Posts

AT&T is offering iPhone 3GS 'best pricing' for early adopters. But 1. it's not everyone & 2. if you don't qualify but still upgrade, don't forget the magic words.

Hopefully, this will be my last post about the subject of iPhone 3GS pricing. Honestly, I hadn't planned on writing this one. Having said that, AT&T seems to be doing it's best to create a confusing situation and I want to make sure that anyone reading this blog understands the options.

As I said in my last post, iPhone upgrade pricing part 2: Is the upgrade price reasonable? there has been a lot of discussion about upgrade pricing for the iPhone 3GS. However, I also said that the pricing itself was pretty straightforward. That's less true now than it was at the start of the day yesterday.

I'll start with the information you're most likely to be interested in, the facts about upgrade pricing. Next, I'll describe what's changed, and end by telling you why I don't think the explanation for the move makes sense.

Before all of that, I want to start with a warning. I called AT&T about this 4 times, and got 3 different answers from the reps I spoke to. I don't know if it's confusion over the recent changes, annoyance over a barrage of questions coming in about the iPhone 3GS, ignorance of the pricing options, or limitations of the system feeding info to the phone reps. Be careful or you may end up paying more for the device than you need to, or opting not to buy because you're quoted an incorrect price.

Here it is. The correct pricing info for the iPhone 3G. This may be the same info you have seen elsewhere online, but there is also conflicting and inaccurate info out there too.

There are three (3) different prices for each of two (2) models of iPhone 3GS available.

1. The 'upgrade' price (also referred to by AT&T as the 'best' price for the device)

This price is available for eligible new customers and existing customers who have spent enough money with AT&T under their current contract to qualify for best pricing.

To qualify customers must have paid for service under the existing contract for something like 12 - 18 months (keep reading). The exact length of time is determined by the cost of the contract. Essentially it's not about the length of the contract but money it represents. Customers with more expensive contracts will spend more money in a shorter period of time and qualify for best pricing sooner.

To receive best pricing the customer must agree to a new 2 year contract.

The best price for the iPhone 3GS is:

$199.00, 16GB model
$299.00, 32GB model

2. The 'early upgrade' price

This price applies to existing iPhone 3G customers who do not qualify for best pricing because they have paid for service under an existing contract for an insufficient period of time, when considering the cost of the service plan.

To receive the early upgrade pricing, a customer must agree to a new 2 year contract.

The early upgrade price for the iPhone 3GS is:

$399.00, 16GB model
$499.00, 32GB model

The formula to determine the early upgrade price is simply:

best price + 200.00

According to AT&T early upgrade pricing is only available for the iPhone.

We also currently offer early upgrade pricing only for iPhone 3G S and iPhone 3G.

3. The 'full retail' price (also commonly called the 'non-contract' price)

As you might guess this is the price for the device without a contract with AT&T.

Keep these two points in mind: 1. This is the most you can possibly pay for the device from AT&T or Apple Inc. 2. Every existing iPhone customer should qualify for one of the other, less expensive options.

A customer willing to pay the full retail price does not have to agree to a contract with AT&T.

The full retail price for the iPhone 3GS is:

$599.00, 16GB model
$699.00, 32GB model

Seems straightforward and it is, except for a couple of complications.

1. Just yesterday, two days before making the device available, AT&T announced that they are extending best pricing to some (not all) customers with the iPhone 3G who would not qualify under the standard policy.

Who qualifies for best pricing under this exception? Customers who would qualify for best pricing in July, August, or September under AT&T's usual policy.

These are people who a) purchased the iPhone 3G soon after it was released last year, b) are paying for pricier contracts. For example, I bought my iPhone 3G the first day it was available last year, opted for the least expensive voice plan, and don't pay for extras. (I prefer not talk on the phone, and refuse to use text messaging as a matter of principle.) I'm eligible for best pricing in December, and so I don't qualify for best pricing under AT&T's exception.

!Note: The next point is the most important part of the post!

2. If you do want to upgrade now, but don't qualify for best pricing, be sure to use the magic words 'early upgrade'.

Unless you specifically use those words, it's likely, at least based on my experience, that you will only be given the option of paying the full retail price. As I've already said, I called AT&T 4 times in 2 days and spoke to 4 different reps. After checking my account, all of them insisted that only option available to me was paying the full retail price of $599.00 or $699.00. They were quite confident, even insistent about it. Even when I specifically asked about the possibility of extending my contract and mentioned that I had read that there was a $399.00/$499.00 option, I was told, in no uncertain terms, that the only option available to me was the full retail price. It was only after I stumbled across the magic words, 'early upgrade' that I was informed that this was an option for me.

Also, buying the phone online starts with an eligibility check, which you can access at Apple's 'Buy iPhone' page. This page leads immediately to the iPhone eligibility check included in many of the blog posts I've seen that discuss the iPhone 3GS.

When I walk through the eligibility check, the only option I'm presented with is paying the full retail price for the phone. (This was true at the time of this post.)

Be aware that you absolutely DO qualify for early upgrade pricing if you're an existing AT&T customer with an iPhone. Do not listen to anyone who tells you that you must pay full retail price.

The last point I want to make is about AT&T's official justification for the exception. I've read AT&T's explanation and watched the corresponding video . The move itself does make some sense, but the explanation is clumsy.

...we’ve been listening to our customers. And since many of our iPhone 3G customers are early adopters and literally weeks shy of being upgrade eligible due to iPhone 3G S launching 11 months after iPhone 3G, we’re extending the window of upgrade eligibility for a limited time.

How does it make sense? Early adopters, that is anyone with an iPhone 3G eligible for best pricing in July, August, and September, are spending a lot of money with the carrier. These people are paying for a pricey voice plan (1350 minutes or unlimited), which a. costs AT&T relatively little to deliver and b. they most likely aren't maximizing, and text messaging (which literally costs AT&T nothing).

These people may be paying literally twice as much as customers with less expensive plans.

Compare

  $30.00 (Data Plan for iPhone)
+ $39.99 (Nation 450 w/Rollover Minutes)
--------  
= $69.99  

   $30.00 (Data Plan for iPhone)
+  $99.99 (Nation Unlimited)
+  $20.00 (iPhone Text Messaging Unlimited)
---------  
= $149.99

This amounts to an extra $960.00 a year. So it's not a surprise that AT&T is willing to drop the price of the device by $200.00 for customers paying them an extra $960.00 a year. (It's also not especially generous of them.)

For those of you in the same situation as me, who may be considering the early upgrade, don't think of it as spending an extra $200.00, think of it as saving $760.00.

What's my problem with AT&T's explanation?

According to their statement, the exception is being made because:

...many of our iPhone 3G customers are early adopters and literally weeks shy of being upgrade eligible due to iPhone 3G S launching 11 months after iPhone 3G...

That explains only why customers who would be eligible in July are being offered best pricing, and doesn't say anything about customers not eligible until August, and September - 2 to 3 months after the introduction of the iPhone 3G. It seems like a stretch to suggest that people who missed the eligibility cut off by as much as 3 months are 'literally weeks shy'.

My interpretation is that in response to criticism AT&T wanted to create a restricted subclass of iPhone 3G owners who do qualify for best pricing. There are likely very few if any customers who would normally qualify for best pricing in July, so they expanded that group to the point that a. it would seem large enough to divide the critics and defuse the criticism b. but not so large as to cost them a significant amount of money.

I don't have a problem with the concession, except that it's not so much a concession as it is a ploy. Regardless, anyone paying close to $150.00 for AT&T's lousy service has certainly earned the price reduction.