My Thoughts on iPhone 3Gs Pricing
I’m tired of sharing my thoughts on this over and over so let’s just create a blog post to make sure we’re all on the same page.
I’m a rational individual with a thought process toward pricing including the situation both Apple and AT&T are in regarding pricing these devices. I also am in a group of individuals who are used to getting what they want and luckily, Apple gave us the tools (iPhone) to voice our opinion from anywhere there’s cell reception.
I was sitting in the audience in January of 2007 at Macworld San Francisco. It was then that the iPhone was released. Two months later, I moved in with Laura at our one year anniversary. Let’s fast forward to June 28th, 2007. I came home from the gym and told Laura that I would be camping out at the nearest iPhone Reseller which in Sunny Saint Augustine, Florida was the AT&T store. I lined up at 10PM for a 6PM launch (the following day) and I was still considered #2 in line just behind a retired US Army Veteran. The next 20 hours were fun, exciting and awesome and finishing up as I purchased an 8 gigabyte iPhone for $599 which was the most I’d every spent on a mobile phone by about $500. I was upgrading from a Palm Treo 650 and I was STOKED. Below are a few moments from that awesome time sitting in line for an Apple device.
Photos from that day:
Videos via Ustream
The day is July 11th, 2008 and I was again lucky to be at the keynote as Steve Jobs announced the iPhone 3G. This iPhone has a larger capacity (16gbs), had GPS and 3G cell speed which was a leap ahead of the previous generation device. Here are some photos as Laura and I camped out for 15 hours for the launch of the iPhone 3G here in San Francisco. We were 10th in line at one of Apple’s Flagship stores.
Apple’s iPhone wasn’t subsidized in 2007 and we all paid the $599 price tag for the device. It was a great phone and a phone we all thoroughly enjoyed using. In 2008, a $199/$299 model was introduced but you’d have to finish up your 2 year AT&T contract with this choice because AT&T was taking a loss on every phone sold (paying full price to Apple on the upfront costs) in exchange for getting cash from us every month which would help them recoup our costs. Early termination cost $175 if you want out of that contract thus paying AT&T for their monetary loss on the device.
This year, (1 year and a few days after the 3G launch) Apple has introduced iPhone 3Gs which has a myriad of new “upgrades” that make the new model more pleasing to use. Of course, they kept the same price point w/ 2 year contract on the new phone. Of course, those of us that bought an iPhone 3G aren’t eligible for an upgrade at this time because AT&T isn’t done recouping their losses on the subsidized price we paid. Understandable and this is exactly how all carriers and all phone releases happen. iPhone isn’t the only phone to get this kind of treatment and AT&T says “too bad” and I completely agree with them.
Now that we’re all caught up on A) my fanboy status and B) how subsidized pricing works, let’s move forward and discuss the implications AT&T faces by not caving to iPhone users’ request. If you bought an iPhone 3G in June of last year (it was released June 11th), then you’re eligible for “upgrade pricing” in March of 2010 or you can upgrade to the iPhone 3Gs between now and then for the price of $399/$499 and sign a new AT&T contract for 2 years. There is contract free pricing of somewhere around $800 if you so choose.
AT&T’s iPhone exclusivity contract is over with Apple sometime in 2010. No one knows if that’s January or December but sometime in the next year, AT&T will no longer be the exclusive US carrier for Apple’s iPhone and that’s when things get interesting. There’s only one other major US GSM carrier (GSM Is what the iPhone’s radio type is) and that’s T-Mobile. The other carriers (Sprint, Verizon) are CDMA band carriers so Apple would have to engineer the iPhone to work with those carriers.
Apple may or may not announce a T-Mobile, Verizon or Sprint iPhone in 2010 and every month in 2010, iPhone 3G owners will suddenly start seeing their 18-24 month contracts expire. AT&T will call them up asking if they want to pay $199 for an iPhone 3Gs w/ a new contract but many of them will switch. Why?
1. AT&T is the single most expensive carrier in The US.
2. AT&T has the worst cell coverage for voice, EDGE and 3G in the US (of the big 4)
3. AT&T has the worst customer service of any other carrier in The US.
I’ll gladly jump to Verizon if they carried the iPhone because EVDO and their voice coverage is fantastic and their prices aren’t so bad compared to AT&T. AT&T can enforce subsidizing on the 20 million people that purchased an iPhone 3G OR let it slide and get them for another 18 months because the customers you piss off now will be happy to jump ship to another carrier in March – July of 2010 AKA when AT&T’s Apple exclusivity runs out and another carrier in The US has iPhone 3Gs.
I’m going to fork over $499 on the 19th for an iPhone 3Gs and you should too but if you’re patient, you could be running a 3Gs for only $199 in only 8 months on a kick ass Verizon network instead and AT&T will be wishing they locked you in for another 2 years.
