NY Times Article, Complete Misunderstanding of Phone Contracts

[mad3inch1na]

http://www.nytimes.com/2014/09/28/technology/199-apple-iphone-6-is-fiction-if-not-fantasy.html

I just thought I would post this because it is one of the most embarrassing articles I have read, especially coming from the NYT. The author completely misunderstands how carriers work, and then makes it into an attack on Apple. The worst part is, the author thinks that iPhones used to cost $200 last year.

 

[citivolus]

I agree, it's surprising the the NYT completely missed the point that the "$25 discount that one would be 'losing'" was actually given by AT&T to existing Mobile Share customers such as myself without anything in return. So basically one would have to "give back" a discount they received without earning it. I don't understand why people are making such a big deal of that. AT&T is a business, not charity. If you compare the monthly rates now compared to two years ago, I think the majority of people are paying less per month, even when you factor in "losing" the $25/month "discount".

 

[hipnetic]

So, basically, the doofus decided to give up his old monthly plan to save some money short-term on one of the newer mobile share plans, and now realizes (because he didn't read the fine print before he switched) hat he can no longer take advantage of the subsidized phone pricing.

The $199 2-year contract pricing still makes sense for people on an older plan.

 

[Rigby]

http://www.nytimes.com/2014/09/28/technology/199-apple-iphone-6-is-fiction-if-not-fantasy.html

I just thought I would post this because it is one of the most embarrassing articles I have read, especially coming from the NYT. The author completely misunderstands how carriers work, and then makes it into an attack on Apple.

I think the author (now) understands very well why carriers are doing what they are doing. And I don't see how it's an "attack" on Apple. The iPhone is just the most prominent example of how phone upgrade cycles work and how people are lured into buying phones more often than really required by the subsidy model.

The worst part is, the author thinks that iPhones used to cost $200 last year.

Judging from many posts on this forum, quite a few people do. The article should be required reading for those people.

 

[rui no onna]

I think the author (now) understands very well why carriers are doing what they are doing. And I don't see how it's an "attack" on Apple. The iPhone is just the most prominent example of how phone upgrade cycles work and how people are lured into buying phones more often than really required by the subsidy model.

Judging from many posts on this forum, quite a few people do. The article should be required reading for those people.

Completely agree.

 

[seth556]

I don't see how this is news to people. What other item can you buy for 1/4 of the price just by signing a contract? Of course you're paying for it, just not directly. And usually when you sign a contract and get the phone for cheap, you'll pay much more than the normal off-contract price.

 

[jon889]

How is this an attack on Apple? Non-fanboy customers don't take the time to understand contracts and pricing like we do. Think outside your damn bubbles. The average consumer can't imagine a phone being worth much more than 199, and doesn't necessarily associate the up front cost of the phone with the cost of their service.

It's not the most enlightening article (especially for the macrumors audience) but in no way is it an attack on Apple. Perhaps a light commentary on a convoluted pricing scheme.

 

[Squirreljam]

I also didn't find the article an attack on AAPL. My guess is it was written as a first person narration of the confusion most consumers have with US cellphone service and subsidy pricing. As an example of the confusion over the MSVP line discount, just look at how many threads there were on here claiming that ATT was charging an extra $15/25 with a new phone!

Most interesting to me was the analysis of financial reporting related to the newer strucure(s). Interesting that Next et. al. book the revenue up front; be cool to follow telco stock pricing over the next few years and see how this plays out

 

[ZBoater]

Let this be a lesson to you kids. Just because its in the newspaper, doesn't mean it's accurate or true.

 

[ToroidalZeus]

So, basically, the doofus decided to give up his old monthly plan to save some money short-term on one of the newer mobile share plans, and now realizes (because he didn't read the fine print before he switched) hat he can no longer take advantage of the subsidized phone pricing.

The $199 2-year contract pricing still makes sense for people on an older plan.

This.

 

[mad3inch1na]

I may have misread some of the article. When the analyst said that companies obfuscate their pricing schemes, I thought he was referring to Apple, although he was most likely talking about phone companies. The main issue I had was that the article used the iPhone 6 as a backdrop for what is wrong with our phone carriers. It is understandable considering millions of people are specifically buying an iPhone 6 right now, but it still came across as Apple colluding with the carriers. And again, the author still kind of got the whole subsidized/unsubsidized thing backwards.

The article may be useful for consumers to understand that the phone market has changed in the last year or two, but it does a poor job of actually detailing that change. As somebody who has a somewhat decent grasp on where the phone market is right now, the article was confusing and hard to follow.

Matt

----------

The $199 2-year contract pricing still makes sense for people on an older plan.

It really depends on how many people are in your plan, the current data/minutes you have, and how often you want to replace your phone. Many family plans were more expensive than mobile share plans with comparable features. Next is a ripoff no matter how you look at it, but unsubsidized plans can be cheaper and less restrictive, depending on your needs.

Matt

 

[Rigby]

I may have misread some of the article. When the analyst said that companies obfuscate their pricing schemes, I thought he was referring to Apple, although he was most likely talking about phone companies. The main issue I had was that the article used the iPhone 6 as a backdrop for what is wrong with our phone carriers. It is understandable considering millions of people are specifically buying an iPhone 6 right now, but it still came across as Apple colluding with the carriers.

Apple is absolutely colluding with the carriers, and so are the other manufacturers. They always advertise the subsidized pricing to make the phones look less expensive, don't officially sell unlocked phones for several months after release to help lock in subscribers etc.pp. You need to understand that the relationship between carriers and manufacturers is very complicated and interwoven. Often their interests are aligned (e.g. attractive new phone models are an opportunity for carriers to gain customers), sometimes they clash. Besides accounting tricks, part of the reason why we see the carriers moving away from contracts is because it makes phones look cheap and plans look expensive, thus putting the carriers at a perceived disadvantage without compensation. The whole thing is an ongoing tussle over revenue, market power and mindshare.

Next is a ripoff no matter how you look at it, but unsubsidized plans can be cheaper and less restrictive, depending on your needs.

Next is just a zero-interest loan that can be used together with unsubsidized plans, and can be paid off early without penalty. How is it a ripoff? I think it's an excellent deal for those who don't want to be on contract.

 

[HEK]

How is Next a ripoff? You pay exactly the list price of the phone plus tax. Not a penny more. You are fronted the total cost by AT&T and repay them in monthly installments. They charge "zero" interest.

You can pay off early, own the phone at any point. Or, your choice, pay the 12 months, not pay the remaining 8 months and turn the phone in. At which point you can get the newest, latest phone, again using Next plan.

Both the carriers and the phone manufacturers, cloud the real cost of the phone with the subsidized pricing, 199, 299, 399 bull***t. They don't lie, but certainly cloud the fact that under all subsidized plans the monthly phone rate charge is higher.

In point of fact, previous years the phone carriers cheated us as the rate plan monthly cost per phone, stayed the same even after the two years. I kept my first subsidized phone for three years. Paid the $40 per month even after the two years. Pure profit for the carrier.

When my carrier offered me the option of $15 per month per phone I took it. Since they throttled my unlimited data, I wasn't giving much up. Saved me $400 over eight months with two phones. Current plans are more forthright about what you get for what you pay. BUT, you have to read the fine print. They shout $199 and whisper $25 more per month for 24 months.

 

[ToroidalZeus]

snip.

When people wanted to talk with cell phones carriers gouged us for voice. Then when people wanted to send messages with cell phones carriers gouged us for text. Now people want to use data with cell phones so carriers are gouging us for that. So the new data plans are carriers adjusting to the current market conditions.

As for the cell phones themselves, they have always been expensive. The RAZR launched at the exact same price as the iPhone. Back then people weren't used to paying for a cell phone plan let along a hundred dollar phone; so without the subsidies the adoption rate of cell phones would have been much lower. The same was true with smartphones; people weren't used to paying for data and expensive devices. But now that so many people have smartphones the carriers don't see a need to subsidize the devices.

Lastly why does NEXT/EDGE suck? Because it's designed to save the carriers--NOT YOU--money. If you do the math you will see that you do get cheaper plans AT FIRST. BUT once you START UPGRADING the cost savings quickly disappear. If I wanted to keep on 5 lines under NEXT instead of a 2 year contract my monthly service would increase by ~50 dollars.

tl;dr
unsubsidized' plans + NEXT > [are more expanse than] subsidized plans + 2 year

 

[mad3inch1na]

Apple is absolutely colluding with the carriers, and so are the other manufacturers. They always advertise the subsidized pricing to make the phones look less expensive, don't officially sell unlocked phones for several months after release to help lock in subscribers etc.pp. You need to understand that the relationship between carriers and manufacturers is very complicated and interwoven. Often their interests are aligned (e.g. attractive new phone models are an opportunity for carriers to gain customers), sometimes they clash. Besides accounting tricks, part of the reason why we see the carriers moving away from contracts is because it makes phones look cheap and plans look expensive, thus putting the carriers at a perceived disadvantage without compensation. The whole thing is an ongoing tussle over revenue, market power and mindshare.
Next is just a zero-interest loan that can be used together with unsubsidized plans, and can be paid off early without penalty. How is it a ripoff? I think it's an excellent deal for those who don't want to be on contract.

Alright, I will choose my wording more carefully next time. I understand that Apple colludes with carriers, but no more so than any other phone company, at least as far as I know. I just thought it was interesting how these issues apply to the industry as a whole, but Apple was called out specifically.

And in terms of Next, I haven't been keeping track of it since it came out, but I see that they changed the way it works. Definitely a good deal, and a much better one than it used to be.

 

[Rigby]

Now people want to use data with cell phones so carriers are gouging us for that. So the new data plans are carriers adjusting to the current market conditions.

Which is exactly what people want, isn't it? Plans with gigabytes of data weren't even available a few years ago. And if you take a closer look at the carriers' profit margins and compare them with Apple's, you will see that Apple "gouges" us much more than they do. What people forget is that all the infrastructure required to serve hundreds of millions of people serveral GB of wireless data per month at high speed costs enormous amounts of money.

Lastly why does NEXT/EDGE suck? Because it's designed to save the carriers--NOT YOU--money. If you do the math you will see that you do get cheaper plans AT FIRST. BUT once you START UPGRADING the cost savings quickly disappear.

You can't generalize that. It depends on your plan. For many people the unsubsidized plans absolutely save money. They also have the advantage that you are not locked into a contract and can switch carriers anytime you want without penalty.

If I wanted to keep on 5 lines under NEXT instead of a 2 year contract my monthly service would increase by ~50 dollars.

Perhaps that is true in your case. Doesn't mean it is for everybody else.

 

[ToroidalZeus]

Which is exactly what people want, isn't it? Plans with gigabytes of data weren't even available a few years ago. And if you take a closer look at the carriers' profit margins and compare them with Apple's, you will see that Apple "gouges" us much more than they do. What people forget is that all the infrastructure required to serve hundreds of millions of people serveral GB of wireless data per month at high speed costs enormous amounts of money.

The facts show that carriers are spending less money today per capita then they did last decade for cellular upgrades.

You can't generalize that. It depends on your plan. For many people the unsubsidized plans absolutely save money. They also have the advantage that you are not locked into a contract and can switch carriers anytime you want without penalty.

These these cellular providers won't introduce plans that will cost them MORE in the long-run then the status quo.

 

[twoehr]

It was a horrible article. Totally not good enough for the NYT. it should've been at the other end of a banner ad that says "one weird thing to know when buying an iPhone".

 

[roadbloc]

Sounds like US mobile phone companies charge through the nose for their contracts, and then charge through the nose for anything else they can think up of. I've never had to pay an "upgrade fee" or even an upfront phone cost... just the £10 a month for my unlimited "allowance".

Then again, my phone isn't an iPhone. It may be a more pricey affair for them since higher cost is one of Apple's traditions.

 

[mobilehaathi]

Sounds like US mobile phone companies charge through the nose for their contracts, and then charge through the nose for anything else they can think up of.

Well, we are talking about the US here. That's sort of our modus operandi.

 

[jnpy!$4g3cwk]

Let this be a lesson to you kids. Just because its in the newspaper, doesn't mean it's accurate or true.

Is there something factually incorrect in the article? I didn't notice anything, but, I admit, I blew through the article. Because it laboriously waded through what I thought was the obvious. In any case, I've been on T-Mobile for about four years now with unlocked, paid-for phones. It is way, way cheaper than buying phones on contract. But, "you knew that".