be an iPhone or it could be something else. One thing is for sure though, I wouldn't have to make that decision if I were to upgrade to the 3Gs now... I wouldn't want to pay an early termination fee and therefore At&t is guaranteed me as a customer beyond next year.

And what do you suggest for people who buy the 3GS now and next year want to upgrade to whatever iPhone is released? Should AT&T just lose $200 for every iPhone sold, every single year?

And as for people switching to Verizon, you're seriously deluded if you think things won't be the same with them. That's just how subsidies work, for EVERY cell phone carrier.

Well said!

So, you don't agree with the subsidies model but you think $600 is too much for a phone? Which is it? You can't have it both ways. The iPhone costs $600, either you pay that upfront or you get it subsidised with a contract, with all that comes with it...

 

[Moria]

1 simple reason providers won't kill the early uprade fee

Here it is...

When you bought your iPhone initially you knew, and signed the contract saying so, that you were getting an 18 month or 2 year contract.

How many of you seriously didn't think there would be another one coming out a year later? You knew what you were getting yourself into when you got the contract and should stick it out.



And before you saying anything, I've still got 6 months left on my contract and I fully intend on honouring it unless O2 are very nice to me (/us) and let us end our contracts a bit early. If they don't, I won't kick up a fuss because I willing signed an 18 month contract.

 

[Eddyisgreat]

In before this is wastelanded.

 

[joshellis625]

AT&T isn't going to do squat people, get over it.

 

[tasset]

Sigh... I'm not really surprised the wireless subsidy model is what it is. When I try to explain it to friends or coworkers their eyes glaze over, people are so bad at basic math.
But they do know sticker shock, seeing their expressions when they see unlocked phone prices. For the carriers to sell premium services, and for the device makers to produce cutting edge phones that use them, it seems to require giving people an unrealistically low price to make the economics happen.

 

[airlights]

Oh god, lol.

 

[Screwtape]

Like everything else in this world, it all comes down to money. The way AT&T makes back the money for the subsidization of the iPhone is through the contract. By allowing people to upgrade early and still get the subsidized price, AT&T will lose quite a bit off money and they obviously don't want that.

Would it be cool if they allowed it? No doubt. But it's just not good business sense for it to happen.

 

[sinsin07]

After reading multiple articles on this topic it seems there's a good chance At&t will do away with the iPhone specific early upgrade policy.

Factors:

Changing their policy...

- Will win the hearts of the loyal iPhone community and users. The best advertising is by word of mouth. The iPhone 3G community is quite large as well as quite passionate... You see where I'm going with this.

- Will strengthen\not destroy their relationship with Apple which in return will help extend their exclusive U.S. iPhone contract. See, Apple reacts quickly to their customer complaints/suggestions; they wan't At&t to do the same. When it comes to the iPhone, Apple and At&t are a team, but Apple has the upper hand.

- I'm just throwing this out there... Even with the 3G being subsidized, I don't think the profit margins are so small that At&t will take a significant hit by allowing free upgrades, or at least get hurt.

Where you standing in Orlando Florida when you wrote this? Better yet please tell us what planet your from so we can all move to this dream world.

 

[hairydawg75]

They won't....and they shouldn't. And that is coming from someone who is only eligible for the full 599/699 price even though I have a 3G.

 

[sinsin07]

Here it is...

When you bought your iPhone initially you knew, and signed the contract saying so, that you were getting an 18 month or 2 year contract.

How many of you seriously didn't think there would be another one coming out a year later? You knew what you were getting yourself into when you got the contract and should stick it out.



And before you saying anything, I've still got 6 months left on my contract and I fully intend on honouring it unless O2 are very nice to me (/us) and let us end our contracts a bit early. If they don't, I won't kick up a fuss because I willing signed an 18 month contract.

Thanks for stating the obvious. I'm sure AT&T thanks you. By the way if your not getting paid post by AT&T, them why are you acting as there front boy?

 

[Pooshka]

Here it is...

When you bought your iPhone initially you knew, and signed the contract saying so, that you were getting an 18 month or 2 year contract.

How many of you seriously didn't think there would be another one coming out a year later? You knew what you were getting yourself into when you got the contract and should stick it out.



And before you saying anything, I've still got 6 months left on my contract and I fully intend on honouring it unless O2 are very nice to me (/us) and let us end our contracts a bit early. If they don't, I won't kick up a fuss because I willing signed an 18 month contract.

Here ya go again with your ole broken record...

 

[spaceballl]

Uh - doubtful...

 

[eezing]

Let's say ATT does what you want them to here. We'll simplify the problem to make it easier for doing calculations.

Let's say two million people upgrade from an iPhone 3G to the iPhone 3GS 16GB and they pay $200 (this is what you are proposing). The retail price is $600. We'll say ATT gets them from Apple for $500 (for the sake of argument).

For each person who buys that iPhone 3GS, ATT has an upfront cash disbursement of $300. Remember, taking a $300 dollar hit right up front on each unit isn't just $300; it's forgoing the rate of return ATT could get investing it other places. We'll peg that at 5% per year compounded monthly.

If 2 million people got that upgrade, ATT would be taking an upfront loss of $600,000,000 (six hundred million dollars). Take that rate of return of 5% and defer those cash disbursements one year into the future to when they would have offered those 3G owners a reduced upgrade when their line became eligible anyway, and they're out out $630,697,138.7 (six hundred and thirty million, six hundred ninety-seven thousand, one hundred thirty-eight dollars...and seventy cents).

So you tell me, do you think they're going to lose over six-tenths of a billion dollars in business by not letting 3G owners upgrade early considering they already have those users locked in for another year?

Let's take a look at the other end of the spectrum here:

Let's assume those 2 million users take their business elsewhere at the end of their 3G contract.

So, we're now in the future here and At&t overthrew their upgrade policy and allowed 3G users to upgrade with no addition fee. Let's say each of those 2 million customers was thrilled with At&t's decision and feels very positive about their relationship with the company. That being said, at the end of their 3Gs contract they go ahead and decide to fulfill a new 24 month commitment and purchase the 4th Generation iPhone (at current prices).


Customer pays:

16GB Phone: $200 + Monthly fee $80 (for the sake of argument) x 24 Months = $2120

x

2,000,000 = $4,240,000,000

[Four Billion, Two Hundred and Forty Million]


This is Revenue, not profit. Clearly, it is more profitable for At&t to keep their customers.


I know this is extreme, but I think this is a valid example.

 

[anjinha]

Let's take a look at the other end of the spectrum here:

Let's assume those 2 million users take their business elsewhere at the end of their 3G contract.

So, we're now in the future here and At&t overthrew their upgrade policy and allowed 3G users to upgrade with no addition fee. Let's say each of those 2 million customers was thrilled with At&t's decision and feels very positive about their relationship with the company. That being said, at the end of their 3Gs contract they go ahead and decide to fulfill a new 24 month commitment and purchase the 4th Generation iPhone (at current prices).


Customer pays:

16GB Phone: $200 + Monthly fee $80 (for the sake of argument) x 24 Months = $2120

x

2,000,000 = $4,240,000,000

[Four Billion, Two Hundred and Forty Million]


This is Revenue, not profit. Clearly, it is more profitable for At&t to keep their customers.


I know this is extreme, but I think this is a valid example.

First, you can't count on the $200 people pay upfront because AT&T has to pay that to Apple for the iPhone... And if they are letting people upgrade early they lose around ~$200 on each iPhone so you have to deduct that as well...

And I don't even wanna get started on what else is seriously wrong with that logic. You clearly know nothing about economics...

 

[AiralynRose]

Let's take a look at the other end of the spectrum here:

Let's assume those 2 million users take their business elsewhere at the end of their 3G contract.

I know this is extreme, but I think this is a valid example.

I don't think it is valid. It makes sense, yes. If it were any other cell phone, this would be true. BUT the thing is, the type of people who are complaining are the people who MUST have the newest and greatest iPhone EVERY year. As long as ATT is the only one with the iPhone they're NOT going to leave, just complain.

 

[eezing]

First, you can't count on the $200 people pay upfront because AT&T has to pay that to Apple for the iPhone... And if they are letting people upgrade early they lose around ~$200 on each iPhone so you have to deduct that as well...

Oh sorry..... I guess I have to do the math for you:

4,240,000,000 - 630,697,138.7 = 3,609,302,861.3

 

[eezing]

I don't think it is valid. It makes sense, yes. If it were any other cell phone, this would be true. BUT the thing is, the type of people who are complaining are the people who MUST have the newest and greatest iPhone EVERY year. As long as ATT is the only one with the iPhone they're NOT going to leave, just complain.

Even better for At&t..... A LIFE LONG CONTRACT!

 

[anjinha]

Oh sorry..... I guess I have to do the math for you:

4,240,000,000 - 630,697,138.7 = 3,609,302,861.3

Now you have to deduct all the money AT&T loses when other cell phones users want the same early upgrades the iPhone users are getting...

 

[MikePA]

I have come to despise the contract/subsidy model that America has become addicted to.

Despise? Get a life. It's a pricing model, not a life and death issue.

If people don't like ATT, buy from another carrier.

All these threads filled with people whining because they can't get a subsidized phone prove how self centered and self absorbed they are. Man up, ATT sold you EXACTLY what you signed up for. ATT isn't the federal government doling out cell phone welfare.

 

[eezing]

First, you can't count on the $200 people pay upfront because AT&T has to pay that to Apple for the iPhone... And if they are letting people upgrade early they lose around ~$200 on each iPhone so you have to deduct that as well...

And I don't even wanna get started on what else is seriously wrong with that logic. You clearly know nothing about economics...

Leaving out the $200 still adds up to over 3 billion.

As I said, this is and extreme case and was used to compare to the earlier post.

 

[SmoothCaller]

I'm with all the people that don't understand how business or simple math with numbers bigger then 200 works.

AT&T should give us all (iPhone 3G Users) a free iPhone 3GS, just because we are so loyal, and while they are at it, perhaps they could lower my monthly bill and let me out of my contract next month too!!!!

AT&T should also on behalf of us (iPhone 3G users) take all the money that they make off of us and donate it to the Human Fund on our behalf.

If you have to bitch about the cost of upgrading early, perhaps an iPhone isn't for you, if 200 dollars is going to break the bank, maybe you shouldn't have an iPhone in the first place.

In closing I think all iPhone 3G users should demand that Obama forces AT&T to allow us to upgrade for free!!!!! You know in the spirit of change and hope and what not.