$599 for a new iPhone? Are you kidding?

by Christopher Elliott on July 8, 2010

Has AT&T lost its marbles? Maybe.

Here’s what happened to me after I responded to an email from Apple, inviting me to upgrade to the newest iPhone (wait time: three weeks). It offered me the first phone for a reasonable $199. But the second phone on my two-line account would cost $599.

Must be some mistake, I thought. Last year’s upgrade to the iPhone 3 cost exactly the same for both phones. So I contacted Apple.

It wasn’t a mistake.

A helpful agent named “Tiffany” — no last name given — informed me that my second line hadn’t billed enough in 2009 to qualify for an upgrade. She’s right: Everything is billed to a primary number, so the second line technically is a freebie. Either AT&T or Apple had changed the way they determined who would get a subsidized handset.

“It’s AT&T’s policy,” she said. “Contact them.”

So I did.

I spoke with a helpful customer service representative at the wireless carrier, who told me Apple required AT&T to impose these strict limits. I politely appealed to a supervisor, who just reiterated what the representative said. He promised to ask for a waiver, but added, “I can already tell you that they’ll say ‘no’ to this. They’re very strict.”

I’ll wait to hear back from AT&T before I appeal this to someone higher up the corporate food chain. In the meantime, I have a few thoughts I’d like to share with the readers of On Your Side:

Has AT&T lost its marbles?

I mean, they could have signed me to another two-year contract by offering me a second phone at a reasonable (though by no means cheap) price. Instead, I may take my business to a competitor once the iPhone is no longer exclusive to AT&T.

Also, have I lost my marbles? I don’t need another phone. Besides, the best feature of the iPhone 4, the new operating system, is freely available to iPhone 3 users.

Someday, we’ll all look back on this madness and laugh. Until then, it’s Apple and AT&T who are laughing — all the way to the bank.

Tagged as: Apple, AT&T

  • cjr

    “Has AT&T lost its marbles?”

    No, they’re simply catering to the suckers of the world, the people who must upgrade with every new iPhone available.

    Don’t upgrade every year, and you’ll be fine.

  • http://bidontravel.com/blog Don Nadeau

    Moreover, could Apple and AT&T be ticking off international iPhone travelers any more than they are?

    Apple could easily push AT&T to negotiate reciprocal iPhone data rates with telecoms in other countries, e.g., with Rogers in Canada. That means AT&T travelers would enjoy prices similar to domestic data charges while traveling in Canada and Canadians ones their domestic rates while traveling in the U.S.

    Instead, we face outrageous iPhone usage charges that must be driving many customers to iPhone alternatives. Apple, you are losing me and I’ve been loyal to you since 1986.

  • http://www.talestoldfromtheroad.com Dick Jordan

    An interesting revelation, although I personally have no need for either a second line or a second iPhone. Even so, you’d think that the second phone would be cheaper (or even free).

    One would have thought by now the iPhone would be capable of having two separate lines (and phone numbers) on a single handset. Having to tote around two (or more?) iPhones reminds me of the old movies in which the Big Boss always had a half-dozen or so telephones scattered across his desk back in the days before multi-line phones existed.

  • K

    It helps to understand that the cellular carrier subsidizes the cost of the phone knowing that you can’t have service without a phone. So that FREE!, or $20, or even $199 phone costs the carrier a lot more. If you don’t have the billing history or the contract to show that you will provide enough profit to make up the subsidy, why would it be expected that you would get it for the discounted price, even if you signed a new contract? If they changed the business model to reflect the true cost of the phone and then just reduced the per-minute/byte/plan charges, fewer people would get sucked into a contract because they wouldn’t be able to afford the up-front phone expense.

  • Jose

    Mr. Elliott…. wait a few months.. and then.. come to Verizon, where customer services is superb. I got the strom blackberry in the first line, and open a second line with the droid… we are inloved with this two phones. Of course, once the Iphone arrives at VZW.. I will change one of those phones for the Iphone.. but..ATT? no way!

  • jonbad

    The big explanation by K about subsidies is crap. It sounds like ATT is billing everything to one phone so the other one won’t qualify. What if the billing was split evenly between the two? Would they both qualify then? Also, I like how Apple sends you to ATT and ATT says it’s Apple’s fault. Do these sound like honest companies that are fairly subsidizing phones just so you don’t have to go without?

    Supposedly, a two year contract is so the carrier can get its money back on the subsidized phone, but if you pay full price for the telephone up front you still have to pay the same monthly charges as those who got a subsidized phone. A rip-off. Verizon is one of the worst. $20 a month just for texting? Plus, Verizon makes you pay the same whether you pay full price for the phone or not. Both ATT and Verizon are not worth doing business with. And don’t get me started on the “we just like to gouge you” activation fees – another rip-off.

  • andi330

    It may help to understand that they are likely already making an exception for you in letting you upgrade even one phone now. You don’t state specifically one way or the other in your article, but it sounds like you signed a 2 year agreement last year when you bought your iPhone 3GS. I don’t know AT&T’s exact uprade policy (I’m with VZW) but in a similar VZW situation that means that you agreed to keep that iPhone 3GS (or purchase a new phone at full retail from AT&T or a 3rd party) for as much as 2 full years. (Many companies shorten that time to 20-22 months rather than waiting until your contract is expired in the hopes that you’ll renew at the discounted rate and never leave contract status.)

    It sounds like AT&T is offering you an early upgrade, and you and the rep are both correct, it would only be available for the primary line due to the amount charged each line pays. I don’t know what AT&T’s early upgrade policy is. It looks like they were making certain options available specifically to people who would be eligible to upgrade by year-end early for the new iPhone 4, if they have a standard early upgrade policy I can’t find it. I do know the VZW policy so I can give you an idea of a competitor’s setup.

    At VZW to qualify for an early upgrade, you have to have been on a calling plan that is $49.99 or higher for at least 3 months, and completed at least 12 months of a 2 year contract (customers on one year contracts don’t qualify for the program). This has to be the cost of the calling plan only, data plans and other add-ons don’t qualify unless you are on a plan that bundles all of that into the main cost. So let’s say you have a couple who has the minimum family share plan for $69.99. The way that’s billed is $60 to the primary and $9.99 to the second line. After 12 months completed on the contract the primary line would be eligible for an upgrade, the secondary would have to wait until the official upgrade date. But say the company split the bill 50/50 between the two phones. Each line would then pay $35 (rounded up). In that case, neither phone would qualify for an early upgrade program and both users would have to wait to upgrade until the official date.

    Obviously, as you go to the higher plans, this math no longer works. Once you hit a plan of $99.99 or higher, you could argue that if the cell phone company split the bill 50/50 both phones would qualify. The problem with that is that then it is not consistant. You are never going to please everyone in the way you handle early upgrades. Cell phone providers take a huge loss on the cost of phones when they subsidize your purchase in exchange for a contract. That’s why 2 year contracts get a bigger subsidy than 1 year contracts. They base those discounts in part on your commitment to keep the phone for the entire duration of your contract.

    This is at least in part due to the contractual nature of cell phone service in America. I have heard from friends overseas that many countries don’t have subsidized phones and cell phone contracts. Instead you can buy a new phone as often as you want at full retail, and in return you are not required to stay with the company any length of time. In reality, you can do that with most service providers here in the U.S. as well (though it is my understanding that due to the nature of AT&T’s contract with Apple that it was not an option with iPhones in the past, perhaps that has changed).

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