iPhone Pricing Details: Getting iPhones To Unlock Just Got A Whole Lot Trickier

from the can't-play-that-game-any-more dept

Tue, Jun 10th 2008 12:07pm — Mike Masnick

When we wrote about the iPhone pricing immediately after the Steve Jobs keynote, it wasn't entirely clear what the details were, and if AT&T/Apple had shifted to a typical carrier-subsidized model. However, the details quickly became clear. Indeed, Apple and AT&T ditched the deal they had last year, whereby Apple actually received a cut of AT&T's service fees. Instead, AT&T is buying the devices directly from Apple and then selling them (at a loss) to customers who will need to sign up for a more expensive service and a two-year contract (rather than the old one-year contract). Basically, this is back to the traditional model of mobile phone sales -- which Apple had suggested was a thing of a past just a year ago.

Either way, though, the deal works out fine for Apple. It still gets the full price it needs to get on the iPhones and doesn't have to worry about recouping service fees from folks who unlock iPhones. AT&T, on the other hand, now becomes a lot more reliant on service fees, first to make up for the loss on the device sale, and then to show growth in its 3G network usage. To that end, it appears that AT&T has totally ditched the old model where you could buy an iPhone and "activate" it on your own. No more. Now you have to both buy and activate the phone in stores. You can't order the phones online and have them delivered to be self-activated. In Engadget's post, the writer seems confused by this, and quotes AT&T's bogus claim that it did away with self-activation because the company "found that many others wanted to complete purchase and activation in one step so they could walk out of the AT&T store with their iPhone up and running." If that were the case, they could have just added in-store activation, without removing the option for self-activation.

The real reason seems pretty obvious: if you have to both buy and activate the phones at the same time and they require a two year contract, it's a lot trickier to get your hands on an iPhone for unlocking purposes. Since the full process is supposed to happen at once, it seems unlikely that stores will be letting people walk out the door with an iPhone that doesn't also have a contract. Those hundreds of thousands of unactivated iPhones that disappeared into China? Not so easy this time around (of course, you'll also note that the new iPhone will be available in 70 countries, so they're trying to stamp out the issue from the supply side too). Yes, there will still be 3G iPhones out there that can be unlocked, but that market is going to dry up significantly and cost a lot more.

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Filed Under: iphone, pricing, subsidies, unlocking
Companies: apple, at&t

30 Comments

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Fred Speckeen, 10 Jun 2008 @ 12:20pm

unlocked iphones
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GeneralEmergency (profile), 10 Jun 2008 @ 12:23pm

Note to Steve Jobs....
Dear Stevie...

Quit being AT&T's bitch.

Grow a pair and sell unlocked iPhones.

What are the carriers gonna do? Turn down customers wanting service?
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Fred Speckeen, 10 Jun 2008 @ 12:24pm

unlocked iphones
Apple had to do something. Check out the iphone sales tracking widget at www.terapeak.com/iphone and you can see that unlocked phones were selling at a 2:1 ratio to locked ones, and at a roughly 20%+ premium over the past 30 days. If you now have to buy the phone and activate it at the same time.... too bad. Guess there's still going to be a vigorous market for version 1.0..
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Sea Man, 10 Jun 2008 @ 12:55pm

This will affect our chances of getting a 3G iPhone to unlock for all of about a week. I wouldn't worry too much about it.
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Jeano, 10 Jun 2008 @ 12:56pm

Can we import to US
Will iPhones from overseas be sold without a contract. If so, can we import the dang things?

Just wondering.
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Ziggy, 10 Jun 2008 @ 1:11pm

Always a 2-year contract.
It is incorrect that AT&T bumped up the contract length from 1 to 2 years. The contract length for a V1 iPhone with AT&T has always been 2 years.

Anyone buying any new subsidized phone from AT&T will sign a 2-year agreement. It has been this way for several years now. It is true that ou can maybe get a 0 or 1 year contract if you know someone at the local dealer or otherwise sweet-talk the sales person. But the vast majority of new customers to any major carrier in the US signs a 2-year contract these days.
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Anonymous Coward, 10 Jun 2008 @ 1:49pm

why just at&t
I'm never going to leave verizon as long as they keep treating me well. So apple will never get my business even though I would by a iphone in a heartbeat (if I could use it with verizon). I know at least 6 people who feel the same way, so I think they could do much better if they would just open up to all the carriers.
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Charles, 10 Jun 2008 @ 1:54pm

Those "gphones" are looking better everyday.
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DoubleDown, 10 Jun 2008 @ 1:56pm

This is a boon for those that want to sell iPhone 1.0
So I'm upgrading to the new iPhone when it comes out. I know, I know, I know--fanboi, cult follower, idiot--yeah, yeah, whatever. With new "must activate" policy in place, it will make selling my current iPhone on eBay a whole lot easier....and at a significant profit. The previous phones will be the only ones that can be jailbroken (of which I might do, but it might sell just fine anyways without the hassle). If I'm willing to ship it anywhere I could get up to $400 for it. I saw someone when I was in Costa Rica using an iPhone. I asked him how he was able to use it there. He mentioned that it was jailbroken and he bought it on eBay. So this works out great for me (BTW, I was a Cingular customer pre-iPhone anyways....ATT does suck though).
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A Ide0t, 10 Jun 2008 @ 2:11pm

Maybe AT&T and Apple should merge, and make A&AT&T
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Derek Kerton (profile), 10 Jun 2008 @ 2:42pm

Corrections, Answers, & Arrogant Comments
re: Sea Man on Jun 10th, 2008 @ 12:55pm
"This will affect our chances of getting a 3G iPhone to unlock for all of about a week. I wouldn't worry too much about it."

Sure, within a week one may be able to unlock or "jailbreak" an iPhone from a technical perspective. But (unless you also commit fraud) you will still have the two-year contract with AT&T with the voice plan and mandatory $30 monthly data fee.

So you can put a T-Mobile SIM in the phone, get reduced functionality (ex: visual VM), smaller 3G US Network footprint, and you can pay both the T-Mo bill AND the AT&T bill. Go nuts, stick it to the man!

RE: #5 "Will [3G] iPhones from overseas be sold without a contract?" They just might, but don't expect them to be cheap. There has always been a market for unlocked high-end phones from the likes of Nokia, SE, etc. But the mass market has preferred to accept being force-fed the locked units the carriers offer us because of the subsidy they are willing to invest. It's a Faustian relationship, but both parties enter it willingly again, and again, so that's just the market speaking.

RE: #7 "I'm never going to leave verizon..." Well, then, don't hold your breath for a iPhone. iPhone, for reasons of scale economies, is built with GSM-type radios. These work in most countries of the world (including AT&T and T-Mobile networks). Verizon uses another radio technology called CDMA, which is used in a dozen major countries. Apple will probably NEVER offer a CDMA iPhone. But all is not lost: around 2012, a technology called LTE will unite the two camps, and maybe then you can buy a LTE iPhone and port it over to Verizon Wireless. Mark your calendar. But to your point, whether Apple "opens" it or not is irrelevant to you if you want to stay on VZW.

RE #9: "I saw someone when I was in Costa Rica using an iPhone." Anyone can use their iPhone in Costa Rica. It's called international roaming. If you are using a different country as your home carrier, you'll pay high roaming rates, but it'll work. But if you are just not clearly saying, "They were using it with a Costa Rica network/bill provider" then all it means is that they jailbroke their iphone and popped in a local SIM card.
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Anonymous Coward, 10 Jun 2008 @ 2:51pm

Re: Corrections, Answers, & Arrogant Comments
You are so smart.
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Anonymous Coward, 10 Jun 2008 @ 2:52pm

Suppose I already own an unlocked 3g smartphone -- who will sell me just the service? Maybe AT&T would, albeit for the same inflated $30 per phone per month with two year minimum?

But no, I somehow doubt they can restrain their short term greed even that far. After all, think of the lost ringtone fees!

Mark my words, one of the down and out carriers is going to get a big break on this transition, because the top carriers are all too afraid of "competing with their existing services."
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BlowURmindBowel, 10 Jun 2008 @ 3:14pm

Re:
If you already have service why would you need to buy more service?

Just grab the sim out of your current phone, pop it in the new unlocked smartphone you magically found yourself in possesion of; and you are good to go.

Some configuration of the new smartphone's OS may be required to get everything working though...
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Bazil, 10 Jun 2008 @ 4:09pm

AT&
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Jeff, 10 Jun 2008 @ 4:14pm

The Blackberry...
is looking better every day. And AT&T will unlock it for you. Just ask.
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Kevin, 10 Jun 2008 @ 4:19pm

Does Apple care about unlocking?
I thought that the only reason that Apple originally was concerned about unlocked phones/jailbreaking is because they were getting a cut of the monthly fees from AT&T or whoever their approved carrier for that country was? Now that AT&T is buying phones at full price and subsidizing that with a 2 year contract (like most carriers do with their phones), why should they care what carrier you use? They're only selling the hardware. Shouldn't you be able to just buy an unlocked 3G iPhone and go to whatever GSM carrier will have you? I can go to Motorola, Nokia, or almost any other phone company and buy an unlocked phone and then use that phone with whatever carrier I want. Why should Apple be different? Why should they care? I'd think they could make more money by selling the phones at full price directly to consumers rather than selling them to AT&T with their volume discount.

Originally I thought that the issue was that Apple needed to partner with a carrier that wanted the iPhone. Now that the iPhone is the "must have" phone, I'd think that any carrier would be happy to have them on their network, especially if that keeps people from defecting to AT&T.

At any rate, I'm on Verizon. I'm still using an XV6700 because (at the time) it was the best phone that also sync'd with Exchange. My only complaint is that the XV6700 doesn't do GPS. Now that the iPhone can do both of those things and a whole lot more, I'm considering switching. But first I have to see what Android looks like.
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erik, 10 Jun 2008 @ 4:23pm

well,
that sucks

and i was looking forward to getting my g3 and jailbreaking it right away
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Thenameisbam, 10 Jun 2008 @ 4:26pm

for sale
so does that mean that at the apple store they wont sell the iphones with out a contract or that only at AT&T stores wont sell without a contract?
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Anonymous Coward, 10 Jun 2008 @ 5:10pm

Rate plans for the iPhone
Apple hasn't updated their "Rate Plans" webpage. That seems to be absent right now.
But the old page, prior to the announcemnt, is still avaiable in the Google cache. You can also google for ''iphone "rate plans"''.

The $60x24 aspect was what stopped me from getting one of these things as a birthday gift.
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Harknell, 10 Jun 2008 @ 5:13pm

Not an issue really
Hey, let's just look at things a bit more clearly: a 2 year contract isn't jail. So what if you sign the contract. The phone is $199 right? What's the contract breaking fee? I believe it's $175. Do we all not remember that the original cost of the first phone was like $599? So hmm, about $400 for an unlocked 3G iPhone. You buy the phone, sign the contract, call up the next day and break the contract, keep the phone (and no, you don't have to return the phone if you break the contract) and off you go.

Really, where's the big issue? I could see if the contract breaking fee was huge, but really, $375 isn't really a bad price for the thing in the first place.
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Kevin, 10 Jun 2008 @ 8:02pm

Hmm...
The phone is $199 right? What's the contract breaking fee? I believe it's $175. Do we all not remember that the original cost of the first phone was like $599? So hmm, about $400 for an unlocked 3G iPhone.

First, it's not an unlocked 3G iPhone. It's a 3G iPhone that no longer has a contract. You still have to figure out how to unlock it and get someone else to put it on their network.

Secondly, I wouldn't be so sure about that $175 fee. With most carriers I've seen it's usually more like $250, and I wouldn't be surprised if AT&T had a card up their sleeve for just such a situation.

The one thing that I can't get past is charging an extra $15 a month for the ability to sync your email with Exchange. How is that not covered as part of their "unlimited data" plan? It sounds like their "unlimited data" plan is "unlimited" unless the data is RPC over HTTPS. I wonder how they'll enforce that? Are they going to scan every HTTPS packet out there, or just lock that functionality on the phone unless you pay for it?
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do the math, 10 Jun 2008 @ 9:59pm

iphone theft will be at an all time high
with no supply and the typically insane apple demand, iphone theft will spike as soon as there is a way to jailbreak/unlock the 3G phones. how much will a stolen iphone go for considering it would cost $200 plus 2 years of fees to get a legitimate model? $600? $800? $1000? more? the new models are easily identified by their white or black backs too.
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UNKN, 11 Jun 2008 @ 5:10am

Re:
I think their point in saying it will be harder to unlock it is more along the lines that it's going to be harder to get the new phone to unlock without getting stuck into an AT&T contract, not about actually unlocking your phone.
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Nasch, 11 Jun 2008 @ 7:44am

Re: Re:
He didn't say he had service, only that he had a phone. And I would be surprised if you had trouble finding a carrier that would sell you service without selling you a phone. They usually take a loss on selling the phones in order to sell service, I would think they'd be THRILLED to sell service to someone who already has a phone.
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Nasch, 11 Jun 2008 @ 7:48am

Re: Does Apple care about unlocking?
Why should Apple be different?

Because that's their slogan. ;-)

Why should they care?

Because their contract forces them to. They agreed not to sell through anybody but ATT for... what? Five years? Three years?

Originally I thought that the issue was that Apple needed to partner with a carrier that wanted the iPhone.

My understanding is that any carrier would like to sell the iPhone, just not with Steve's conditions.
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hsw, 11 Jun 2008 @ 4:48pm

Unpleasantly surprised
1. If you are bound by a contract for AT&T to recoup its investment in the customer and make a handsome profit in the process, why should it be important that the phone is locked or not? 2. Surprising a relative friend or relative with an iPhone per my understandig is not an option, unless you also include an additional and perhaps unnecessary number as pa part of the gift. 3. If Apple wants to get to the 10 million mark, by requiring the inconvenience of customers to activate the telephone at an AT&T store sounds like an inconvenience that many customers now accustomed to purchasing their electronics through the internet may wind off waiting for a better alternative when it becomes available. It appears that what is a superb product offering is being spared hyper success for a more modest sales goal.
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Whateva my name is, 9 Jul 2008 @ 9:51pm

Bollocks
I think it is completely ridiculous what apple is doing. It is in fact B.S. the best way to please everyone is just to sell it the way they are doing it thru at&t and sell and unlocked one for 500$ so everyone can use it.What is the point building up a beauty if the people it is meant for complain about it.Im sure a lot more people will be willing to pay 500$ for an unlocked one that the stupid one with at&t.Anyway what is the best way of getting it then unlocking it?
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Rebecca, 19 Sep 2008 @ 9:08am

Re: why just at&t
I agree 100%. Same with me
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