Nice, putting words in my mouth. Like I said, the subsidy is being a guaranteed revenue stream. You didn't address that at all.
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Comparing the New Frequent Device Upgrade Programs from U.S. Carriers
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Nice, putting words in my mouth. Like I said, the subsidy is being a guaranteed revenue stream. You didn't address that at all.
This is why these payment plans and buying a phone outright are exactly the same thing, its just a different way to promote it I guess. If you buy a phone at $650, you are still paying for the subsidy in your monthly service fees, even though no subsidy exists. So I am confused as to why people are saying "You're better off just buying at full retail and reselling". This could not be further from the truth. Reselling the phone will get you close to what you paid for it originally, but it won't get you back what you've paid for it in your monthly bills ($20ish?). So either way you go, you're still going to be in the hole.
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Incorrect Assumption
It appears that an incorrect assumption is made in analyzing the Verizon plan. My understanding is that the Edge plan requires the first month's installment up front, but only divides up the subsidized portion of the cost of the phone. So, in the case of the iPhone, that $450 ends up being just under $19 per month, not $27 (which would be the full price of the phone divided by 24).
They require that you have paid off half of the phone in order to upgrade, which basically means that if you include the contract portion, you've paid for the phone in its entirety. Essentially, they're compressing the 24 months worth of payments into a shorter time. If you intend to upgrade as rapidly as possible, you're just about breaking even (less the $199 or so that isn't subsidized, which you'd pay no matter when you upgraded). So if you're going to take advantage of the early upgrade, it's not so bad, but if you aren't, don't get near it!
It appears that an incorrect assumption is made in analyzing the Verizon plan. My understanding is that the Edge plan requires the first month's installment up front, but only divides up the subsidized portion of the cost of the phone. So, in the case of the iPhone, that $450 ends up being just under $19 per month, not $27 (which would be the full price of the phone divided by 24).
They require that you have paid off half of the phone in order to upgrade, which basically means that if you include the contract portion, you've paid for the phone in its entirety. Essentially, they're compressing the 24 months worth of payments into a shorter time. If you intend to upgrade as rapidly as possible, you're just about breaking even (less the $199 or so that isn't subsidized, which you'd pay no matter when you upgraded). So if you're going to take advantage of the early upgrade, it's not so bad, but if you aren't, don't get near it!
If the carriers wanted to appear to be fair to their customers, all of them should completely de-couple the device payments from the monthly service plans for ultimate transparency. More people might actually buy their phones unlocked to begin with, knowing that they weren't somehow subsidizing others, with inflated monthly service charges.
And those who did choose to pay for their phone by monthly installment, would know at any time, how much they still owed on the handset, which amount they could then pay off, and subsequently sell their by then unlocked phone, privately. If on the other hand, after a year or so, they decided not to buy it, they could return it to the carrier, who would have the still-owing amount covered, by the handset's residual value.
I read an article that detailed that. You really have to pull out a calculator to figure some of this crap out. I explained it in one of the other threads about this.
I have Verizon so I'm more familiar with them so I'll use them for an example: Say you buy a phone at $199 with a 24 month contract. After paying your bill every month for 24 months, you'll have paid off 100% the entire cost of the phone because of the subsidy costs added onto the monthly service charge.
But if you use Edge:
After just 12 months (possibly less depending on what phone you actually get and what the cost is), you'll have already paid off 100% of cost of the phone. 50% from the monthly payments, and the other 50% from the subsidy cost in the monthly service charge.
So basically on the Edge plan, if you upgrade after 12 months, you would be paying the same amount split up into 12 months that a person who buys their phone outright would be paying, minus the ETF. So depending on how you look at it, might be an OK deal. Once you go over 12 months though without upgrading, you are now paying more than what the phone is actually worth (probably around $35-40 dollars more per month you go without upgrading).
This might be a good deal for people like me who want the newest and latest phones but cannot afford to pay for it outright, and would still like to upgrade every year.
Edit: Ignore the part about the ETF. I just remembered if you buy the phone outright there is no ETF. But even still, same amount being spent either way.
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Until NW Ohio is not 2G-only (except for Toledo and Bowling Green, which get "4G" but not LTE) I'll stick with AT&T...
T-mobile is the best carrier but i couldn't stick with it because their signal strength was really weak in my area.
Actually, they don't just want to get the money back that they paid to Apple, they also want to cover their cost of sales and make a bit of profit, just like everyone else does. To calculate what costs what, you should assume that you AT&T charges exactly the same amount for an iPhone as Apple does, except that AT&T hides the cost somewhere.
phone prices have been the same for the last twenty years. $650 for a top end phone and less for cheaper phones
All aspects of this wireless operator economy come back to cash flow, churn rates, new subscriber acquisition costs, and ARPU (average revenue per user). The comments thus far - unless I missed one that highlighted it - omit any discussion of the impact of churn. The higher the church rate, the more the operator pays to replace customers in order to keep its subscriber count at existing levels. Replacing customers has thus far required phone subsidies up front, i.e. they only pass on a portion of the device price (note: their cost is likely not the same as the MSRP) at the contract signing. Then they gradually recover the subsidy through a portion of the monthly bill, as already noted, but also by avoiding churn. When a customer under the old regime chose to upgrade at, say, 18 months, which is before the contract expires, the operator had to fork over another subsidy of $100-$400. They are partially offsetting this by avoiding churn (and replacement subscriber acquisition cost), but there's no denying that they must be using some portion of the monthly fees to cover the subsidy.
Now, the larger problem the operators are facing is that network expansions are getting quite costly and the level of service must increase. So, as data consumption increases rapidly but monthly and annual ARPU remain relatively flat, the operator must do something to help cut down costs, including the device costs and subscriber acquisition costs. Enter the new phone replacement regime. Now they can leave service pricing where it was (it averaged out costs among all users, right?) and get those pesky early upgraders on whom they burned big $$$ in subsidies to carry a greater share of the financial burden. In the short run, that's what it appears to mean for many consumers. But there is a chance that this new model will enable the operators to offer the consumer a better value in the long run. Instead of seeing increasing service pricing to cover newer, faster, more expensive devices jam-packed with large screens, more memory, etc., consumers will end up purchasing them like they would a regular computing device. Need a fancy model? Great! Don't? No worries! Don't buy one. That's the theory, anyway. Service pricing could be more closely tied to network upgrade, maintenance, and operation costs instead of continuing expansion in the top tier of customers (biggest consumers of wireless data).
It's an expensive business because consumer (including business) expectations are growing so rapidly. Unlike other consumer products which are largely commoditized, at least for 90% of products in their respective markets, e.g. basic DVD/Blu-Ray players for under $100, the mobility segment just keeps expanding as users move into mobile video and video on demand use cases. In 1980 dollars, today's $89 DVD/Blu-Ray player at Walmart would be around $35. The then-current VCR most certainly did not cost only $35. A $500 smartphone in today's dollars would be something like $200 in 1980 dollars. Now, by comparison, the 1983 price on a Motorola DynaTAC 8000X was about $4k. In 1983 dollars. That's over $10k in 2013 dollars! This should give us all some perspective. Even if nominal prices remain stable, the consumer is better off with time since performance improves and inflation keeps on going.
Look for advanced over-the-top services, too, and more machine-to-machine mobile data consumption. Things are really just getting started. The mobile landscape 10 years from now will be amazing to see. I'd really like to see the operators get more control of device pricing so that they could have more flexibility in how they package deals to customers. Yet device manufacturers like Apple don't want to cede pricing control. I guess that time will tell.
Can't you just pay the Early Termination Fee of $205 ($325 minus $120, 12 months @ $10) buy a new iphone for the $199, or $404 total and sell you old iphone on ebay for $300 - $400? No additional per month and only $100 upgrade worst case? I guess I just don't get "Next".