iPhones/Galaxy S5/Note 4... Consumer Price Gouging

[Dmunjal]

Seriously? Ok, here we go:

YOU SAID: "Unlocked Razr's on Ebay were going for almost $700 at that time."
You read the Engadget article right? They were going for $650, not "almost $700".
THEN YOU SAID: "A contract free TMobile iPhone 6 is $650".

This would make the two phones the same price unlocked. But the problem with your analysis is that the Razr came out in 2004, not 2014. For the time it was a great phone and there wasn't really much else like it. The price quickly fell and it sold on volume, something Motorola didn't expect as it was marketed as a high-end fashion device.

Then you said:

"Point I'm making...phones are now several orders of magnitude more capable than a Razr...yet price is roughly the same."

They are not "roughly the same". The Note 4 starts at $750 and as does the iPhone 6 Plus and can run you up to $950.

Anyway, this doesn't contribute much to the issue of whether there's any bookdoor dealing going on in the industry when it comes to subsidies and gouging the consumer. Because today, everything is pretty much a "Razr", as the market is flooded with smartphones where things are trending toward a state of perfect competition.

There's really no conspiracy. All players are making the most of the market. Google has tried to change the subsidized model by going with unlocked models sold directly with the Nexus devices. The problem is that even at $350, it was still more than the $199 subsidized model and Apple and Samsung continue to reap the benefits.

http://www.fool.com/investing/gener...e-benefit-from-the-end-of-iphone-subsidi.aspx

Be sure to read the comments.

 

[rui no onna]

This thread is stupid.

In 2004, a Motorola Razr was $500 on a 2 year contract through Cingular. 10 years later, an iPhone---any modern smartphone---is light years more refined, more capable, and cheaper on a 2 year contract. Unlocked Razr's on Ebay were going for almost $700 at that time.

A contract free TMobile iPhone 6 is $650 from Apple's website now.

Point I'm making...phones are now several orders of magnitude more capable than a Razr...yet price is roughly the same. If you want a subsidized device, a modern Android, iPhone...anything..is cheaper than a Razr was 10 years ago.

If you want a cheap smartphone now, you can have one. You can get an iPhone for free with a 2 year contract, if you so choose. Or, you can go grab some Android variant for free from somewhere else. There are choices; no one is forcing anyone to purchase a flagship Android or iPhone.

It's not really stupid when that $500 Motorola Razr just costs $200-400 in other parts of the world. I got sticker shock when I moved from Asia since the phones that were selling for just $50-100 contract-free in Asia (for which I was paying $10/mo on prepaid service, tax inclusive) were showing $200-400 before contract in the US and in order to buy them for $50-100, you'd have to sign a 2-year contract costing $40/mo plus taxes. It's like department stores announcing a 50% off sale and then marking up their prices by 100%.

I think it's pretty safe to admit that there's pretty much a wireless duopoly in the US between AT&T and Verizon and both carriers' previous modus operandi was to wait which one will be first in raising fees. Without T-Mobile's "Un-carrier" movement, we'd still be stuck with ever increasing rates and continuing to pay device subsidies for phones that have long been paid off.

 

[booksbooks]

There's really no conspiracy. All players are making the most of the market. Google has tried to change the subsidized model by going with unlocked models sold directly with the Nexus devices. The problem is that even at $350, it was still more than the $199 subsidized model and Apple and Samsung continue to reap the benefits.

http://www.fool.com/investing/gener...e-benefit-from-the-end-of-iphone-subsidi.aspx

Be sure to read the comments.

I never, ever said there is a conspiracy. That I do not know. I believe it's possible that there's one. I believe that if I analyze Apple's quarterly earnings and identify, if possible, a chunk of money coming in from carriers... I can then move to the next step: figuring out the agreement they have with carriers and look if there's anything kicking back from subsidized plans to them over and above the initial carrier purchase price.

Just do a proper analysis and investigation. I am suspicious because of the past behaviour of industry and from the fact that the pricing for cell phone plans is so convoluted: you must purchase a $20 per month data plan on an iPhone subsidized plan at Canadian carriers. Media has stated this is where hidden fees are. This is a major problem if there're hiding things from the consumer to profit off of them.

----------

It's not really stupid when that $500 Motorola Razr just costs $200-400 in other parts of the world. I got sticker shock when I moved from Asia since the phones that were selling for just $50-100 contract-free in Asia (for which I was paying $10/mo on prepaid service, tax inclusive) were showing $200-400 before contract in the US and in order to buy them for $50-100, you'd have to sign a 2-year contract costing $40/mo plus taxes. It's like department stores announcing a 50% off sale and then marking up their prices by 100%.

I think it's pretty safe to admit that there's pretty much a wireless duopoly in the US between AT&T and Verizon and both carriers' previous modus operandi was to wait which one will be first in raising fees. Without T-Mobile's "Un-carrier" movement, we'd still be stuck with ever increasing rates and continuing to pay device subsidies for phones that have long been paid off.

This is exactly what I'm talking about.

 

[GLS]

I've said it before, I'll say it again.

If the OP (or anyone else is bitching about gouging) then there is a simple option: Don't play.

No one is forcing anyone to buy a nearly $1000 phone.

I find it laughable that someone would complain about the cost of a device, when they are not forced to buy said device.

This thread needs put out of its misery.

 

[T5BRICK]

Build of Materials Cost (BOMC) for iPhone 6: ~$200
Build of Materials Cost for iPhone 6 Plus: ~$215
Assemblage: ~$5 per unit.

Your assembly costs are wrong. It takes 24 man hours to build an iPhone 4s. I don't imagine the 6 or 6 plus are a whole lot different. Even if the Foxconn workers only make a dollar or two an hour, they are also provided housing and food. Labor is expensive.

Why is this ok?

Because people keep buying them. If you're not happy with the price, buy something cheaper. The Nexus 5 and Moto X are both good and cheap.

 

[Dmunjal]

I've said it before, I'll say it again.

If the OP (or anyone else is bitching about gouging) then there is a simple option: Don't play.

No one is forcing anyone to buy a nearly $1000 phone.

I find it laughable that someone would complain about the cost of a device, when they are not forced to buy said device.

This thread needs put out of its misery.

Exactly! Thanks to TMobile, AT&T offers a Value Plan which lets me bring my own device and only pay $15 a month per line and shared data. I just buy phones on the used market and avoid this issue altogether.

 

[booksbooks]

I've said it before, I'll say it again.

If the OP (or anyone else is bitching about gouging) then there is a simple option: Don't play.

No one is forcing anyone to buy a nearly $1000 phone.

I find it laughable that someone would complain about the cost of a device, when they are not forced to buy said device.

This thread needs put out of its misery.

I've said it before, I'll say it again: ignorance is bliss.

 

[GLS]

I've said it before, I'll say it again: ignorance is bliss.

What the hell does that even mean? If you for a moment are suggesting that I am overpaying for my choice of phone, so what. I have the means to afford it.

Clearly, you want to complain about something that you have no control over, nor are you forced to purchase. That's fine; life is full of people who do that on a daily basis.

The real question here is why do you even care what an iPhone or Android device costs? If it is too much for you, then you need to explore more inexpensive options.

 

[booksbooks]

Your assembly costs are wrong. It takes 24 man hours to build an iPhone 4s. I don't imagine the 6 or 6 plus are a whole lot different. Even if the Foxconn workers only make a dollar or two an hour, they are also provided housing and food. Labor is expensive.

I don't give a rip about the 4s, regardless of whether you're accurate or not. You haven't cited any source and have no idea what people are paid there.

Here's the deal with the 6/6 Plus as far as I know:

Add in $4.50 for manufacturing, and the cost of production for the iPhone 6 totals $200.10.

http://www.pcmag.com/article2/0,2817,2469089,00.asp

AND

IHS analysts told Re/code that a 16 GB iPhone 6 that sells for $649 without a two-year contract costs Apple $200 to make, including the $4 to $4.50 it pays for associated labor costs.

http://www.techtimes.com/articles/1...n-reveals-how-apple-is-making-huge-profit.htm

The total assembly bill could be more, but without any other information, you can't say that.

 

[HenryDJP]

1. It wasn't the consumers choice to be lied to about a system access fee that continued to be charged to them when the tax was repealed so cell carriers could extract extra profit from people;
2. It wasn't the consumers choice when a cell carrier and device makers continued to profit off of them after a post-subsidized plan without making that explicit to the consumer;
3. It wasn't the consumer's choice when incumbent carriers colluded together to fix roaming prices to make it harder for smaller players to compete who needed to use such infrastructure; and
4. It wasn't the consumer's choice to be stuck on 3 year cell phone plans when in the US and other places there were 2 year plans, etc. And we had big industry players pushing back saying it will hurt consumers, etc. and the exact opposite has happened.

Turns out, the government, lawmakers, and consumers agreed, and they did something about it. And now the industry is much better for it.

And don't expect anyone to believe you weren't aware of the Verizon Device Recycling Program. Regardless, it changes nothing. They bartered with you and they're out no cash. You think you got paid $300 for your phone but you didn't. They'll sell your phone and make money from you accordingly. You are not in the driver's seat with cell carriers.

And if everyone thought like you, nobody would confront that industry can and does unfairly profit from consumers. Nobody would stand up for it. We'd all continue to live our lives ignorant of these things and let it continue. And any of these "toys" that basically are in many ways required to be competitive as a working professional would just be looked at as "toys", and not for what they really are: an essential tool in a person's life today.

WOW, very poor post. You call me a liar and you call me ignorant which has now made you lose every bit of creditability you had and now it made me decide to ignore any future posts from you. And I notice that when someone insults you, you threaten to report them ,yet, you pass the same insults to me.

I know nothing about Verizon. I just became a customer of theirs in the last 3 weeks. I've had my iPhone 4S from Sprint for nearly 3 years. After I gave Verizon my phone my bill is now $300 less and I'm fine with it. I don't give a rat's behind what they do with the phone or how much more money they make from selling it. I'm not concerned about being in the "Driver's seat". Unlike you I'm not out to see these companies fry.

If everyone thought like you....they would be online forums ranting all day rather than taking your concerns up with these companies face on or contacting your state senator or whomever runs the country you live in to get what you want.

Listen buddy, work on your own issues. I don't have a chip on my shoulder. As I said from my very first post with you. Don't insult people here as you have just did me. Could I have reported you? Yes and the moderators don't take kindly to members calling each other liars and ignorant. I just thought you might've wanted a fair discussion. Turns out you want to be the only one right. If you respond you'll be talking to yourself. I won't even read your posts. In fact I'm putting you on ignore in settings so I won't see your posts anyway.

 

[booksbooks]

WOW, very poor post. You call me a liar and you call me ignorant which has now made you lose every bit of creditability you had and now it made me decide to ignore any future posts from you. And I notice that when someone insults you, you threaten to report them yet, you past the same insults to me. :roll eyes:

I know nothing about Verizon. I just became a customer of theirs in the last 3 weeks. I've had my iPhone 4S from Sprint for nearly 3 years. After I gave Verizon my phone my bill is now $300 less and I'm fine with it. I don't give a rat's behind what they do with the phone or how much more money they make from selling it. I'm not concerned about being in the "Driver's seat". Unlike you I'm not out to see these companies fry.

If everyone thought like you....they would be online forums ranting all day rather than taking your concerns up with these companies face on or contacting your state senator or whomever runs the country you live in to get what you want.

Listen buddy, work on your own issues. I don't have a chip on my shoulder. As I said from my very first post with you. Don't insult people here as you have just did me. Could I have reported you? Yes and the moderators don't take kindly to members calling each other liars and ignorant. I just thought you might've wanted a fair discussion. Turns out you want to be the only one right. If you respond you'll be talking to yourself. I won't even read your posts.

Thanks.

 

[deviant]

If the OP knew that I paid 1200 bucks for this new phone here in Europe he'd straight shoot himself. Lol, 750 bucks is CHEAP. seriously dude, what's the point if the thread? There are cases that cost 3000, and someone buys them. That's how stuff works. VW owners say Audi is overpriced while BMW owners laugh at both. Buy what you want. If you don't like the prices, look elsewhere. Nobody's pointing a gun at your head

 

[xmichaelp]

It makes absolutely no sense whatsoever that iPhones cost more than cellular iPads.

iPhone 6 should start at 499. 599 for the Plus.

749 for the Plus? 849 if you want adequate storage? Hell no Apple. Apple has good value on their macs and iPads but the iPhone prices are way too much.

Nobody cares though because they have no problem paying out the ass for multi-thousand dollar 2 year contracts.

 

[nikhsub1]

This link will make everyone's life here better, promise.

https://forums.macrumors.com/profile.php?do=addlist&userlist=ignore&u=840703

 

[HenryDJP]

This link will make everyone's life here better, promise.

https://forums.macrumors.com/profile.php?do=addlist&userlist=ignore&u=840703

Thank you. It made my life on MR much better, but I already found it.

 

[ZombiePete]

If the argument was that all smartphones were overpriced due to collusion between manufacturers and retailers to ensure that prices remained stable and high, you might have an argument (but I have a hard time accepting that smartphones are a necessary commodity, even in this day and age; it may feel like that, but lots of people get by without smartphones everyday).

However, we know that inexpensive smartphones are available to consumers; the Moto G is a great example of this. The Nexus line has been on the right side of affordability for several generations now. So consumers are not being locked out of buying smartphones due to prices not supported by the market; there are a wide variety of choices at several different price points available to the public.

The fact that the iPhone remains a best-selling smartphone despite what you consider to be prices that are too high despite far more inexpensive choices demonstrates that consumer demand, not necessity and lack of alternatives, is what is driving the price of the phone. If the market didn't support the price then it would either have to be lowered or Apple would lose sales; that doesn't fit any price-gouging scenario that I'm familiar with.

 

[mdlooker]

Other mainstream phones don't have an extensive store network with on-site support, repair, and replacement. Apple also provides software updates on a regular basis.

Is this worth the high price premium?

I think this is a big deal. I don't think the other phones can be repaired on e spot can they? I've never owned an Android but my girl is always having issues and never talks of going to have it repaired; just exchanged/replaced.

 

[mdlooker]

It makes absolutely no sense whatsoever that iPhones cost more than cellular iPads.

iPhone 6 should start at 499. 599 for the Plus.

749 for the Plus? 849 if you want adequate storage? Hell no Apple. Apple has good value on their macs and iPads but the iPhone prices are way too much

But if no one bought the iphone at the current prices, the price would drop. But since there are lines wrapping around blocks/malls at launch, you better believe they're priced just write according to the demand.

I could only wish they were cheaper.

 

[booksbooks]

If the argument was that all smartphones were overpriced due to collusion between manufacturers and retailers to ensure that prices remained stable and high, you might have an argument (but I have a hard time accepting that smartphones are a necessary commodity, even in this day and age; it may feel like that, but lots of people get by without smartphones everyday).

However, we know that inexpensive smartphones are available to consumers; the Moto G is a great example of this. The Nexus line has been on the right side of affordability for several generations now. So consumers are not being locked out of buying smartphones due to prices not supported by the market; there are a wide variety of choices at several different price points available to the public.

The fact that the iPhone remains a best-selling smartphone despite what you consider to be prices that are too high despite far more inexpensive choices demonstrates that consumer demand, not necessity and lack of alternatives, is what is driving the price of the phone. If the market didn't support the price then it would either have to be lowered or Apple would lose sales; that doesn't fit any price-gouging scenario that I'm familiar with.

People aren't understanding.

I didn't start this thread believing that we could hang carriers and manufacturers on price-gouging laws. I just used gouge as a term that is used by many others. The basis of law is commercial law for things like anti-competitive practices and other things if, if... there is some funny business going on. And funny business has gone on in the mobile industry for years, including several lawsuits, some class action, and more government regulation to fix the problems with profit hungry, unscrupulous industry players.

The question is whether or not there is a conspiracy between Apple, others with carriers to extract profits from consumers in ways that are deceptive.

And the question is this:

Why do smartphones like the iPhone 6 Plus or even the Samsung Note 4 cost so much money to buy outright? Particularly when the same technology from the same companies (e.g., iPads) cost substantially less to purchase outright?

 

[ZombiePete]

Why do smartphones like the iPhone 6 Plus or even the Samsung Note 4 cost so much money to buy outright? Particularly when the same technology from the same companies (e.g., iPads) cost substantially less to purchase outright?

Because people are willing to pay those prices. /thread

 

[T5BRICK]

I don't give a rip about the 4s, regardless of whether you're accurate or not. You haven't cited any source and have no idea what people are paid there.

Here's the deal with the 6/6 Plus as far as I know:

Add in $4.50 for manufacturing, and the cost of production for the iPhone 6 totals $200.10.

http://www.pcmag.com/article2/0,2817,2469089,00.asp

AND

IHS analysts told Re/code that a 16 GB iPhone 6 that sells for $649 without a two-year contract costs Apple $200 to make, including the $4 to $4.50 it pays for associated labor costs.

http://www.techtimes.com/articles/1...n-reveals-how-apple-is-making-huge-profit.htm

The total assembly bill could be more, but without any other information, you can't say that.

Then your sources are wrong and you are very misinformed. The labor costs quoted are obviously too low.

Have you ever worked in manufacturing? How about own a business and pay for employee benefits?

 

[ZombiePete]

Then your sources are wrong and you are very misinformed. The labor costs quoted are obviously too low.

Have you ever worked in manufacturing? How about own a business and pay for employee benefits?

In fairness, if you think his sources are wrong you'd be more credible if you posted better sources with contradictory information rather than trying to equate your own personal experiences in manufacturing in (I assume) a western nation with Chinese labor/manufacturing costs.

 

[booksbooks]

Because people are willing to pay those prices. /thread

Or that it's precisely because of and a direct result of the subsidized revenue model that this price exists. And that you're presupposing that all of those people in line and everyone buying an iPhone is buying them upfront unlocked, which is not true at all.

That for the likely fewer people buying unlocked devices, they're stuck paying an "after subsidized plan" price for the phone. So instead of being given a "fair price" upfront for paying all of the doe, you end up paying the end financing price that the industry extracts from the user on subsidized plans. Or that you're in a way punished for buying it upfront.

Some of that "surplus" money may get kicked over to carriers, or not.

What I'm interested in learning is the contract that Apple has with carriers that stipulates the entire Definitive Agreement between both parties. I want to know if consumers are paying the FMV (Fair Market Value) for the device upfront, unlocked or if they're being subject to industry collusion which may be in the form of deceptive practices like hiding extra fees to profit between themselves and the handset makers.

 

[ZombiePete]

Or that it's precisely because of and a direct result of the subsidized revenue model that this price exists. And that you're presupposing that all of those people in line and everyone buying an iPhone is buying them upfront unlocked, which is not true at all.

I'm not presupposing anything. I assume that most people who buy iPhones either get them subsidized or use the more modern no interest financing models (e.g. Next) to get their phones, and that for many consumers iPhones would be much more difficult to obtain financially without such programs.

That being said this is nothing new, at least not in the United States. People buy luxury items that are outside their normal means by utilizing credit, rent-to-own, and layaway programs all the time. Implying that there's some kind of a conspiracy between Apple and carriers seems silly to me, particularly when Apple is hardly the only OEM to participate in such programs.

That for the likely fewer people buying unlocked devices, they're stuck paying an "after subsidized plan" price for the phone. So instead of being given a "fair price" upfront for paying all of the doe, you end up paying the end financing price that the industry extracts from the user on subsidized plans.

This isn't even true anymore with most of the carriers; if you bring a phone and sign up for the right plan, you'll get the same rates as people who use carrier financing. IIRC, you also used to be able to get a discount, at least with AT&T, if you were on an off-contract plan. In any case, a "fair" price is whatever the market will bear; clearly you weren't upset about it enough to avoid buying the phone outright yourself.

Some of that "surplus" money may get kicked over to carriers, or not.

Am I to understand that you're suggesting that Apple might be cutting carriers in on profits made from unlocked phones bought outright? In order to encourage them to continue carrier financing and subsidization programs? That's close to paranoid-level thinking, particularly since it's based on nothing substantive.

Besides, carriers are happy to finance/subsidize the phones if it keeps you paying for their services. That's where they make all their money. That people clearly want iPhones just motivates them to make getting them as easy as possible. You could argue that this has created a scenario where Apple can charge a little more for their phones on the bet that carriers are going to be willing to subsidize/finance a little bit more due to demand, but that's neither a secret nor a conspiracy; it's just good business. I don't even really see how it hurts the consumer, except that perhaps it skews their perception of what their phones really cost...but that frankly is a problem on the consumer's end, IMO.

 

[booksbooks]

I'm not presupposing anything. I assume that most people who buy iPhones either get them subsidized or use the more modern no interest financing models (e.g. Next) to get their phones, and that for many consumers iPhones would be much more difficult to obtain financially without such programs.

That being said this is nothing new, at least not in the United States. People buy luxury items that are outside their normal means by utilizing credit, rent-to-own, and layaway programs all the time. Implying that there's some kind of a conspiracy between Apple and carriers seems silly to me, particularly when Apple is hardly the only OEM to participate in such programs.



This isn't even true anymore with most of the carriers; if you bring a phone and sign up for the right plan, you'll get the same rates as people who use carrier financing. IIRC, you also used to be able to get a discount, at least with AT&T, if you were on an off-contract plan. In any case, a "fair" price is whatever the market will bear; clearly you weren't upset about it enough to avoid buying the phone outright yourself.

Am I to understand that you're suggesting that Apple might be cutting carriers in on profits made from unlocked phones bought outright? In order to encourage them to continue carrier financing and subsidization programs? That's close to paranoid-level thinking, particularly since it's based on nothing substantive.

Besides, carriers are happy to finance/subsidize the phones if it keeps you paying for their services. That's where they make all their money. That people clearly want iPhones just motivates them to make getting them as easy as possible. You could argue that this has created a scenario where Apple can charge a little more for their phones on the bet that carriers are going to be willing to subsidize/finance a little bit more due to demand, but that's neither a secret nor a conspiracy; it's just good business. I don't even really see how it hurts the consumer, except that perhaps it skews their perception of what their phones really cost...but that frankly is a problem on the consumer's end, IMO.

First, it is not the case that all plans are just like the subsidized plans. Here in Canada, you get better options off-contract plans. The iPhone... you're stuck with pretty much an $80 plan. Sound familiar? It should, because ya'll have some $80 iPhone lock-in plans down there in the US and A as well. And with your own device you can also get retention plans, which are unadvertised plans you negotiate.

Second, I couldn't have said it better myself:

But those apparently low subsidized prices include hidden costs that jack the price up over time. And it is nearly impossible for the average shopper to figure them out without extensive and exhausting research.

And guess what? For the three carriers that dominate the U.S. mobile market, the monthly prices for contract plans are significantly higher than those you will pay if you buy the phone outright or finance the full retail price.

http://www.zdnet.com/how-much-does-an-iphone-6-really-cost-hint-its-way-more-than-199-7000033801/

The big problem right now is the veil of secrecy regarding the agreements Apple has with carriers. It is in this agreement that we will see the different business models and who gets what and when.