Steve Kovach of Business Insider did the math on T-Mobile’s new “un-carrier” plan for the iPhone:
Now compare that to the $2,020 two-year cost of owning an iPhone 5 on T-Mobile. You’re saving $580 in most cases. (Sprint comes close with its 450 minute plan, but keep in mind you still get unlimited minutes with T-Mobile. If you talk a lot on your phone, you’re still getting a better deal with T-Mobile.)
He takes into account not only the cost of the phone (after T-Mobile’s non-subsidy subsidy) but the cost of the plans as well. It’s not exactly cheap, but T-Mobile is the clear winner here from a pricing perspective. From a coverage perspective, that’s another matter…
T-Mobile CEO John Legere at an event today where he unveiled the iPhone on his network (FINALLY) as well as the company’s “un-carrier” plans.
It seems that Legere was full of good quotes — “Stop the bullshit” being another. And while I think this is a smart approach to take in an age where almost all Americans hate their carriers, I still find it a little odd that Legere went on and on about the end of subsidies and contracts then offered up his phones with a sort of newfangled subsidy (pay $20 a month until the phone is paid off — plus your contract, of course).
I mean, I get it, you have to pay for the very expensive phone somehow, and most people aren’t going to pay for it all upfront (even if it does save them money in the long run), I just think the messaging here is a little muddled.
Also, I think we all recognize that T-Mobile would be just fine with the status quo if they weren’t in fourth place in the carrier race… Still, again, a smart thing for T-Mobile to try.
The iPhone is an amazing thing.
The U.S. carriers: the opposite of awesome.
If your wish comes true and T-mobile's way (no phone subsidies) becomes the norm, won't that severely cut into Apple's profits for the iPhone? The Nexus 4, a comparable phone in most regards is literally HALF the price of an iPhone5 without subsidies. Is there any way that Apple (Samsung, HTC and the others as well) won't suffer a huge cut in profits if the unsubsidized plan becomes the norm?
Asked by vivekpreddy
Well if the phone was sold at the full price, profits should be about the same (with the money coming directly from the customers, rather than the carriers). Same is true if it were financed (not sure if T-Mobile would pay that difference to Apple up front, but I assume so).
But you’re right that a move to this non-subsidized model could force prices to come down from that full price. And yes, that could severely cut Apple’s profits were that the case.
If I were an Apple shareholder, this hypothetical would probably worry me. But I’m not, so I’m all for it. The U.S. carriers have held everyone hostage with the subsidies and long, expensive contracts for far too long.
Matthew Panzarino also calls a spade a spade:
I do not think that the writers at The Verge are being intentionally apologist. I have too much respect for the staff there and neither Bohn nor Patel has a history of that kind of thing. However, the article as written is nowhere near as hard enough on Google for not delivering LTE in the Nexus 4 as it should be. And it manages to almost completely avoid what should have been the big elephant in the room: Apple has managed to ship a flagship phone with almost no carrier compromises and LTE, so why can’t Google?
The answer is in there, but it’s sort of obfuscated (as Rubin clearly intended). This is why.
This is a much more important article than it may appear on the surface. It shows exactly why it was such a mistake for Google to capitulate to the carriers. They made the proverbial deal with the devil, trading control of their destiny for traction. Too bad.
Make no mistake, when Andy Rubin tells Dieter Bohn and Nilay Patel of The Verge that “costs” and “battery life” are two major factors in the decision, it’s pure misdirection. Said another way, it’s bullshit. How do we know this? Just look at the iPhone 5. It’s rolling out on LTE networks around the world just fine with its thin design, multiple antennas, and solid battery life.
The real issue here is that Google wants to sell an unlocked LTE phone and can’t because the U.S. carriers (Verizon in particular) have them over a barrel. And why do they want to sell unlocked phones (which are more expensive since they’re not subsidized by the carriers)? Because the carriers have proven time and time again that they will not allow Google to push timely Android updates.
And yet, Apple has no problem shipping iOS updates over the same networks. Why? Because they strong-armed Verizon into the same deal they got with AT&T. They fought for the user. Google sold us out to sell some phones. Now the devil is collecting.
We just heard that Facetime over 3G and 4G would only be available on AT&T for those who choose to go with its new “Mobile Share” plans. If you have an individual plan or family plan, you will not be able to purchase or use FaceTime over 3G/4G at any price.
Shocker. But I wonder how Apple feels about this? My guess is that they’re not too happy. I imagine this would have led to one of those Steve Jobs’ mad-as-hell phone calls in the past…
As Weintraub concludes:
Yes, it is probably time to leave AT&T.
Brian X Chen:
The iPhone with a two-year contract on AT&T, for example, costs $200 for the handset and then upward of $90 a month for the plan; over two years, including the cost of the phone, customers pay at least $2,360. With a prepaid plan on Virgin Mobile, which is owned by Sprint, the iPhone costs $650 for the handset, and then $30 a month, including unlimited data (the type of data plan that people are happier with, according to J.D. Power). Over two years, that would cost about $1,370.
It’s a tactic that has worked for decades: trick people up-front and screw them in the rear. Short-term gain, long-term pain. Etc. The carriers thrive on this.
But it’s still pretty jarring to see it laid out in such simple terms: if you’re willing to pay $450 more upfront, you’ll save about $1,000 over the next couple years.
Asked by joshuarudd
I haven’t heard about anything like that, but I agree, it would be awesome.
Dream scenario: a new $199 iPod touch with a $30/month LTE data plan option. Just like the iPad, no contract.
The hitch, of course, is that Apple would have to work with the carriers on such a device to get the data plans. They made it work with the iPad, but the iPod touch would probably be too close (to a phone) for comfort for the carriers, I imagine. A boy can dream though…
Great post by Nilay Patel. There was a time after the launch of the iPhone that everything looked so positive. But alas…
Which is mainly why I hate Android.
It certainly looks true that the iPhone is a “nightmare” for the carriers, as David Goldman of CNN Money suggests. But context is important. It’s a nightmare for their margins — it’s a dream from a product offering perspective.
A few other things here:
1) Boo-fucking-hoo. The carriers have raked consumers over the coals for years with things like SMS charges, which have a near-infinite margin.
2) This shows the position of power Apple has now. This is a direct result of going exclusive first with AT&T to ensure they got the deal they wanted. Once the iPhone took off and AT&T started stealing customers, it forced the other carriers to bend to the same deals.
3) This shows why the carriers need Android and are willing to spend a lot to promote it. All the OEMs besides Samsung are basically getting dicked over when it comes to making money off of Android devices, but the same is not true of the carriers. They love it.
4) Sadly, this will still end with the consumers getting screwed. To be able to pay the Apple subsidy and maintain their huge margins, carriers are going to continue to raise rates and/or put in ridiculous restrictions like this.
I give AT&T a lot of shit (and rightfully so for jackassery moves like this). But it’s important to remember that their main competitor, Verizon, is also a sleazy carrier. Today brings the perfect example of that.
The largest carrier in the U.S. is apparently about to start charging a $2 fee if you pay your bill online or over the phone, sources tell Droid Life. Yes, they’re charging you to pay your bill. The only way to avoid the charge is to set up automatic payments which some people, like myself, don’t want to do.
What a total shitbag move. Verizon is actually incentivizing many people not to pay their bill. Pure greed.
Update 12/30: That didn’t last long.
*at the slowest, shittiest speeds they can possibly provide
If you live in a big city like New York or San Francisco, I can’t imagine why you’re still using AT&T. Seriously, just switch to Verizon, it’s wonderful. But millions are sticking with AT&T and as a present this Christmas, they’re getting flaming bags of shit sent their way.
I’ve had at least a dozen friends in the past couple of weeks says that they’ve received messages from the carrier saying their service will soon be throttled. Why? AT&T claims they’re using 12 times more data than the “average smartphone user”, and in an effort to maintain their network, they’ll start reducing the speed of their data.
It’s complete and utter bullshit.
These are people who pay for unlimited data (which AT&T has since discontinued, but they were all grandfathered in). AT&T doesn’t want to face the backlash if they kick them out of those contracts, so instead they’re taking more subtle, slimy maneuvers to make sure they can screw over long-standing customers.