They don't make profits on phones, they make it all on the service. Also, not everyone buys a new phone regularly, but they always have to buy some sort of service. So why would they take the cost out of the phone to help sell phones when they can take it out of the plan to help sell those which they make all of their money on?
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I figured out why AT&T changed their pricing
- Thread starter TH55
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Do you have any documentation that phones existed when time was invented? I'm also pretty sure that time was not invented.
The 'change' in pricing was really just the end of subsidation. In the old world you'd pay '$199' for a 16 GB phone and then sign a 24 month contract with a monthly service fee. That monthly fee included an amount to pay back the actual cost of the phone which the service provider paid when you bought it. (though many customers somehow thought their phone only cost $199 they paid.)
The bad part about the old system was that you continued to pay that inflated fee even when the phone was paid off. Or you had people demanding they get early 'upgrade pricing' as a loyal customer...even though they hadn't paid enough monthly fees to pay cover the cost of the device.
Now everything is separate and transparent. The pricing for the phone is separate (via Next or Edge) and you pay a flat service cost for the phone.
Carriers always made their money on service fees. Subsidizing phones originally was a way to encourage people to buy high dollar devices that required data plans. 7 years ago people would have balked at paying $800 for a smartphone....now they don't even blink.
The bad part about the old system was that you continued to pay that inflated fee even when the phone was paid off. Or you had people demanding they get early 'upgrade pricing' as a loyal customer...even though they hadn't paid enough monthly fees to pay cover the cost of the device.
Now everything is separate and transparent. The pricing for the phone is separate (via Next or Edge) and you pay a flat service cost for the phone.
Carriers always made their money on service fees. Subsidizing phones originally was a way to encourage people to buy high dollar devices that required data plans. 7 years ago people would have balked at paying $800 for a smartphone....now they don't even blink.
Like the other guy said, this has always been the case.
Among dozens of other examples in phone service history, this is the reason AT&T immediately got rid of all texting plans aside from the unlimited $30 plan as soon as iMessage was on the horizon. They realized that everybody would either get rid of their text plan entirely or drop to cheaper text plans. So their idea to combat that is to force everybody onto a $30 text plan and act like they did everybody a favor by making them unlimited.
Because they saw what T-Mobile started doing and that it was working. As such is the way the wireless industry works. The profit has always come from the service that's obvious. An iPhone costs $650 from any carrier but the price of service varies between them.
Amazingly the financing options have turned out to be a boon for Apple and carriers. Programs like NEXT, JUMP, and EDGE combined with the "Shiny new iPhone for $0" promotions have helped propel the iPhone 6/6+ to extraordinary sales figures. People don't have to wait 2 years anymore and can basically upgrade whenever they want.
I'm on T-mobile and although I don't have a 2 year contract, if I ever leave before the phone is paid off I still owe for the phone. So in a way I still have a contract. Plus if you're on say Verizon and AT&T and leave after 2-6 months then you'll pay a hefty ETF to leave so it would be almost close to full price for the iPhone.
I work for a major wireless carrier and they told us that we wouldn't make profits on the phones we were subsidizing until the last couple months of the 24 month commitment.
Now carriers are putting the cost of the phone in the hands of the consumers and if they upgrade in a year and trade in their old phone, the carrier can turn around and resell that certified pre-owned device and make even more revenue with it.
So, if you can afford it, it's a win win for the consumer and a win win for the carrier because both are making out in the end.
I personally buy my phones out at full retail and so I'm not on a contract, but with this retail installments deal, I can just budget out for 12 months of the installment payments (AT&T Next 12) and trade in my old device and budget out for another 12 months whenever I get my iPhone 6s in a years time. Works out better for those of us who would rather pay full retail for newer equipment more often.
Now carriers are putting the cost of the phone in the hands of the consumers and if they upgrade in a year and trade in their old phone, the carrier can turn around and resell that certified pre-owned device and make even more revenue with it.
So, if you can afford it, it's a win win for the consumer and a win win for the carrier because both are making out in the end.
I personally buy my phones out at full retail and so I'm not on a contract, but with this retail installments deal, I can just budget out for 12 months of the installment payments (AT&T Next 12) and trade in my old device and budget out for another 12 months whenever I get my iPhone 6s in a years time. Works out better for those of us who would rather pay full retail for newer equipment more often.