Filed under: iPhone
Unsubsidized iPhone prices
Stories about cell phone unlocking and resales have hit the news recently. TracFone sued numerous resellers who (legally) bought inexpensive subsidized units, unlocked them and sold them overseas. In the iPhone world, the story differs. Rather than leveraging subsidized prices, the way the TracFone defendants did, iPhone resellers added value on top of the unsubsidized units. They bought the phones, unlocked them and sold them for a profit.
The story gets more interesting with the current generation "no commitment" iPhones. The latest 3G "no commitment" iPhone pricing appears to include an extra $200 profit margin on top of the $200 subsidy.
TUAW reader Adam Jenkins offers proof. In Massachusetts, purchasers pay tax on the full unsubsidized phone price, regardless of carrier subsidies. The 5% sales tax for his new 16GB 3G iPhone came to $24.95. Clearly, Apple and the State of Massachusetts believe the unsubsidized 16GB price is $499, not the $699 "no commitment" price. That extra $200 offers a nice cushion on top of the unsubsidized sale, providing pure profit.
What's the opposite story of resellers taking advantage of cell phone subsidies? Seems to be the 3G iPhone.
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Reader Comments (Page 1 of 3)
David said 1:37PM on 7-14-2008
Even as a fairly intelligent geek, I understood very little of this post.
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Ryan Trevisol said 1:43PM on 7-14-2008
Basically it means that in Massachoo, you have to pay tax on the unsubsidized price of the phone, regardless of if you're really paying that (boo!). So with a little math, you can figure that the unsubsidized price is $499 for a 16GB phone.
Or, you can just ask an apple store employee while you're waiting in line what the price would be if you were not "upgrade eligible."
Oori said 1:47PM on 7-14-2008
I'm a geek but also have an advanced psych' degree. Seems to me this kind of writing is what you get when try to be a bit apologetic for something there's no real reason to apologize for. Seems that Apple is quantifying the price of the iphone (sans subsidy) at $500 and then pushing another $200 on the consumer for choosing a no-ties configuration
John C said 3:57PM on 7-14-2008
I found that this story was quite simple to understand.
My question is: How do they justify the $200 surcharge legally, or ethically?
Would Apple not be happy to sell as many units as possible? There must be some incentive to encourage people into the AT&T contract, though I'm not sure that it outweighs volume sales/market share.
It sure seemed that Steve Jobs was gloating at the WWDC about numbers of unlocked iPhones being used around the world, so confusion abounds here.
Eric said 4:56PM on 7-14-2008
I think the "gloating" was because the phone was so good people were willing to import it and find ways to use it on their own carrier, even without full features.
Ben Belden said 6:17PM on 7-14-2008
"My question is: How do they justify the $200 surcharge legally, or ethically?"
I don't have a cell phone contract so I don't know, but how much is an early termination fee? I'd guess around $200. So to me, this is basically just the same as if you bought a $399 or $499 phone unsubsidized and then immediately canceled your contract.
chuy said 1:44PM on 7-14-2008
I guess she means that Apple and the carrier are making more money out of the actual cost of the iphone which according to the paid state tax it should be $499 usd not the $699 of the actual "no commitment " price.
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me said 1:50PM on 7-14-2008
What are you trying to say? This post didn't make ANY sense.
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min_t said 1:52PM on 7-14-2008
Isn't this story a wee bit premature. You can't get an unsubsidized iphone without a service plan, yet.
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Randy said 2:12PM on 7-14-2008
True, but it brings to light what the real unsubsidized price is. now if anyone tries to sell an unsubsidized iPhone for something significantly higher, then you'll know you're being ripped off.
michas_pi said 1:59PM on 7-14-2008
A post by Erica? Sweet.
In before shitstorm.
(Glad you're free from the shackles of the NDA.)
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jonny appleseed said 2:02PM on 7-14-2008
This post confuses the hell out of me.
If you're trying to say I'm going to pay tax on my $300 (subsidized) iphone as if it were $500 then I'm angered
If not, then I'm just still confused
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Adam said 2:43PM on 7-14-2008
If you live in Massachusetts (also California, I think, and possibly other states, too) then yes, you will be paying tax on your $300 phone as if it were a $500 phone.
CreativLogic said 2:02PM on 7-14-2008
ALL cell phones should be sold without a commitment. They should keep us using their service by quality not by contract.
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djfred said 2:21PM on 7-14-2008
Damned straight.
John C said 4:04PM on 7-14-2008
Agreed wholeheartedly.
Hopefully Apple will open it up as an unlocked everyone-phone when their AT&T commitment is finished. Then there will be incentive for other carriers to implement the iPhone network features, and some healthy competition will begin.
You have to think that if Apple became concerned with only with sales of the device, that people would flock to the provider with the best support for it.
Look at the iPod's pervasiveness and you'll see why carriers would be quick to support this phone as an open device.
Jordan said 4:32PM on 7-14-2008
And I should have a wet bar installed underneath my desk at work. I wonder which will happen firs-- Hang on, plumber's here.
Balls said 2:06PM on 7-14-2008
It's basic economics right?
If the internet is to be believed, 90% of the worlds population has wet their crotches in anticipation of the new iphone, so why not capitalize on the demand and price gouge the shit of of them?
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kickpush said 2:20PM on 7-14-2008
*sigh* I don't know why I bother reading this site anymore. Most of the information posted here is late, wrong, inconsistent, or just doesn't make any sense what-so-ever.
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Jason Smith said 2:25PM on 7-14-2008
I have zero idea what this post was about.
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