AT&T Hoses Existing Customers
If there was any villain of the WWDC today, it was, without a doubt, AT&T. I'm prepping a longer blog post on this very topic, but for now, all the proof you should need to conclude the AT&T was today's Death Star is this: it's charging existing iPhone 3G customers a $200 premium to upgrade to the new iPhone 3G S.
Last year, when the transition from the iPhone to the iPhone 3G occurred, AT&T offered a customer-friendly policy that helped fatten its bottom line: any original iPhone customer could upgrade to the iPhone 3G as long as they signed up for a two-year contract and paid the subsidized price for the phone.
Not this year. AT&T, apparently having learned its lesson from doing something right and being met with piles and piles of money and happy customers, has decided that iPhone 3G owners who want to upgrade to the iPhone 3G S will have to pay $399 for the 16GB model and $499 for the 32GB (the subsidized prices are $199 and $299 respectively). Reportedly some iPhone 3G owners may qualify for the subsidized price one year after their iPhone 3G purchase, but not me. I bought the iPhone 3G on the day it came out and the Apple/AT&T upgrade checker says I may be eligible for a regular upgrade in December 2009 - 17 months after my purchase.
The only thing more unfriendly to existing customers would be to make them pay even more. As an AT&T customer for the last few years, someone who switched to AT&T in order to get the iPhone, who doubled the cost of his cell phone bill in doing so, and an owner of both previous iPhones, I feel very lightly valued tonight - and I'm looking forward to the end of AT&T exclusive's iPhone contract in 2010.
Next up? The rest of the reasons AT&T was the dark cloud on a day full of otherwise-bright skies in the land of Apple.
Yes, without a doubt this is the worst news of the day surrounding this whole affair (although I’m saddened by the loss of even build-to-order matte screen options on Apple laptops). I own a first-gen iPhone and was thinking about upgrading to the 3GS, if only for the GPS and location aware stuff and neat-o compass, but now I’m considering riding out my contract and leaving AT&T as soon as another carrier opens up in the US, instead.
My guess: within a few days we’ll hear something different from AT&T as they backpedal from the up-swelling of malcontent.
I wouldn’t be surprised if you’re right, Eric, that AT&T will drop that price some. Still, I wouldn’t be surprised if they didn’t, either.
Piles and piles of money is misleading. The Iphone costs about 500$ for its mid model – not unlike a pre or a bb storm. And all service providers follow the same model of subsidizing the phone through a contract. ATT’s contract is only about 5$ more a month than verizon’s or tmobile’s. You are forced to buy data, but then again why use a smart phone if you dont? So all said and done, why is ATT/Apple being vilified for what ALL cellphone service providers do. Stupid commies, you hate it when some one has a nice product. You are all happy when we had our stupid bricks and clam shells and no one said anything. Even now Verizon locks the crap out of their phone and sprint sucks with customer service and tmobile sucks with their cell coverage. The best phone / service experience is to be had from an apple Iphone and ATT for now. If verizon offered an Iphone without locking the crap out of it, it would be better for now, what you have from ATT is it.
Hi Hananiel – I think the frustration – certainly in my case – is not about AT&T locking down the phone, but about it not treating its existing customers very well on this point. Especially after doing a very good job in this transition last year when the iPhone 3G came out.
I agree that AT&T has a right to make money and compete with other providers. Not question about it. Still, I stand by the piles and piles of money statement. Here’s why:
AT&T said yesterday that it had 1.6 million iPhone activations in the first quarter of 2009. Forty percent of those were new customers.
That means the iPhone brought in 640,000 new customers and, assuming (for the sake of argument) an average new monthly fee of US$100, a total of $192 million in just one quarter. Annualized, that’s over a three-quarters of a billion dollars of revenue AT&T didn’t have prior to the iPhone in just one year. From new customers only.
That is indeed quite a bit of money and, when you add in sales of phones, existing customers who upgraded the price of their plans, the last two years of iPhone contracts, and other additional revenue, I’d say AT&T is indeed making piles and piles of money from the iPhone.
I’m still frustrated by the fact that, as an existing AT&T customer, when I got the original iPhone, they made me pay a surcharge instead of giving me the special iPhone data package. So as a loyal AT&T customer, I was being penalized, not rewarded.
Wow…what a naive article. Have you ever bought a cell phone? Anyone who has knows that upgrade pricing is not offered less than a year into a 2 year contract…ever. And your iPhone 3G is less than a year old, because they all are. So AT&T not offering you a deal is not only not surprising, its not even interesting.
Verizon? Same. T-Mobile? Same. If I buy a Blackberry Storm right now from Verizon, it’ll be pretty cheap with a new contract. If the Storm 2 ships in 3 months, do you think Verizon will offer me a deal on a new one? Nope. Why? Because that isn’t how it works, and it never has been. I could have been a loyal Verizon customer for 12 years…wouldn’t matter. The terms of a contract price are clear. AT&T doesn’t owe you anything.
When you bought your 1st Gen iPhone, it wasn’t subsidized. You paid retail price, thus making it possible for an upgrade price regardless of where you were in your initial contract. Again, that’s how it works, and always has.
Then there’s your claim about your bill doubling. I take it you’ve never owned a smartphone before? I used a BBerry on Verizon before my iPhone, and it was a FORTUNE to own. Verizon charges $45/month just for data! So by comparison, my 1st gen iPhone data price ($20) was a savings I was happy to have.
What is it with people wanting rewards for “loyalty”? You bought a high end smartphone. You paid a price, and signed a contract. AT&T should kiss your feet too? Please… Sounds to me like sour grapes that you don’t get to have a new toy on the cheap. Sorry buddy…come join us in 2009, won’t you?
Your arguments have some fundamentals flaws. The original 8Gb 3G iPhone from Apple had a list price of $ 499. That’s what Apple charged AT&T who then provided the phone for $ 199 with a two (2) year service agreement. AT&T makes up that $ 300 difference (and a profit) as you pay your monthly service charges over that two years. If after one year you now want a 16Gb iPhone 3GS which costs AT&T another $ 499 and they sell you that for $ 199 their out of pocket is $ 600 and you’ve only paid for one year of service so far. All they are trying to do is recover the money they’ve paid to Apple and now won’t recover from you. BVL is correct — the 2G iPhone wasn’t subsidized so AT&T could offer an upgrade to 3G at an attractive rate.
As for MMS — the video on the 3GS is going to consume a lot of bandwidth (as are the new 3MP pictures it takes)as will MMS running on all of the existing iPhones. AT&T bought additional wireless spectrum in the last FCC auction for billions of $$’s. That spectrum is what the analog TV stations will be using up until this Friday, March 12 when they must switch to digital. The switch from analog to digital TV was supposed to occur in February — it was delayed until June. This delay is VERY likely what is delaying AT&T’s support for MMS — they have to make sure they have enough capacity before they turn it on otherwise you will be writing blogs about the terrible service. So if you want to blame someone — blame the folks who delayed the switch to digital TV — Congress and the FCC…
So why didn’t AT&T say this ? It would give ammuntion to Free Press and other groups who want to end the exclusive agreements — essentially AT&T would be killing it’s golden goose.
Great post PFC (except for the part where you disagreed with me
).
I had no idea the wireless spectrum issue was affecting this and hadn’t seen that mentioned anywhere else. That’s fascinating and super-informative.
Thanks very much for pointing that out!
You guys feel bad about the lack of upgrade to 3GS. What about us poor fools who just switched from a perfectly fine relationship with Verizon just to get an iphone a month ago. Where’s my easy upgrade option? I feel totally ripped off! Thanks AT&T for not telling me before I made the change. As soon as Verizon gets the next generation iphone 4GS(?) I’ll be dumping AT&T and go back to Verizon
CaSea4Me – Depending on when you switched, you may be eligible for a free upgrade to the iPhone 3G S. I’d contact your AT&T store immediately to see what they can do for you. You’re definitely not the only person in your situation.
Good luck.