The Beginning of the End for $200 iPhones?

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The Beginning of the End for $200 iPhones?
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Courtesy of Cliff Judy, WFTV

So there’s some somewhat confusing news about buying that new iPhone you’ve been pining for. If you’re an AT&T customer, your payment choices just got narrowed down. (Video via Apple)

Overnight Thursday, MacRumors noticed Apple switched out its options for buying iPhones in the Apple Store. Once you click the model and color you want, AT&T customers only have the option to buy one under an AT&T Next rate plan.

‘Yeah, so with AT&T Next, you get the new iPhone for zero down,’ AT&T’s commercial said.

‘Zero down?’

‘Zilch.’

Sure, that sounds nice — it’s a commercial, so it’s supposed to — but this means you can’t go to the Apple Store anymore and make a one-time payment to buy a cheaper, subsidized phone.

And the public at large doesn’t generally like changes, especially more expensive, poorly explained changes.

A changing business model

The 16GB iPhone 6 costs $649 on its own. When carriers like AT&T, Verizon and Sprint get you to sign one of those irksome two-year contracts, they pay Apple a subsidy to knock your price down to $199. (Video via Apple)

By getting rid of the subsidy, AT&T customers shopping in the Apple Store will now pay for the phone through a charge to your monthly bill.

‘Stuck in a contract?’ T-Mobile’s commercial asked.

T-Mobile already adopted this strategy more than two years ago and, through a variety of strategies marketing itself as the ‘Uncarrier,’ it’s had some pretty impressive subscriber growth.

The industry as a whole seems to be moving toward this installment system, albeit slowly. The obvious benefit to the wireless carrier is it doesn’t have to put up that $450 every time someone buys an iPhone. The benefit to the consumer is you can get upgrades sooner and you’re not, as T-Mobile put it, stuck in a contract.

All right, so that’s the change explained. But what’s the difference in cost?

The Verge published an exceptionally thorough article on just that. It made the comparison using a 16GB iPhone 6 with a data plan of 3GBs a month.

Under the subsidy plan, you’d pay the $199 fee upfront to buy the phone and $80 a month for your plan. With fees, the total cost over the course of a two-year contract was $2,159. Under the installment plan, your monthly bill is $92.09 to bring you to a total cost of $2,210.16 after two years. So basically, $50 more — or the difference of $2 a month and you’re not under contract.

Now, for those who don’t like change or don’t care that they’re under contract, you still have the old option. For now, at least.

AT&T’s website still has the subsidy plan active if you decide to buy through them instead of the Apple Store. With the industry looking ever more seriously at the installment system, though, who knows how long a $200 iPhone will exist?

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Clark Howard About the author:
Clark Howard is a consumer expert whose goal is to help you keep more of the money you make. His national radio show and website show you ways to put more money in your pocket, with advice you can trust. More about Clark
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