iPhone Early Cancellation Fee $175

[fishkorp]

I bet this high cancellation fee points to relatively low service fees. They're probably hoping to get a full two years out of every contract and are simply protecting that with a higher-than-normal cancellation fee to make sure they get all 24 months.

why do people keep saying it's high? $175 is the normal AT&T cancellation fee, even if you buy phones unsubsidized. i never buy subsidized phones because i get phones at 50% off "regular" price with my company discount (except iPhone of course) and i'd still have to pay the $175 if i broke my contract. this is typical and a standard with Cingular/AT&T. if you have a contract at all, and break it, you pay $175. it's printed on the contract itself.

 

[Tampa Tom]

Why Would You Cancel?

Without a network what good is the iPhone? Use only the WiFi side of it?

 

[clevin]

its still cheaper than normal AT$T deals, i think its normally $200

 

[daveschroeder]

Without a network what good is the iPhone? Use only the WiFi side of it?

Because some people are hoping to get an iPhone, and hoping that it will just work on <insert other GSM carrier here>, and they'd prefer to get the iPhone as cheaply as possible.[1]

Other people want to use just the touchscreen video iPod and WiFi functionality of it, and don't care about the phone part.

(And no, there is zero reason - zero - to believe that WiFi is locked to a contract. It would defy reasoning, because any time you turned the radio off in the phone or were in a remote area out of range, the phone wouldn't "know" whether it's on a contract, meaning WiFi would be disabled? Come on, people. Think.)

[1] This is theoretically possible, if the iPhone is sold as unlocked in the US (very unlikely), or if there is a "hack" to unlock it (possible), or if someone has AT&T service for 90 days, which is the minimum for AT&T to give you a code to unlock your phone for use with other SIMs (which is usually for international travel usage of prepaid SIMs), and then turning around and canceling the contract once you get the unlock code. But, this could be what they refer to as a "subsidy unlock code" (even though iPhone isn't subsidized), which is required to be entered EVERY TIME you use the phone when another SIM is inserted. So it will remain to be seen how "portable" iPhone is to other GSM carriers in a practical sense. Obviously things like visual voicemail won't work, but the basic functionality of the phone should.

 

[Tampa Tom]

Without a network what good is the iPhone? Use only the WiFi side of it?

Any why have a contract?? It's not like I can take my iPhone and use Verizon or Sprint. I see no need for a contract. The iPhone only works with AT&T. I'm locked in or have a $600 paperweight.

 

[Philsy]

Hang on, the phone is full price AND you have to sign for a two-year contract? Is this normal for the US?

In the UK, you have a 12 or 18 month contract and get the phone at a heavily discounted price, perhaps even free. The deal suggested will never wash here.

 

[njfuzzy]

Activation

There is a real possibility that the iPhone has been designed to need activation. That is, it may lock you out entirely, or from certain features, until you activate it.

I wouldn't normally expect anything like this from Apple, or even really from AT&T. However, it's hard to see what else the iTunes account requirement could be for. It looks like when you sign up for an AT&T account, they send the authorization to your iTunes account, and when you synch your iPhone, you can use it.

Here's hoping I'm wrong.

 

[daveschroeder]

Hang on, the phone is full price AND you have to sign for a two-year contract? Is this normal for the US?

In the UK, you have a 12 or 18 month contract and get the phone at a heavily discounted price, perhaps even free. The deal suggested will never wash here.

Ugh. This is OLD NEWS. It has been known for weeks that the iPhone is NOT SUBSIDIZED.

Also, it's been known for quite a while that activation with AT&T would *probably* be required. But, if you'd read anything in this thread so far, you'd also know that it appears there will be ways to get the iPhone *without* activation for those who so choose.

And no, this is not normal in the US: phones requiring a contract are almost always also subsidized; sometimes cheap or free as you have noted. But, since it looks like there will be ways to get an iPhone without activation, the point is moot.

 

[daveschroeder]

There is a real possibility that the iPhone has been designed to need activation. That is, it may lock you out entirely, or from certain features, until you activate it.

I wouldn't normally expect anything like this from Apple, or even really from AT&T. However, it's hard to see what else the iTunes account requirement could be for. It looks like when you sign up for an AT&T account, they send the authorization to your iTunes account, and when you synch your iPhone, you can use it.

Here's hoping I'm wrong.

This is technically possible, but the case is probably that all phone functionality simply won't work until it's activated, but everything else will. There's no compelling reason to do it any other way.

The iTunes requirement is indeed almost certainly for activation, but that doesn't necessarily imply that you HAVE to activate in order for the it to even work at all, even for the non-phone functions. I'll agree that it would be technically possible, but Apple is speaking of an iTunes requirement because most iPhone customers will, you know, actually want to activate and use their phones like normal people, not searching for ways to get iPhones without service. ;-)

 

[Le Big Mac]

Cancellation fees are usually reimbursement for the cell phone subsidy. ATT pays $200 of the cell phone cost and needs that money back if you cancel your service. The fact that the cancellation fee will apply to the iPhone is evidence that a "subsidy" payment is still occuring. However, the $200 isn't going to the cost of the phone, so where is it going? Apple's pocket.

Cancellation fees are not reimbursement for the subsidy. That's just the justification offered. The real reason is that they want the contract to mean something, and to ensure you keep paying them your monthly fee.

that said, $175 is typical for ATT (I thought it was $200 now).

 

[Mydel]

I still would love to know if AT&T will unlock it for you once you pay canceletion fee. Eventually how long will it take to hack simlock . I bet my left testicle that less than a week..

 

[daveschroeder]

Cancellation fees are not reimbursement for the subsidy. That's just the justification offered. The real reason is that they want the contract to mean something, and to ensure you keep paying them your monthly fee.

Heh. Yeah. That's because it's "reimbursement" for the subsidy. When people say that, they don't mean it's directly dollar-for-dollar equal to whatever the phone was discounted (even though it sometimes is). But they want you to "keep paying them your monthly fee" for the contract term because that's how they can afford to discount - "subsidize" - the phones up front. That money just doesn't come out of thin air. They're going to get it by having you as a customer for a minimum of 2 years, or they're going to recover some cost with the cancellation fee.

That said, AT&T obviously isn't going to have $0 or administrative fee cancellation for iPhone just because it isn't subsidized; they're going to want to keep those customers, too. In any case, both answers are right: it absolutely is cost recovery for the subsidy on subsidized phones, and they ALSO want to keep you paying your monthly bill for at least the contract term.

 

[daveschroeder]

I still would love to know if AT&T will unlock it for you once you pay canceletion fee. Eventually how long will it take to hack simlock . I bet my left testicle that less than a week..

AT&T's policy is to only unlock if you have been a customer for 90 days. THEN, you could cancel. It remains to be seen, however, what the unlock situation is like on iPhone.

 

[u2mr2os2]

Subsidy

Where does everyone get this "confirmation" that the iPhone is not subsidized? Is it because that there's one price only, so therefore is must not be subsidized? There's a cancellation fee that's not out of line with other carriers or phones, yet people think there's no subsidy and therefore the fee is just pure profit?

Come on - this phone is subsidized people. You just can't get it without a contract or else it would cost more. Just because they don't come out and say "by signing a 2 year agreement, we are going to give you a $175 discount on the phone" doesn't mean there is no subsidy.

I think Apple had made it clear that they did not want multiple prices for the phone in the market. Since it is common to give discounts with contracts, then the only solution was to just require the contract so that every iPhone is sold at a discount so that there is only one price. It had the benefit of letting them meet the price points they wanted.

Now I could still be wrong in the end because I think there's still a chance that they might announce that $499 and $599 are the prices without contract and the contract gives a discount. They have recently dropped the contract requirement working from their commercials and press releases. However, I've seen nothing that confirms there is not a 2 year contract requirement, and as long as there is such a requirement, you can bet the phone is subsidized.

 

[manu chao]

Also, it seems almost positive that Apple Retail stores and apple.com will be selling iPhones WITHOUT activation. Obviously, it will need to be activated on AT&T if you want to use it, and activation looks as if it will happen via iTunes, according to other numerous hints (such as Apple's email saying activation REQUIRES an AppleID/iTunes account), but that doesn't mean people can't just buy the phone and not activate it. And we already know the price is unsubsidized, so it is what it is.

However, the phone is almost certainly NOT "unlocked", meaning that ONLY AT&T SIMs will work in the phone. This is extremely typical of US GSM phones. Granted, again, it was mostly used to manage subsidies and keep people on a particular carrier, and it remains to be seen if AT&T will unlock phones at customers request (e.g., for traveling, etc. to use prepaid SIMs internationally - their policy on this is that the person has to be a customer for 90 days). But in this case there is the catch-22 that you have to be an AT&T customer before you can even get the phone unlocked.

I think your points are all very valid. The question is whether somebody else than AT&T will be able (and legally allowed) to unlock the phone.

 

[Yixian]

So in other words, this means $1000 unlocked iPhone on eBay for Europe.

Great...

FU Apple, you'd better subsidise it in the EU or get ready for zero sales.

 

[daveschroeder]

Where does everyone get this "confirmation" that the iPhone is not subsidized? Is it because that there's one price only, so therefore is must not be subsidized? There's a cancellation fee that's not out of line with other carriers or phones, yet people think there's no subsidy and therefore the fee is just pure profit?

From this very article itself:

"Even though AT&T isn't subsidizing the iPhone's hefty price [...]"

From the AT&T employee Q&A:

"[...] no subsidies are being offered on iPhone at this time [...]"

But I suppose AT&T is internally lying to its own employees, and AT&T SVPs are lying to the press to keep the fact that it's really subsidized a secret? Come on.

Come on - this phone is subsidized people. You just can't get it without a contract or else it would cost more. Just because they don't come out and say "by signing a 2 year agreement, we are going to give you a $175 discount on the phone" doesn't mean there is no subsidy.

...except that there is no subsidy, and AT&T itself has confirmed this numerous times.

Also, read my previous posts. It appears almost certain that iPhone will be available at the announced price WITHOUT ACTIVATION at Apple retail stores and via apple.com.

I think Apple had made it clear that they did not want multiple prices for the phone in the market. Since it is common to give discounts with contracts, then the only solution was to just require the contract so that every iPhone is sold at a discount so that there is only one price. It had the benefit of letting them meet the price points they wanted.

AT&T already having confirmed that iPhone isn't subsidized aside - including in this article - you're overlooking the simplest explanation for why the phone won't have multiple prices, especially if it's available without activation (or, more accurately, self-activation) through Apple: it's not subsidized.

Now I could still be wrong in the end because I think there's still a chance that they might announce that $499 and $599 are the prices without contract and the contract gives a discount. They have recently dropped the contract requirement working from their commercials and press releases. However, I've seen nothing that confirms there is not a 2 year contract requirement, and as long as there is such a requirement, you can bet the phone is subsidized.

You haven't been looking hard enough, then, because there is a lot of anecdotal evidence that makes it seem that Apple won't be activating phones either in its stores or via apple.com, and that it will be a self-activation process via iTunes (again, read my previous posts in this thread before you respond). AT&T may "require" activation in its own stores. That's fine. That doesn't mean you can't get the iPhone via Apple if you're hell-bent on getting one unactivated.

The bottom line is that iPhone isn't subsidized. Whether there is money changing hands between AT&T and Apple behind the scenes is irrelevant: subsidies on phones mean that the *customer* benefits from them. I don't care if AT&T is giving Apple every dime it has: if the iPhone is sold for the same price with and without activation - which it appears it will be - it isn't "subsidized" in any normal meaning or sense of the word.

Of course, there are myriad other issues: will the phone be able to be (easily) unlocked? Will the phone itself be basically useless with iTunes until iTunes detects that it's gone through the self-activation process? If that is the case, will there be an easy hack to work around that? Etc. etc. etc. Of course, most normal people getting iPhones will just buy and activate. All of this other stuff we're talking about is really just fringe-type issues that 99% of people don't know or care about.

 

[jholzner]

Where does everyone get this "confirmation" that the iPhone is not subsidized? Is it because that there's one price only, so therefore is must not be subsidized? There's a cancellation fee that's not out of line with other carriers or phones, yet people think there's no subsidy and therefore the fee is just pure profit?

Come on - this phone is subsidized people. You just can't get it without a contract or else it would cost more. Just because they don't come out and say "by signing a 2 year agreement, we are going to give you a $175 discount on the phone" doesn't mean there is no subsidy.

I think Apple had made it clear that they did not want multiple prices for the phone in the market. Since it is common to give discounts with contracts, then the only solution was to just require the contract so that every iPhone is sold at a discount so that there is only one price. It had the benefit of letting them meet the price points they wanted.

Now I could still be wrong in the end because I think there's still a chance that they might announce that $499 and $599 are the prices without contract and the contract gives a discount. They have recently dropped the contract requirement working from their commercials and press releases. However, I've seen nothing that confirms there is not a 2 year contract requirement, and as long as there is such a requirement, you can bet the phone is subsidized.

So, if I walk into an apple store and plunk down my 600 bucks but never activate the phone I guess AT&T is out 175 bucks for a phone I never even used on their network. It's not subsidized...it's NOT NOT. My god how often does this have to be talked about.

 

[aswitcher]

I can see a lot of overseas sales going to any AT&T franchise that arranges for the purchase and off plan for foreigners easily.

 

[bytethese]

Any why have a contract?? It's not like I can take my iPhone and use Verizon or Sprint. I see no need for a contract. The iPhone only works with AT&T. I'm locked in or have a $600 paperweight.

T-Mobile? Hell, any other GSM carrier? Sprint and Verizon use CDMA/TDMA, they are incompatible with GSM phones. At work, I had my T-Mobile BB unlocked so that we can put it on CingulAT&T's network. I wasn't getting any T-Mobile service there but I am now getting plenty of CinulAT&T. They don't wan't someone buying it and going to another network.

 

[Philsy]

Ugh. This is OLD NEWS. It has been known for weeks that the iPhone is NOT SUBSIDIZED.

Also, it's been known for quite a while that activation with AT&T would *probably* be required. But, if you'd read anything in this thread so far, you'd also know that it appears there will be ways to get the iPhone *without* activation for those who so choose.

And no, this is not normal in the US: phones requiring a contract are almost always also subsidized; sometimes cheap or free as you have noted. But, since it looks like there will be ways to get an iPhone without activation, the point is moot.

So why is the iPhone different? Who's going to pay full price for it apart from a few Apple zealots?

 

[firsttube]

Any why have a contract?? It's not like I can take my iPhone and use Verizon or Sprint. I see no need for a contract. The iPhone only works with AT&T. I'm locked in or have a $600 paperweight.

a $600 paperweight that has wifi and is a widescreen video ipod.

 

[fanboy]

Subsidy in the voice/data plan?

The biggest missing piece of information is the voice/data plan. I suspect the cost of the plan maybe lower than normal, especially data aspects of the plan. Apple would want a nice overall experience with the iPhone and not to have it ruined by a bad or excessively expensive plan.

 

[fishkorp]

Where does everyone get this "confirmation" that the iPhone is not subsidized? Is it because that there's one price only, so therefore is must not be subsidized? There's a cancellation fee that's not out of line with other carriers or phones, yet people think there's no subsidy and therefore the fee is just pure profit?

Come on - this phone is subsidized people. You just can't get it without a contract or else it would cost more. Just because they don't come out and say "by signing a 2 year agreement, we are going to give you a $175 discount on the phone" doesn't mean there is no subsidy.

I think Apple had made it clear that they did not want multiple prices for the phone in the market. Since it is common to give discounts with contracts, then the only solution was to just require the contract so that every iPhone is sold at a discount so that there is only one price. It had the benefit of letting them meet the price points they wanted.

Now I could still be wrong in the end because I think there's still a chance that they might announce that $499 and $599 are the prices without contract and the contract gives a discount. They have recently dropped the contract requirement working from their commercials and press releases. However, I've seen nothing that confirms there is not a 2 year contract requirement, and as long as there is such a requirement, you can bet the phone is subsidized.

i thought when the phone was first announced in January that Jobs said it wouldn't be subsidized because he didn't want it to appear to be a "cheap" device?

 

[daveschroeder]

So why is the iPhone different? Who's going to pay full price for it apart from a few Apple zealots?

The answer is that EVERYONE is going to pay full price for it.

Your question, I think, is "who is so concerned about getting an iPhone unactivated at the same price, apart from a few Apple zealots?"

And you're absolutely right: 99% of people don't care about all this garbage, and will just be getting an iPhone and activating it on AT&T.