Does Apple need to come clean about the 3G iPhone’s price? - Macenstein

Does Apple need to come clean about the 3G iPhone’s price?

I was in the Apple Store this weekend picking up my 3rd set of replacement iPhone earbuds (I gotta start checking my pants before washing them). As the Apple Store dude “checked me out” (meaning rang up my purchases, not mentally undressed me with his eyes) he noticed the earbuds and struck up a conversation:

“Hey, you have the iPhone?”.
“Yep,” I replied. (I’m quite the conversationalist).
“How do you like it?”
“I Love it.”
“You going to get the new one?”
“Oh really? Why not?”
“Well, it doesn’t really do anything my current one can’t, and it costs $15 a month more to use, not counting the $299 upfront cost”
“$10 a month”
“It only costs $10 a month more.”
“Oh, I thought you had to pay an extra $5 a month to get the 200 text messages I have now?”
“Oh, yeah, if you want the text, then yes, it’s $15 a month more”.

Now, I know for a fact that Apple’s employees have been told how to push the 3G iPhone, and what to tell the customers it costs. This guy knew it would be $15 a month for comparable service to what I have now, not $10. It seems to me that Apple, perhaps sensing there is no real selling point to the iPhone 3G that wasn’t there in the 1st gen iPhone, is really trying to push the “Wow, it’s so affordable now!” angle. Their slogan, “Twice as fast, half the price” is very misleading, and really needs a generous sprinkling of asterisks linking to footnotes. (Actually, they DO put an asterisk on the tagline in the Apple online store, just not on the giant front page ad. However, the asterisk seems to only apply to the “twice as fast” claim, not the “half the price”, perhaps implying that even the 2x speed increase may be up for debate).

I don’t begrudge Apple the right to charge whatever they want, nor AT&T their right to charge so much more for 3G service (although it seems a bit excessive). What I DO have a problem with is the whole “Buy the new cheaper iPhone” marketing angle, when it is impossible to spend less money using it than using the 1st gen model.

What if Apple released an updated MacBook Pro, for $999, marketed it as “Twice as fast, Half the Price”, but then charged $55 a month for the power cord rental? That’s basically what they’re doing with the 3G iPhone. Just as you can’t use a MacBook Pro without power, you more or less can’t leave the store without signing up for a new 2 year plan that will cost you MORE than the $200 you “saved” after 14 months. That means those remaining 10 months of the contract will cost you $150 more than the 1st gen iPhone users.

Apple is allegedly charging just as much for the 3G iPhone as the old model – they are just charging AT&T instead of you, who in turn is charging you… And then charging you even more. Their “Half the Cost” ad campaign really deserves some scrutiny, especially when you consider that not one of their current 1st gen iPhone partners is charging less for the 3G plans than the current plans. Other 1st time international partners like Canada and New Zealand are charging so much for their iPhone plans that the negative press has caused for major newspapers in those countries to call for an iPhone boycott.

I realize Apple only has so much control over what their mobile partners charge, but they have full control over their advertising. So where is the cost savings? Who is paying half price, and for what?

To be honest, most of my anger over this pricing scheme is because I feel let down by the 3G iPhone’s feature set. I am a loyal Apple soldier, and I likely would have paid $15 more a month if the iPhone was in any way different from my 1st gen iPhone other than 3G speed. Yes, there’s GPS, but not being a cross country truck driver, it’s not a must have feature for me, and I already have a GPS. If the processor was faster, if the camera optics were better, if there was a video camera, if there was a 32 GB version, MAYBE I would spend more per month, but a “twice as fast” speed bump for 1.75 times the current data price is silly, and I can’t understand the rationale of anyone who would camp out in line for this “update” to the iPhone. I actually have a theory that Apple let the 1st gen iPhone sell out a month before announcing the new 3G model so that there would not be a publicity nightmare mad rush of people buying up the old model after the 3G unveiling, so underwhelming is the 3G.

But whatever, to each their own. To all who are anxiously awaiting the 3G iPhone in hopes that it will justify its inflated price by doing something the 1st gen can’t, well, more power to you. I shall remain smugly content with my 1st gen model, happily using it for a much lower price, just so long as Apple keeps making headphones that fit its stupid proprietary recessed headphone jack…

Damn! I guess I found something the 3G can do that mine can’t… Cheaply replace my washed earbuds…

32 Responses to “Does Apple need to come clean about the 3G iPhone’s price?”
  1. Ryan m says:

    Vodafone NZ should be ashamed of themselves… just because they have the must-have gadget, and they are currently the only GSM/UMTS in the country, doesn’t mean the consumer is willing to bend over to get it. More than likely they will NOT buy the iPhone, and NOT continue to be a Vodafone customer.
    Take a look at the ‘iPhone 1G’ plan…. that $6k for an iPhone over 24 months.

    The only thing that bothers me is it looks as if it’s Apple who is screwing the customer, not the carrier.

  2. rick says:

    It sounds to me like you would rather have had Apple go on charging you $399.00 for the iPhone and letting you go to ATT for your data plan … oh, wait, ATT would STILL charge you $30.00 a month for the 3G data plan, a full TEN DOLLARS more than the EDGE network everyone has been complaining about for a full year.
    Somehow, Apple answers the Edge slowness complaint, comes out with a 3G phone and, oh, now it’s their fault that ATT charges more for a 3G phone. Wake up and realize that Apple could have just left the price at $399. They didn’t. They have the right to advertise that fact.
    Yes I do know all about subsidized pricing – and I know that ATT is paying Apple. But Apple could have asked YOU for more. They don’t. And, go buy a Blackberry; the data plan will be just the same.
    I get tired of people who refuse to break out the cost of voice and data from the cost of the device. The way I look at it, I’m paying Apple a device fee; ATT a voice and data fee. Do you blame Ford or GM every time you have to pay for gas?

  3. Dizil says:

    I’m waiting for iPhone 3 or honestly apple lost me on this iPhone I may wait to see what Android has to offer, or check out some Nokia’s they sync up with lots of macs. I love the simplicity of the iphone hooking to my macbook pro, but these price gouging and honestly nothing has really changed on the new iPhone it actually looks cheaper than the new one.

  4. Vincent V. says:

    you bring up a very goooooood point! even though i love apple products and may very soon be an apple employee.. i opted not to get an 3g iphone. and stick with tmobile… i even got a bb curve for free for renewing my contract… plans… ESPECIALLY texting plans are way cheaper with tmobile… I have at&t for dsl because my apartment has an agreement with them… and let me tell you I hate trying to PAY these people.. they have horrid customer service… anyhow before i stray any further away from the topic.. i most likely will also be shooting for a 1st gen 8gig iphone that i will unlock in a heartbeat to use on tmobile =)

  5. Paul says:

    Don’t forget that 80% of the USA does not have 3G service.

  6. @rick,
    I’m not sure your gas analogy makes a lot of sense. I actually WOULD be mad at GM if they advertised their cars were “half priced”, then struck an exclusive deal with Exxon for a special fuel that my GM car required, and in the end it cost me twice as much as buying last year’s car at full price which used regular fuel. I don’t begrudge Apple charging whatever they want, nor AT&T charging so much more more 3G (although it seems a bit excessive). What I DO have a problem with is the whole “Buy the new cheaper iPhone” marketing angle, when it is impossible to spend less money using it than using the 1st gen model.

    -The Doc

  7. Andrew Booth says:

    I totally agree. The UK (o2) price plans are basically the same for the 3g iPhone as they are for the standard one. Our plans in the UK are much better than AT&T’s in the US. If you want to upgrade in the UK, then you can use the same contract as you are already tied into.

    I wont be upgrading because I love my brushed metal back of my iPhone and really dislike the plastic backs of the 3g iPhone. Plus, I have no need for the extra speed that comes with 3g (Im usually using wi-fi everywhere I am, whether it be at home, uni or out).

    And if anything was to make my decision to not upgrade any clearer, it would be o2’s terrible handling of the upgrade service online yesterday. They have been sending current iPhone owners texts for months saying that we would get first chance to own the new iPhone, and when it came to the day of upgrading, the systems was only working for NEW customers.

    Anyway, rant over.

  8. darrell says:

    and there lies the real truth – the iPhone 3G isn’t really the ‘2nd Gen iPhone’ it’s simply, the 1st Gen iPhone with 3G – the GPS was thrown in there only to keep it as competitive as BlackBerry. keep in mind that all 2.5G iPhones and iPod Touches will still be able to run the app store and with that will bring 3rd party peripherals. a real 2nd Gen iPhone would have a hardware upgrade, much like the iPod.

    i say if original iPhone buyers are happy with their 1st Gen iPhone, then they should stick with it. if you have expendable income – then i say still stick with the 1st Gen iPhone. being frugal and having a low carbon footprint is the trend right now anyway 😛

  9. Dave-O says:

    “2.5 times the current data price”?

    20 x 2.5 = 50

    The plans charge $30 ($35 if you must have the 200 text messages). That ain’t 2.5 times more expensive. The data plan is 50% more expensive.

    While I agree that the iPhone 3G isn’t much of an upgrade for existing iPhone owners, I think you’re wrong about how desirable it is for people who don’t have an iPhone, especially since many of them waited for 3G and/or GPS. Expecting the second revision to be compelling is foolishness. Do you buy every revision Mac or iPod? In the case of the iPhone it’s even sillier. You’ll be getting the same software upgrade that ships with the iPhone 3G. Of course, the second version isn’t compelling when you already have most of it.

    Your power cord analogy sucks. It’s more like a MacBook at half the cost when the power companies are charging 50% more. Not Apple’s fault. Even that analogy is lacking in that the power isn’t twice as good.

  10. ma77 says:

    it is truly sad that in one year all apple could muster in there “2nd gen” iphone/itouch was G3 and GPS. I love my iphone and use it every day. but It lacks alot of things that i would expect apple to add in there next release. but then again most of the things i want would be software based.
    if i had my choice between a Gen 1 iphone and a gen 2, i would go with the gen 1. I don’t need to surf the web that badly when i am away from a computer.
    just give me my e-mail and news feeds and i am happy.

  11. M. Rothe says:

    Up here in the great white north (Canada) we have been eagerly anticipating the apple iPhone but now that the data plans have been announced many of us are rethinking our purchase. Problem is there is a true oligopoly here whereby all of our carriers have particularly high data rates. It is just that the iPhone has brought a lot of scrutiny to this and the carriers have to justify why they charge so much more than their American counterparts.

    Sadly, I suspect not all that much will change and I will have to forgo the the joys of iPhone ownership. Not so much because its not in my budget but more because I can’t quite convince myself to overlook these usury data plan fees.

  12. @Dave-O,

    Thanks, I went to Art School, not “thinking” school. I changed it to 1.75x the price, which is a more crommulent way of saying it. (the comparable plan is 75% more expensive, not 50%)
    -The Doc

  13. Gary says:

    I agree with Paul.

    For example, there is no 3G where I live, so, if I get the 3G iPhone, I’ll be paying for something that I won’t be able to take advantage of. If AT&T would be flexible enough to get rid of that $30 data plan in places where there is no 3G, I would’ve gotten the new iPhone. Or charge for a first gen data plan for the new iPhone where there is no 3G.

    But, I still believe that “unlocked” is the best for Apple and its followers. This is specially true in countries where prepaid phones are the norm. Apple won’t be able to top their accomplishment with the iPod if the iPhone is locked. I, for one, have 3 iPods. How can I do the same if I keep on getting contract extensions for every new iPhone that I may buy?

  14. THD62 says:

    I saw that TomTom has an app ready that will take advantage of the GPS in the 3-G. Anyone have confirmation of this?

  15. william says:

    Here’s the deal. Apple was charging $399 for the iPhone, now they are charging $199 for the iPhone. That’s about half. Apple doesn’t charge you for phone service, for SMS messages, or for data plans. You pay a phone carrier for that.

    That is not analogous to Apple renting you the power cord. That is more like buying a cheaper car and then finding that the price of fuel went up (or down hypothetically.) Honda/Ford/GM/etc. sell cars, they don’t sell fuel. Apple is selling phones, not phone service. I understand that the phones are generally tied to one carrier, but that doesn’t change who is providing what.

  16. Jonro says:

    Perhaps we need an online petition against AT&T like the one against Rogers that got Apple’s attention. I don’t send a lot of text message, less than 30 a month. The new data plan doesn’t include any free messages and that is price gouging for something that costs AT&T nearly nothing to provide. Should the new data plan cost more than the 2G plan? Probably not, but I could accept a small increase if it were fair.

    Consider this: AT&T’s data plan is more expensive than typical DSL service, but during a typical month, I’ll probably transfer less than 1% of the data that I will upload and download at home. It’s a considerable amount of money for a small amount of usage. I won’t be upgrading to an iPhone 3G this year.

  17. Bizlaw says:

    @ Gary:

    Check your facts. AT&T won’t charge you for 3G service if you can’t get 3G where you live. Also, their maps are not updated on the websites. AT&T has added much more 3G service over the past several months.

    @ Paul:

    What do you mean 80% of the US doesn’t have 3G service? Do you mean population or geography? Most larger cities have 3G service, which certainly covers more than 20% of the US population. If you’re complaining that you can’t get 3G service in Yellowstone National Park, you’re a moron anyway. Turn off your phone and enjoy the scenery.

    Yes, AT&T charges more for 3G than EDGE. Do you pay more for high-speed internet than dial-up? Damn right you do. It costs more to have a faster network, and the faster the speed, the more people will use it.

    I remember when I used to use yellow pages/white pages phone books because looking up a phone number on the internet took five times longer due to dialing up, trying to find the data, waiting for downloads, etc. Now I don’t even know where the yellow page books are in my house. I have faster internet, so I use it more. More load on the network, so more hardware, lines, etc. are needed. More costs.

  18. mark says:

    “AT&T’s data plan is more expensive than typical DSL service, but during a typical month, I’ll probably transfer less than 1% of the data that I will upload and download at home. It’s a considerable amount of money for a small amount of usage.”

    But I bet it costs a lot less to extend the DSL infrastructure to a community, than it does to build out the 3G infrastructure nationwide.

  19. aranhamo says:

    Okay, besides the data plans being more expensive than before, as an existing AT&T customer who doesn’t already have a data plan, I don’t qualify for the subsidized iPhone price. Plus, I can’t use my upgrade allowance toward an iPhone. So were I to get an iPhone, not only would I have to pay the now more expensive data plan rate, I would also have to pay the full cash price for the phone, which is like $400, right?

    So if I want an iPhone, it’s going to cost me over 24 months at least $1120 more than what I’m paying now.

    But if I wanted a Blackberry, I would qualify for a subsidized price, plus my upgrade allowance, so I could get one for free. So they’ve pretty much guaranteed that no existing AT&T customers with voice-only plans will buy an iPhone.

  20. Jonro says:

    “But I bet it costs a lot less to extend the DSL infrastructure to a community, than it does to build out the 3G infrastructure nationwide.”

    I’ll bet it doesn’t. Wireless always costs less to buildout than wired. That’s why cell phone usage is expanding so quickly around the world, especially in third-world countries.

  21. Ben R says:

    You might want to check your facts, aranhamo. There is no requirement that you previously had a data plan to get the subsidized pricing. You can check your eligibility on the at&t iPhone site and see for yourself.

  22. aranhamo says:

    These are the requirements:

    You have to have either completed your 24-month contract, OR:

    #1. Customer has had a standard calling plan plus data services costing at least $68.99 a month but no more than $98.99 a month, and who has been in contract (and not had a phone upgrade) for 21 months or more,
    #2. Customer has had a standard calling plan plus data services costing $99 a month or more, and who has been in contract (and not upgraded) in the last 12 months.
    #3. A customer with a calling plan and data services of less than $69 who is 21 to 23 months into contract may upgrade for a fee and a commitment of an additional two-year service contract extension.

    That’s not really clear to me if you have to have a data plan. I have no data services, but I pay per-use of data. My plan has zero included text messages or any other data. If I use a lot of data or go over my minutes, I may pay more than $69 in a month, but my plan is less than $69 a month otherwise.

    I’ve asked AT&T about this on the phone. I am not eligible for upgrade pricing on the iPhone. I have a $100 upgrade allowance I can use towards any phone EXCEPT the iPhone.

  23. Telephone Engineer says:

    It costs less to provide thin wireless coverage than wired coverage, and much more to provide wireless coverage comparable to wired coverage. Cell phone usage maybe expanding around the world, but cellphone service doesn’t compare to FIOS.

    You get free e-mail, and you are complaining about the cost of texting. That’s like crying for dessert when you don’t eat your supper.

    The irony is all these posters complaining that what is most economical for them is not what is most economical for Apple or AT&T. They want to boycott Apple for making economical decisions. They prefer a beleaguered Apple. Probably prefer Microsoft, too.

    If this is your idea of being a “loyal” Apple soldier, I hope your marriage is sound.

  24. Dave-O says:

    I’ll accept 1.75 (and crommulent, but only because I’m a Simpsons fan). However, the option to not buy the SMS plan is relevant. I wouldn’t because I don’t send/receive 25 messages a month.

  25. Paul says:

    No 3g where I live. Not even close. Staying with my 2g

  26. shithead says:

    original 8 gig = $600
    slap in the face price drop = $100 apple cash (they still got your money
    1/3 the price, 3g, 2x as fast, gps, feeling you just got stuffed after only a year = pricele$$

    back to you, fuckers!!! n!n

  27. Ethan says:

    “Do you blame Ford or GM every time you have to pay for gas?”


  28. Adam says:

    You can get iPhone compatible headphones from Skullcandy. I don’t know if they’re cheaper or not but they’re definitely higher quality.

    Check ’em out. I love my candies.

  29. SoSideSrfr says:

    In business, it seems fair to enhance your products to make them more desirable, or competitive, and usually, those enhancements carry a price increase. In keeping with the car theme that has been used a bit here, when car makers come out with a new car model, they typically increase the price with all the new gadgetry and performance. In addition, if you want it to be sportier than the base model, that added performance costs more…period. Anyone that has purchased a car with upgraded sport packages understands this theory in practice when they go for a change of tires. To get the performance they are built to deliver, you have to purchase more expensive parts.

    Apple really is no different with this version of the iPhone. The iPhone 3G is in fact faster and has GPS. The new 3G feature is faster and should increase the demand for internet usage (i.e. more data downloaded). That data bandwidth is going to cost something. Currently you won’t pay the same rate if you increase your home internet bandwidth. You pay more. It is not unfair, it’s simply commerce in it’s truest form. Smaller, faster, better usually = more expensive. In this case however, if you don’t count the AT&T subsidy, the price is exactly the same.

    The bonus – Apple has allowed AT&T to subsidize this increase in technology to take some of the sting for the increase in plan charges. This simply puts the iPhone on the same playing field as all the other phone manufacturers in how the cell phone game is played.

    In this world of tech blogs where we all live daily, we thrive on the latest, fastest, smallest, and coolest technology. Bottom Line: Apple has addressed the criticisms we all shared of the original iPhone by opening development, adding enterprise support, adding 3G, and adding GPS all the while keeping the price low and providing for a subsidy model that keeps the innovation from killing us on the back side. Does it cost more, yup. Over time, it will go down, but you know there will be something faster and better (WiMAX?) waiting to take it’s place. Oh, and it will cost more per month than the 3G plan.

  30. Peter says:

    Just saw this..
    which might be a good way to figure out how much the iphone really costs.. And you’re right looks like it isn’t $199!

  31. Arjun says:

    I actually think this iPhone version was just an Update to make it compatible internationally. I know that Swisscom declined the iPhone because we’ve been on 3G nationwide for years, and a EDGE phone is just something no-one would buy.

    The GPS, the 3G, the enterprise features, 3rd party apps, are all just updates to make the iPhone more competetitive in a market Apple might have underestimated.

    They were, after all, successful with a music player that was comparatively underfeatured until the iPod touch came out (which arguably still isn’t very feature-rich as such).

  32. Monkey says:

    I think a point many people are missing in their car-gas analogy is that people are not buying cars where the price is subsidized by Exxon because that is the only place you can get gas for that car and then the auto mfg gets a cut from Exxon. I don’t blame the auto manufacturer when I buy gas because I can get any brand I want. If I were locked in to one brand then I would be irate. I’d love to have an iphone but can’t imagine making that 2 yr contract with the devil.

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