Part of the premise of several things I post here is the realization that some people or companies are dishonest. Noting the dishonesty, be it here or at other blogs or publications, says to those people or companies, “Hey. We know what you’re doing. We’re not stupid.”
Too often though, we are lied to and we accept the lie.
Two days ago, I picked up my new iPhone 4. I “bought” it from Radio Shack for the excellent price of zero dollars and zero cents. In fact, they gave me $20 on top of that price, to be used toward AppleCare or an accessory of my choice. The reason the phone was free? Radio Shack is running a deal (through this month) wherein customers may trade in their iPhone 3GS for a $200 gift card, which can then be used toward the purchase of an iPhone 4. Since I wanted the $199 16GB iPhone 4, my “purchase” was a wash. I’m mentioning that so I can mention this: in the course of my conversation with the guy at The Shack (branding #fail, but that’s for another post), he commented that the reason the phone was only $199 was that AT&T was subsidizing the unit with a 2-year contract.
Of course, you’ve heard that before. It’s a fact of life with cell phones – or rather, cell phones that don’t suck. The phone is normally $5,000 (or $599, something like that) and the carrier is knocking a bunch of money off the top which you’ll pay back over the life of the contract.
That’s a lie.
Does the carrier pay – in this instance – Apple the difference between what I paid and what Apple charges? Sure. Yes, technically, AT&T is fronting some of the bill. The difference between what Apple charges ($599) and the $199 I would have paid were it not for Radio Shack, is $400. The contract length is two years. Subsidy per month? $16.67.
Logically, if I were to stay with AT&T past the two-year contract, my monthly plan should go down by $16.67. After all, I’ve paid back the “loan” that AT&T gave me (which is what it would be defined as, if they gave me money upfront that I was paying back over time).
More importantly, if I were to buy a phone unsubsidized and bring it to AT&T, they should hook me up with a plan that’s $16.67 per month less than they normally charge.
Neither of those situations is reality. AT&T charges every customer the same rate plan as every other customer. If there is no difference in the monthly charge between someone who bought a subsidized phone and someone who didn’t, and if the monthly bill doesn’t go down after paying back the $400 difference, then AT&T cannot claim that unit subsidies are built into the monthly price. AT&T isn’t subsidizing anything. It’s a lie. QED.
I, for one, will stop perpetrating the myth that the carriers are subsidizing the phones. Who’s with me?