This is an item from a couple months ago, but it nonetheless demonstrates a sense of entitlement on the part of iPhone users.

Their anger revolves around the fast-evolving iPhone. To get one, most consumers committed to a two-year contract. But over that two-year period, since its introduction in 2007, the iPhone has undergone technology enhancements and, like many electronic devices, the price has fallen.

This week Apple introduced its new souped-up iPhone 3GS, with a price of $199 for the 16G version and $299 for the 32G version. However, that’s only for new AT&T subscribers.

If you bought one of the earlier versions of the iPhone and want to upgrade before your contract is up, it will cost you an extra $200. The upgrade price is $399 for the 16G version and $499 for the 32G model. Without a contract, consumers pay $599 and $699, respectively.

“If you are a loyal iPhone user like me, contact them through e-mail, phone, whatever — let your voice be heard,” wrote one upset iPhone user on the AT&T forum. “Let them know you will not be quiet. Do whatever it takes.”

The husband of a coworker/friend of my wife with whom I have struck up a friendship like to talk gadgets. He commented that one Apple guy he knows was complaining about the people complaining about how people who buy early-releases of products pay more than those who wait just a few months or a year. And not a little bit more. The Applehead said that that’s the way it works for all Apple products and people should expect it. My friend replied that if Apple is going to penetrate the market beyond Apple’s enthusiastic base, they’re going to have to get used to people pushing back against Apple the same way that they push back against anyone else.

It actually puts me in the rare position of agreeing with Apple. Early adopters do pay a premium and that should be expected. That Apple makes this premium so steep may be a little aggravating, but the solution is that people need to just wait six months or a year or a couple years. That happens to be what I do all the time!

In this case, though, they’re not just complaining about the price drops and the early-adopter premium. The complaints now center on cell phone contracts and how it’s the new customers that get the cool price breaks. I have no proof beyond my biases, but I suspect that the complainants are not the people that are new to Apple’s business model but people who know it full well, accept it, but then get on their high horse when it seems like it’s coming from someone other than the hallowed Bay Area gizmo giant. On a sidenote, I suppose I should lay off Appleheads a little bit. I’m seeing more of people aiming their barrels at Apple in addition to AT&T and this is a positive development.

Whatever the case, iPhone users are not asking to be treated like everyone else. They’re asking to be treated special. When you sign a two year contract, the words on that paper actually mean something. They mean that in return for the price break that you get on the phone, you agree to be their customer for a two year period. This is the case whether you buy a Motorola dumbphone or an eggheaded iPhone. Once you’ve done this, you have punched your ticket. Their failure to give you anything above and beyond that is not taking you for granted. That is the agreement that both sides signed on to. You’re not giving them your business anymore. They’ve bought it.

Now, when it comes to most cell phone users, you can simply leave after the contract has expired. You may have to buy a new phone, but that’s not as big of a deal because you can get a price break on the new phone. The iPhone is a little bit different because you can’t get an iPhone on any US network except the AT&T one. That’s a decision you made when you sold your soul to Apple because Apple contracted your soul out to AT&T. There are three people to blame here and AT&T is only one of them. So to the extent that iPhone users are being treated differently, it’s because AT&T is merely getting compensation for the rights that Apple sold to them.

But generally, the contract system affects all of us and Apple users have no right to be exempt from it. Anyone that is under a contract with a provider is not in a position to demand generosity on the part of AT&T. As a non-iPhone AT&T customer, I don’t expect AT&T to give me a price break on a phone without getting something in return. Since I’m not under contract (more on that in a minute), I could get a new phone (at a discount) for a new contract. They get something and I get something. What the iPhone people are asking for is to get something without giving anything that they are not already contractually obliged to give.

Now, there are two caveats to this.

First, the article itself is not entirely clear on what AT&Ts policy is towards people like me. It says on one hand that the special, special low rate is only available to “new subscribers” but then on the other it talks about what would happen if you wanted to upgrade “before your contract is up”. I am mostly addressing the case of the latter. If AT&T’s position is that existing subscribers that are not under a contract should not receive the full discount, well, that’s pretty aggravating. Periodicals do that sort of thing all the time, but it’s a bigger problem here because it’s less problematic to stop service then re-start service a month later (which is what Mom used to do with magazines). I know that there are ways that you can keep your phone numbers, though, so maybe it’s less big of a deal. Regardless, it’s an uncool business practice if that’s what they’re doing analogous to an old apartment complex I lived in which raised the rent on existing tenants but kept it the same for move-ins because they figured that they could take advantage of the hassle of moving. However, that does not appear to be what the iPhone users are complaining about. They’re still under contract.

The second caveat is that unlike some carriers, AT&T is different in that they are not as flexible about extending a contract when you’re in the middle of a previous one. With some other carriers, if you’re a year in to a two-year contract, you can get a two year extension along with a phone discount (thus leaving you with three years on the contract). AT&T, to my knowledge, does not let you do that. That doesn’t strike me as fundamentally unfair, though. If they have a flat-rate for cancellations, they have a lot to lose by letting people dig in deep with multiyear contracts that they have no intention of living up to. This is particularly true for iPhone users, many of whom have every intention to leave. And notably, the discount they’re asking for is actually greater than the cost of cancellation. In any event, they’re not even asking for preemptive contract extensions. They’re asking for something for nothing.

Don’t misinterpret me entirely. I hate the contract system that they’re complaining about. In fact, I spent extra money to avoid it. The last time I needed a cell phone, I went on eBay and paid a hundred or two more than I otherwise might have specifically so that I would not have a contract and so that I could take the phone and use it on T-Mobile (or any other GSM carrier) if I wanted. iPhone users are quite free to do the same. Of course, if they do, they will have to pay more than the price they are complaining about. In other words, despite everything above, AT&T is subsidizing iPhone upgrades.

AT&T and other carriers often sell these things at a loss in return for assured business. Think the iPhone is too expensive? Apple is the one that sets the price. Don’t like the way that prices start sky-high and fall just after you bought one? That’s Apple’s, not AT&T’s, business model. By subsidizing upgrades, AT&T is actually doing more than they could be. And for all the complaints about it (including my own), there is something to be said for the subsidized/contract model, it can be good for the consumer who doesn’t want to have to drop a few hundred dollars on a phone from one paycheck and it can be good for the companies because they can more comfortably rely on that income. Win-win. I wish it were not so prevalent, but it is not without its upside. But the deal is what it is. Those words in that contract actually mean something.

Category: Market

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5 Responses to AT&T Fails to Recognize that iPhone Users are Special

  1. Peter says:

    As I understand it, in most European countries, and perhaps elsewhere, there are no cell phone contracts. Everything’s on a month-by-month basis.

  2. trumwill says:

    I think that they have contracts in Europe, but they’re less important because phones have to be offered unlocked.

    They can do that sort of thing more easily because they have a standardized (GSM) network system. Our network systems are split between GSM (AT&T and T-Mobile) and CDMA (Sprint and Verizon). So an AT&T phone not being able to work on Verizon is not just a matter of a software lock but rather is a hardware issue, too. If the iPhone ever does break away from AT&T and onto Verizon or Sprint, they’ll have to release a CDMA version. Same goes for the Palm Pre if they want a product for T-Mobile or AT&T.

  3. Kirk says:

    Meanwhile, my $18 tracfone sits idle in the center console of my truck….

  4. Becky says:

    I dont’ think Europeans have contracts, but from what I hear, the service is far more expensive. I have to admit that I’ve kind of laughed at all the people that were crazy to pay $600 for the first phone when the next one came out a year later for much less (and the original version’s price then dropped). I guess i”m not much of a technology geek, though.

    What I heard from some freinds, though is that they have two iPhones and they would only let one of them upgrade (the “owner”), which doesn’t sound fair to me.

  5. trumwill says:

    Whether it’s fair or not depends I think in part on how much money they’re making off that second phone. If they’re basically charging double, that’s definitely unfair. If it’s sort of like our family account where the second one is only a little more than the first, it strikes me as being more reasonable.

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