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AT&T Hurts iPhone 3G's Image

Any person can own a piece of shiny Apple gear, and every person who decides to buy in will pay the same high prices for admission to the club. That’s equal opportunity exploitation, and it defines Apple’s brand cachet, along with the company’s consumer-friendly, easy-to-grok retail experience.

But with new AT&T stipulations announced Tuesday regarding the pricing and policies of iPhone 3G plans, many would-be buyers of the newly upgraded Apple device are shaking their heads in dismay. This time around, AT&T has set some new rules, and they’re not exactly one-price-fits-all or comprehensible. Apple customers old and new are about to say goodbye to the sheltered Apple retail experience of yore and will now face the reality of the cellular carrier business through AT&T. Apple’s been in the business of simplifying things for consumers for years. This is hardly AT&T’s claim to fame.

Does Apple really want to get in bed with a company (AT&T) and an industry (telecom) known for dissembling, price-gouging, complicating, and confusing consumers?

It’s hard to fault AT&T for raising basic prices on iPhone 3G service plans: After all, 3G networks cost more money to build and operate, and it is natural that some of that cost would get passed on to consumers. iPhone 3G plans now start at $70 for 450 minutes (this includes unlimited data and Internet usage). But here’s where the natural price increases stop.

This new basic iPhone 3G plan includes no text messages. Text messages, light data bits which cost relatively little for a carrier to whip around its network, were included on last year’s AT&T iPhone plan. Text message plans now range from an extra $5 to $30 per month. What was once free is now rather expensive. This is akin to Apple jacking up prices for iTunes tracks, or suddenly charging for once-free podcasts. Apple just wouldn’t do it.

The most egregious act committed by AT&T, and one in which Apple is actually complicit, is the announcement that the iPhone 3G is not universally priced at $199/$299. Steve Jobs shouted from his keynote mountain top on June 9 that the new iPhone will cost $199/$299. While restrictions and caveats were always a possibility, they were never explicitly mentioned. On July 1, AT&T confirmed what few Apple-watchers had predicted: The cheap price is not for everybody.

The cheap price, according to AT&T, requires not only a two-year contract, but a qualifying upgrade status. If you don’t qualify, you pay $399/$499 instead. Who doesn’t qualify? Good question. AT&T doesn’t exactly make its upgrade eligibility requirements very straightforward (so totally, shamefully, “un-Apple”). Here’s the company’s upgrades policy: “Device offers are made available from time to time based on a number of factors: service tenure, spending levels, payment history, usage practices and other factors.”

If you have an AT&T account, you can log-in to your account page on the company’s Web site and find out if you are eligible. So far, reports from AT&T customers suggest that people who’ve renewed a contract in the last 18 months are not eligible to buy the subsidized iPhone 3G.

Of course, new AT&T customers qualify for the cheaper iPhone 3G. But AT&T has also created another class of customer. Original iPhone (not 3G) owners have clout and status above regular people in AT&T’s world. If you bought the first-gen iPhone, you are privileged to buy the new iPhone at the discounted price. Apple isn’t typically in the business of creating first-class, special-rewards, or frequent-buyer programs. It’s not a classy, high-end thing to do. But Apple isn’t in charge here.

And it is hard to image Apple ever allowing for the possibility of this kind of nonsensical loop-hole: AT&T customers who’ve recently renewed a contract could conceivably cancel their contracts (usually less than $200 for the cancelation fee), then create a new account with AT&T and sign up for a subsidized iPhone. Doing this might actually cost less than paying $399/$499 for the unsubsidized iPhone 3G.

AT&T has left several frequently-asked-questions un-answered on its handy-dandy tip sheet. The company shows how an iPhone 3G family plan works, but chooses not to explain how a family plan involving iPhones and also non-iPhones would operate (and how much they would cost). There are price increases here, too: Traditional AT&T family plans require a $10 fee for adding an additional line. Adding an iPhone costs $40.

But what happens if you attempt to create a family plan that already has text messages bundled in, as well as shared minutes and data, and you toss an iPhone 3G into the mix? Can the iPhone 3G line use some of the bundled text message without paying for its own? AT&T chooses not to answer, and Apple certainly won’t weigh in. Doubtless, there are dozens of similar questions about plans and rates.

These types of nitty-gritty questions are, frankly, beneath Apple’s notice. Apple doesn’t want to touch all of this messy pricing stuff with a ten-foot pole, but by not actively involving itself in the policy details of the sale of its own forthcoming phone, it might begin to lose the high customer-service marks and relatively polished brand image it has cultivated in recent years.

Last year, Apple controlled the retail experience by offering consumers an easy way to activate their iPhones with an AT&T plan via iTunes software. That convenient experience courtesy Apple is now gone, as well, leaving AT&T to run Apple’s customers through a meat-grinder of a purchasing system that has always catered to the lowest common denominator.

AT&T, in its press releases, leaves much unsaid. You can buy an iPhone from an AT&T store come 8 a.m., July 11. But wait, can’t we also buy an iPhone from an Apple store at the same time? Right? AT&T doesn’t say. Neither does Apple. Confusion ensues. Confusion isn’t good for consumers thinking about dropping hundreds of dollars on a device and a monthly subscription. And it certainly isn’t good for Apple, either.

What about the currently available info on iPhone 3G pricing and plans seems unfair or confusing to you? Which of your questions haven’t been answered with the kind of clarity you expect? We invite you to share your gripes in the comments section below.

  • I agree on the pricing issues. I won't be buying an iPhone 3G simply because of the so-called 'upgrade eligability' BS. Well, that and the fact that the phone has at least a half-dozen features my 2 YEAR old Moto phone has (mainly A2DP). It does do things very well that no other device can do, but it's missing too many features for the price in my opinion.

    As far as I know, Apple is offering the ability to purchase the phones at an Apple store, but you still have to activate it during the sale. Will they have AT&T reps in the store? I have no idea, but let's hope not.
  • Those eligibility rules seem fairly standard for the cell phone arena.
    It doesn't seem like they're doing anything different for the iPhone....
  • resonance451
    I've used AT&T for about 5 years now, and my god has it been miserable. Not only is their customer service piss poor, the network is god awfully slow with tons of dropped calls. And that's just the start of it. Don't join AT&T. You'll be kicking yourself.

    To be clear, I want an iPhone. I really want an iPhone. But I won't be getting one. I'm already having so much misery dealing with having had to replace 4 defective Blackberries (worst piece of garbage in electronics this side of the Phillips CD-I). I finally got a Blackjack II which is serving me alright. However, I want the iPhone, because I like my iPod touch and would like to have the convenience of a phone that works with all those features.

    But, the iPhone will be too expensive, and AT&T is the most greedy and untrustworthy company I have come across. No way I am falling into this trap. Maybe Apple, instead of being greedy, should have considered making the Phone available to other carriers. That way there wouldn't be the need to activate the phone in store and have such ridiculous pricing, because people wouldn't buy it to hack it.
  • fsbrainck
    These new pricing policies are ridiculous. I can understand upping the data plan charge (a little!) for unlimited 3G (though they should provide a price tiered approach based on usage needs) - but where did the "twice as fast half the price" moto go!? My cell phone died on me 8 months ago so I renewed my contract knowing that iphones were not subject to contract based pricing. I got a free crappy phone waiting for the next iphone to come out. Now I have to pay $500 for it along with a 25% increase in plan rates?? Either they increase the rates and allow for all iphone buyers to get the carrier subsidized version or they leave the rates as is and make people pay the full price as it was previously. People like me (numerous for sure) get to pay for both! Maybe I'll just wait for Android compatible phones and switch companies!
    (and don't get me started on SMS charges! why is it the same price as a unlimited 3G data plan, isn't it data as well ??!!)
    Folks in Hong-Kong might pay $500 for their iphone but they get 500 minutes AND unlimited SMS for USD$24/month!
  • I would KILL to have it as good as you guys. Just look at the pricing strategies in Canada for the Rogers iPhone and you will be glad AT&T is your cellular provider!
  • I agree, I've been eagerly waiting for the iphone 3g for months. Now, AT&T has put me off to the whole thing by not only charging me $200 for the phone (quite a gift for being a loyal customer) because I am mid-contract and also jacking up the plan price to $80 (including basic 200 text messages). Totally ludicrous, I'll probably just leave ATT altogether when I'm done in March...
  • The whole idea of charging for texts msg is a crime. Check Asia.
    The telecom companies that package and sells these txt plan, is no better than drug cartels.
    why wont' AT&T DIE? this company has shady origin, so shady that history doubts the founder really invent the telephone.
    Cell phone growth hasn't stop, and landlines is dying, these gougers are opportunistic pigs that will set erronous price plan for future to come.

  • davidk
    This is absolutely ridiculous. I would have gladly spent the $299 for the 16GB iPhone AND paid the $30/month for the data plan, but based on the new pricing I'm seriously thinking about bagging ATT entirely and paying the early exit fee to do so. This has definitely burst the balloon the original announcement created.
  • Why do people complain? Do you think AT&T really cares if you don't agree? Do you have any idea how many people ARE going to go buy it? These prices aren't ridiculous at all for what you are getting. I'm not a huge Apple fan, I refuse to buy a Mac because I can buy a better PC for a lot less, but the iPhone trumps all other phones and is easily worth the money. If you're too cheap to pay for something that's worth the money, then don't buy it! No one is forcing you and no one wants to hear these annoying complaints.
  • baseballmaven
    This is really unbelievable--It's the bait and switch that has me angry. 1. Apple announced new lower pricing--no hint of an "if." 2. AT&T has always stated that the iPhone was apart from their normal contract prices--so you just have to pay the cost Apple charges (that was what they told me when I switched over but decided to wait for the new iPhone). 3. AT&T listed the cost of the new plans--and I was ready to pay the extra (which, I believe originally included 200 text messages). 4. Now, all of the above are no longer true--if I want an iPhone I have to pay full (old price) freight, plus increased cost per month.

    On top of that, now I read that the 'family plan' with iPhones will be $40 extra per line instead of $10--that is truly low low low. I've written to Apple, will write to AT&T, but will they care? Doubt it.