Apple fans are in a frenzy over the new iPhone 5 and I would expect the same after any Apple iPhone announcement. During their presentation they annouced their prices of the phone, and in fine print told you that in order to get this price you must sign a new 2 year contract. This isn’t breaking news to anyone who has bought a smartphone in the last few years. However, to those who only buy phones when you upgrade your contract it may be a bit of an eye opener.
The iPhone 5, with a two year contract, has been subsidized by the phone carriers to be offered at $199 for the 16 GB model, $299 for the 32 GB model and $399 for the 64 GB model. What they don’t tell you in their release conference is that the true retail price of the phone is actually $649 for the 16 Gb, $749 for the 32 GB and $849 for the 64 GB. You could buy a Wifi and Cellular Data enabled iPad $20 less than iPhone 5 at each price point!
After assessing my personal situation and asking you, my readers, “should I get a smartphone?” I decided it was time for me to join the smartphone revolution. I actually called AT&T and got a Samsung Galaxy SII Skyrocket for free before the Samsung Galaxy SIII came out. There was a question nagging at me after the transaction…
How Can Cell Phone Carriers Give You a $450+ Discount?
The key to cell phone carriers being able to take such a huge $450 hit on the phone up front is that nasty two year contract agreement you sign (or simply agree to) without thinking twice about. As a part of most of these agreements you MUST have a data plan and, as many of you know, they aren’t cheap. I personally opted for a 3 GB plan that cost $30 a month and if I go over they charge me an extra $10 per GB. There was a cheaper option for 300 MB for $20 a month but if you go over it cost $20 for each extra 300 MB you need.
Worst case (for the cell phone carriers) you have signed up for $480 2 year data plan and they have you locked in with their service for two years. Cell phone carriers just barely made back the two year contract discount they gave you. Keep in mind though that many people do opt for the largers plans like I have. If you opt for the $30 package they rake in $720 over the length of your contract. In addition to that, some people exceed their monthly limits and pay a higher price for less data in overage charges.
What Did Cell Phone Carriers Do Before Smartphones?
Cell phone carriers often offered free phones before the smartphone was invented! The key is they weren’t nearly as expensive or complicated as today’s smartphones. Honestly, today’s smartphones are essentially handheld computers. Cell phone carriers built their cell phone discount into their base plan rates which, at the time, only included minutes. You know, back when people actually talked on their cell phones…
Will you be splurging for an iPhone 5 without a contract upgrades? Will you be waiting until you are elligible for a contract upgrade? Or will you be like me and not get an iPhone? Let me know down below!