In Fantasyland, The iPhone Slices, Dices and Comes With Free Service
from the take-your-booyah-somewhere-else dept
The launch of the iPhone did little to dispel the speculation surrounding the device, as Steve Jobs left enough unanswered questions to keep rumors swirling for a while. Most of them have been fairly harmless, but a recent one stands out, as "celebrity" stock-picker Jim Cramer says Cingular/AT&T will give iPhone buyers 18 months of free service in order to win subscribers over from Verizon Wireless. As Barron's Eric Savitz points out, it's a ridiculous claim, not to mention one AT&T apparently never made. Cramer's claim simply makes no sense whatsoever: Cingular is paying Apple, in some form, for the right to have an exclusive deal on the iPhone, in the hopes that it will recover the subsidy by selling service to iPhone users. So why would Cingular subsidize the iPhone itself, then lock customers into a two-year contract, only to provide them with free service for 18 months? That dramatically increases the subsidy cost, and gives them only 6 months to recover it and turn a profit. Even if Cingular were selling the iPhone at a profit (which it certainly isn't), there's no way that profit would justify 18 months of free phone service. Fanboys letting their imaginations run wild is one thing, but talking heads basing investment "advice" on unfounded speculation is a bit out of order.Thank you for reading this Techdirt post. With so many things competing for everyone’s attention these days, we really appreciate you giving us your time. We work hard every day to put quality content out there for our community.
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The IPhone Slices and Dices...
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AT&T everything from them should be free
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What Service?
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Media Free "Bee"
2 Years free "service" is insane, not only impossible for Cingular/ AT&T to give away.
Media sounds a bit more like it.
And, although im not 100% sure, 6 months sounds decent.
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Since you're so sure that the iphone is costing apple/cingular money, and since most sites disprove this, it throws the continuity of your 'story' into question.
So, not only did I waste time reading a 'story' that was obviously made to get people to read it, without second thought to journalistic integrity, but I've also wasted time writing this comment!
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Re:
You mean *Apple* is making at least 50% profit on each phone (and some others have questioned that report, so I wouldn't take it as gospel).
Since you're so sure that the iphone is costing apple/cingular money, and since most sites disprove this, it throws the continuity of your 'story' into question
You conveniently mix Cingular & Apple here, which is a mistake. Apple is making a profit on the phones. Cingular is not making a profit on the phones. The difference is an important one.
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Mm, hm.
Setting aside merit and practicality... its an interesting phenomena. AT&T would be wise to fan the flames, but admittedly foolish not to cash-in. The question is... short term, or long term? The interesting thing is this... once AT&T gets a certain segment of the business, they will do everything in their power to KEEP that business. If a year and 1/2 of free service (on a 24 month plan) causes legions to jump ship from competitors, this is the time to launch such an incentive. The Cingular website is already gauging interest, and fending off early-enthusiasts attempting to beat the presumable cattle call.
Remember the basic rule that it is less expensive to KEEP a customer than to ATTRACT a new one. They, AT&T/Cingular have just succeeded in releasing a nuclear BOMB of "attraction". With this once in a lifetime opportunity, were AT&T to do this "incentive" (or perhaps something like it)... given other incentives to stay... like free calls to anyone in the network, cross-pollination service incentives dealing with land-lines and cable, etc, etc... it does not seem entirely far fetched, as much as it sounds incredibly disturbing.
Now, I'd heard 1.5 years of "free" service, not 2 years (although the contract was supposed to be for 2 years). On a basic $40 plan, 24 months is $940 over 2 years. 18 months leaves them with a $220 contract, with perhaps a $150-$200 cancellation fee. Even $220 is roughly $10 per month... the discount appearing on every bill as such. This is of course leaving out those who might want a data plan. A potential customer might attempt this attractive deal for 6 months before deciding to upgrade his/her service, thereby extending the contract another 6 months, and upping the monthly fees.
Personally, I think it is a trifle foolish for anyone not to consider this rumor at least mildly plausible. If anyone remembers the "pay-outs" many customers were receiving simply to "switch" long-distance carriers, back and forth for consecutive months... (for cash payments of hundreds of dollars), you can only begin to recognize what these companies should recognize. This is a HIGH-STAKES numbers game.
We've yet to truly understand the full nature of the deal Apple made with Cingular, and probably won't for a number of years.
While Microsoft plays catch-up with the Zune, Apple has created a customer-capture and retention system in the iPod/iTunes brand, that is the envy of many industries who continue to launch products that claim to be the "iTunes of..." INSERT SERVICE NAME HERE. Apple has apparently pledged to "keep out the bad guys" with regards to those that would "unlock" the iPhone, enabling people to go to other services. My money is on the notion that Jobs would feel more confident with Cingular boasting such measures, if he had an incling of other fronts of positive persuasion as well.
I still think plans for a "perfect storm" are in the works. As basic as this first offering is, it seems clear that this game of Texas Hold 'em isn't going to finish on the first round.
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"I want you to sign up for 2 years, but seeing that you are really eager to set your grubby hands on this shiny new iPhone, I'm going to require tat you pay 18 month in advance."
Now that makes a lot more sense.
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Ummm...
Jim Cramer says Cingular/AT&T will give iPhone buyers 18 months of free service in order to win subscribers over from Verizon Wireless
Didn't Cingular/AT&T get the exclusive deal with Apple's iPhone in order to do just that?
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The media is the hype machine, Wall Street tries to cut through the hype. Of course, media hype can affect the markets and how consumers act, so of course they take that into account. If you want a sense of where the market is going, look to wall street, because they are the ones who put their money where their mouth is.
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None of this matters...
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iTarded
The average "fully on" account for the iPhone is predicted to be ~$100/mo, between data, picture share, video share, and minutes.
So people actually believed that they'd get an $1800 discount on a $600 phone, in order to get you to switch from another provider?
You people (believers) are as hopelessly dumb as Steve thinks you are, and that's a damn shame.
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But if AT&T are not...
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Re: But if AT&T are not...
> drop $500 on a phone which is not subsidized
Apple thinks this new "iPod" is a premium device compared to its other iPods. True, it only holds as much as a nano, or for more, twice that, but running MacOSX and being fullscreen, etc, etc... they're thinking "cha-ching". Far be it from us to suggest Apple allow the minds of the public to be bent by discounting the cost presented to the consumer, especially when they prepare the 6G iPod-only device for the market. I think they have every right to expect people to pay that much for a combination device like this.
--And people will do it too. Will Cingular discount its service plan? They certainly have the room, don't they? I'm sure Apple will even sweeten the wholesale cost to them through their retail chains. Seems the Cingular reps denying the story, "deny" the story by confirming the requirement of a rate plan. LOL. Anyway... much like Apple defends its iPod brand by not allowing it to be subsidized, I'm sure Cingular won't allow any "discount" to be characterized as "giving away" anything either. I'm sure Cingular will count on these rumors being dead 6 mo. from now, so it can spin characterization of its rate plans freely.
> Here's the analyst call and presentation.
Thanks, Carlo.
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