How much did your iPhone cost? If you said $199, $299 or even $399 you’re somewhere near $350 off. As some consciously forget, the carriers often shield the owner from the real total cost of the iPhone. That may not last.
iPhone sales could be hurt as carriers switch from so-called subsidized contracts, where customers pay only a fraction of the cost a new iPhone up-front, to deals where the true cost of the phone is more visible, argues a piece in the WSJ.
Many U.S. iPhone customers are not aware that the full cost of an iPhone ranges from $549 for a 16GB 5c to $849 for a 64GB 5s. The reason is that carriers have traditionally asked for only $0 to $200 up-front, hiding the balance of the cost in the monthly tariff. With carriers now switching to separate instalment costs for the phone, and the cost of upgrading every year or two more visible to consumers, analysts believe some will choose to upgrade less often …
AT&T Inc, which reports first-quarter results Tuesday, sold 15% of its smartphones without a subsidy in the fourth quarter. UBS analyst John Hodulik estimates that figure will rise to 35% this year [...]
Brian Marshall, an analyst at ISI Group, estimates U.S. sales of the iPhone fell 20% in the last quarter of the year following a flat showing the quarter before, as sales growth continues to slow.
The consensus estimate of Q2 iPhone sales was of year-on-year growth of just two percent.
Falling sales due to a switch away from subsidies is a phenomenon that has already been seen in the UK, where it’s common to pay the full cost of the phone up-front in return for much cheaper tariffs. The result has been more people holding onto their existing handsets for three years rather than two.
Not everyone thinks a move away from the subsidized model makes sense. Verizon’s CFO Fran Shammo said that the model “has done wonders for us in this industry, so I think to abandon that I think is a mistake.” But with both AT&T and T-Mobile pushing hard for contracts which separate the cost of the phone from usage charges, it’s likely that the shift will be a permanent one.
The big unknown in all this, of course, is what Apple will offer in the iPhone 6. Make that sufficiently compelling, and consumers will want it, up-front subsidy or not. A recent survey showed that 40 percent of North American consumers planned to buy the new handset, a higher figure than for both the iPhone 5 and 5s when also measured before any official announcement by Apple.