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Boston.com is reporting that iPhone subscribers will have to pay $175 to break their two year contract.
Even though AT&T isn't subsidizing the iPhone's hefty price -- $499 to $599, depending on the storage capacity a customer chooses -- the company will charge a $175 termination fee for iPhone users who want to break their two-year contracts.
Okay, can we just drop the charade here?
Essentially, we have a $599 to $699 phone being subsidized by AT&T down the $499 to $599. From a consumer viewpoint, that's exactly all we've got here. Maybe the corporate deal between Apple and AT&T calls it something different, like "profit sharing", or "infrastructural improvement bonds" or whatever other lawyerly gobbledegook they devised.
But to you and I, this is absolutely positively no different than every other carrier-subsidized phone out there.
Other than, of course, the fact that it only runs on one network (AT&T) and we don't have the option of paying more up front to avoid the (meaningless because there is nowhere else I can use that $600 iPhone!) 2-year contract.
So, not only do we have
every single one of the anti-consumer lock-in predatory practices here, we
also get a whole new brand of inventive anti-consumer predatory practices.
When they said Apple was going to change the whole way cell phone companies do business, this is not what I was imagining! Who else out there thought things could get markedly
worse for the consumer?
Early cancellation fees are typical for mobile phone contracts in the U.S., but the article points out that these fees typically help cover the phone subsidies that mobile carriers offer on new phones. The iPhone, however, has been heavily rumored not to benefit from these retail discounts. Regardless, AT&T spokesperson Mark Siegel justifies the fee by noting that
"There are certain fixed costs we incur in serving every customer who establishes service with us."
And, yes, as anyone who's ever opened a cell phone account knows, you collect those fees up front. And they amount to $35, last time I checked. If there was $175 worth of costs in getting a person into your customer database, then you'd be charging that to the folks that sign on without 2-year contracts. But, you don't. You charge $35 (which, btw, is obviously highway robbery as it stands).
IMHO, if you have to hide fees like this (activation and setup and cancellation fees) then you haven't found an honest, working business model. Those of us who work on large-scale database systems every day know how little it costs to add a few records in one or two tables to identify and "activate" your customers. If you aren't able to absorb those costs in the day-to-day profits of your business then, I'm sorry, you shouldn't be in business.
Sigh. And phone company execs wonder why they are so universally hated ...
