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AT&T WTF?

Posted 06/09/2009 at 10:39:46am | by Roberto Baldwin

AT&T Since the introduction of the iPhone there has been rumbling of discontent concerning the Apple/AT&T blood oath. The list of gripes people have with the mobile carrier are too numerous to name here. But, it usually comes down to this, "AT&T sucks, T-Mobile is better, I'm going to wait until I can get an iPhone on T-Mobile."

AT&T doesn't do much to win over disgruntled customers. Recently, the company quietly changed its TOS to disallow apps like SlingPlayer Mobile for iPhone from utilizing their network. The Internet noticed and AT&T apologized explaining it was an accident. They "accidently" changed their TOS, right. Of course SlingPlayer Mobile for the iPhone was released and wasn't allowed on AT&T's network.

Which brings us to yesterday. When it was announced that iPhone OS 3.0 would be available on June 17 the crowd cheered. When it was announced that while many carriers would have MMS ready to go on that date, AT&T's MMS support would be ready "later this summer" the crowd let known its displeasure. When tethering was announced, once again, cheers. When AT&T didn't appear on the list of carriers supporting tethering, more booing.

AT&T told Wired that they planned on supporting MMS and tethering in late summer.

“We plan to offer a tethering plan, but don’t have an announcement to make at this time,” the spokesman said. “We absolutely will offer MMS on iPhone 3G S and iPhone 3G with 3.0 upgrades in late summer once we complete some system upgrades that will ensure our customers have the best experience with MMS. These upgrades are unrelated to our 3G network.”

Maybe AT&T didn't hear about the iPhone OS 3.0 event in March. You know the one where Apple announced MMS. Other carriers heard about the event and they seem ready to rock the MMS starting next week. Tethering wasn't announced at the iPhone OS 3.0 event in March (although it did come up in the Q&A after the event, and Scott Forstall admitted it was ready on the device side but needed support from the carriers as well) so we'll just believe that it was as big a surprise to AT&T as it was to us. Sure, why not?

The lack of MMS and tethering support out of the gate are valid reasons to be upset with AT&T. Are they upsetting enough to give up your iPhone? As far as I'm concerned, no. For a majority of users, tethering isn't really that important. The MMS fiasco could be reason enough for Apple to look to other carriers in the future after their contract with AT&T expires. Apple has dropped partners that failed to deliver the goods before. It's the reason we're using Intel Macs instead of IBM's PowerPC.

And that brings us to the outrage that cropped up later in the day: upgrading the iPhone 3G. After the keynote, everyone -- including myself -- attempted to reserve an iPhone 3G S on the Apple site. It would be delivered to our homes! No more standing in line getting sunburned in the summer heat. We're nerds, we burn easily.

But wait, those prices that flashed on the screen at Moscone don't match what AT&T and Apple are offering. This must be a mistake. A horrible, horrible mistake. These prices are $200 more than advertised. OUTRAGE!

Before you strip naked and run into the nearest AT&T store to file an angry grievance, remember that the iPhone 3G was subsidized when you purchased it. You got your shiny iPhone 3G for far less than the OG iPhone because AT&T got you to sign a contract that said that you promised to stay with them for two years. After 18 months of those two years, AT&T gives you the option to upgrade your phone to another one at the fully subsidized price. Before that, you have to pay an Early Upgrade price. Hence the extra $200.

"But I'm an early adopter, I purchased both iPhones, they owe me!" Yeah, not so much. Yes, as an iPhone owner you are special, you're just not special enough to get out of their service contracts. It's the same contract for Blackberry and Treo owners.

There's a lot to be upset with AT&T about, but the contract you agreed to in order to get 3G speeds isn't one of them. Think about it this way. The 32GB iPhone 3G S costs $699 without a commitment. That means you're not locked into a two-year contract because the phone's price isn't being subsidized by your monthly bill. The fully subsidized version of the 32GB iPhone 3G S is $299. Let's do some math, shall w?.

$699
-$299
----------
$400

You're saving $400 by committing to AT&T. But, AT&T has to get recoup that $400 so they figure they'll break even hardware wise locking you into a two-year contract and allowing you to only purchase another fully subsidized device after 18 months. We divide the remaining $400 by 18 months, and $22.22 of your monthly bill for the first 18 months of our contract goes towards the purchase of your 32GB iPhone 3G S. Viola! You get your new iPhone, AT&T gets paid.

Yes, it sucks that you have to pay $200 more to get the shiny new iPhone 3G S because the iPhone 3G was released only a year ago. But it's what we agreed to. As for the other AT&T issues, the Internet has been very vocal about its displeasure with the carrier and hopefully AT&T will get its act together or Apple will say adios to the carrier.

COMMENTS: 18

TAGS: AT&T, WWDC 09

COMMENTS

The "half the subsidy
Submitted by jkiley on Tue, 2009-06-09 10:10

The "half the subsidy for waiving half your contract" makes sense on the surface, but it does not reflect how AT&T operates. AT&T will let you buy a new subsidized phone after a year in exchange for a new two year contract. You only have to complain a little, and a manager will override it in the name of "customer service."

Part of the exchange for the subsidy on the iPhone 3G was an extra $15/month (plus applicable marginal taxes). That's about 200 per year (15 * 12 + [taxes]). This new monthly pricing is in line with BB pricing for similar service.

Given AT&T's general willingness to allow an upgrade after a year (not stated policy, but this is how it works on the ground), this is not at all an even deal. $699 is a full price that includes a non-contract penalty (this is above the "full retail" price that would be the likely price point). Most hardware like this prices around 3x materials, or about $600 in the new iPhone's case. That makes the true subsidy likely at or under $300.

The problem with pissing off early adopters is that they're the ones who have a substantial influence on general consumer attitudes and purchasing. When you stick it to them, they more than repay the favor in negative sentiment (measurable in dollars).

This is more short-sighted money-grabbing from AT&T. It's probably too early to short them now, but I think a good sized short position leading up to each WWDC is probably a good idea going forward. I would expect Verizon to get aggressive once they have access to an LTE iPhone. I imagine that they would get tons of cancellation fee paying switchers (me included), but some sort of full or partial cancellation fee subsidy would pull millions of AT&T customers away. Breaking even on the early adopters would be fine, because the good press would help get a lot of $40/month Verizon voice users into a $70/month iPhone.

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Agreed
Submitted by Roberto Baldwin on Tue, 2009-06-09 11:33

If anyone is able to talk their AT&T rep into letting them purchase a subsidized iPhone 3G S after only a year with the iPhone 3G, please share your experience with us. I also believe that AT&T could be healing a lot of wounds if they allowed first adopters the ability to get a full subsidized price on the new iPhone. Like you said, these are the people that get others to buy devices.
Also, I fixed your formatting issue.
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Roberto, I read somewhere
Submitted by jkiley on Wed, 2009-06-10 09:26

Roberto, I read somewhere (and a quick poll of my friends is consistent with this) that the breakdown is (i) 1 year subsidized upgrades for iPhone 3G users with on-time accounts with a monthly expense greater than $100, or (ii) 18 month subsidized upgrades for iPhone 3G users with on-time accounts with a monthly expense less than $100 (I doubt $100 even is possible, but it's not yet clear to me which side that is on). That's still around a month after the launch for the early adopters, though. Thanks for fixing the formatting.

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get out of contract?
Submitted by bigbowood on Tue, 2009-06-09 10:07

with AT&T changing their T.O.S. back and forth, does anyone know if that somehow voided our contract?

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ETF less than cost of new phone.
Submitted by springkeeper on Tue, 2009-06-09 10:21

So if I want a new 32GB iPhone, I can pay $499 now, or $299 in about six months (for me). OR I can just cancel my existing contract, and pay my early termination fee (ETF) of $120, then turn around and buy the new iPhone 3GS for $299 on June 19 with a new 2year contract. Does the Death Star have anything in its TOS that prevents this?

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That's great but...
Submitted by hawaiiinsomniac on Fri, 2009-06-26 11:24

You won't get to keep your old mobile number.If that doesn't matter to you, go for it.

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"So if I want a new 32GB
Submitted by Rohardi on Tue, 2009-06-09 12:34

"So if I want a new 32GB iPhone, I can pay $499 now, or $299 in about six months (for me). OR I can just cancel my existing contract, and pay my early termination fee (ETF) of $120, then turn around and buy the new iPhone 3GS for $299 on June 19 with a new 2year contract. Does the Death Star have anything in its TOS that prevents this?"

This will not work. If you cancle your contract and try to activate another line with in 90 days, AT&T will just re start your old contract, plan and date for a discounted phone. this is a fact I work for AT&T.

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$360 more than first gen :(
Submitted by allenhuffman on Tue, 2009-06-09 13:22

When iPhone 3G was announced, I would have upgraded if the service fee wasn't $15 per month higher ($10 extra for 3G plus $5 for the same TXT plan included with the original iPhone). That $360 over two years made the new "cheaper" iPhone 3G cost more over two years than the original. Now a new phone is out, and I'd love to upgrade again, but I do not want a new two year contract. We all understand that contract is to subsidize the hardware, but they still want a contract if you buy a phone outright at full retail price. Where is the subsidy in that? My original two year contract is up in a few weeks, and on other carriers that would give me ultimate power. Years ago, Sprint doubled my minutes and gave me a huge credit for new phone hardware when I called up to let them know I was thinking of switching carriers. After they insisted they could "only" do this with a two year contract, I was able to talk them in to a one year. (At the time, they offered a month-to-month plan but it was more per month.) Somehow I think AT&T won't budge for iPhone users, but we'll see.

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I call BS on this whole $699 w/o a contract
Submitted by frankly on Tue, 2009-06-09 15:56

In your post you said, "The 32GB iPhone 3G S costs $699 without a commitment."I am really getting tired of everyone repeating this without thinking it through. Sure, it is technically correct. If you want to buy an iPhone 3GS from AT&T outright you will pay $699. The question is, WHY? An iPod touch lists for $399Are you telling me that adding a phone and a couple of other features makes the iPhone 3GS worth $300 more, almost double the cost??? And I don't want to hear about the faster processor and more memory because everyone knows we'll get a faster touch with more memory in October for the same $399, if not less. Heck, they might ship the $299 model with 32 GB at that point and up the $399 to 64 GB. The point is that everyone just takes AT&T at face value that $699 is the valid price for a non-contract iPhone 3GS. This is typical cell phone pricing BS and it needs to stop. How many people think that AT&T is actually paying Apple $699 for the iPhone? Seriously. Not on your life.

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hmm?
Submitted by broadwaybobby on Tue, 2009-06-09 16:53

i called att and they said i can get the 3gs for the subsidized price
and i got 3g on realease day after 4 hours in line..
well i have to wait till aug. 16th
but if less then one month saves me 200 dollars
well ill live lol

just call att 1-800-331-0500
and type in ur 10 digit cell
then press 0
press 0 one more time

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Help
Submitted by Likeable-Larry on Thu, 2009-06-11 11:26

I got some cheap ass phone to hold me over for the past two months until the 3gs came out, my old one died. NOW AT&T is telling me, sorry pal, you signed a two year contract---live with it or shell out 200 clams for the 32. Does anyone know of the approximate time when Apple dumps AT&T and so can tell AT&T to stick it?

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AT&T...
Submitted by Cell Phones on Sun, 2009-06-14 09:40

This is a nice informative posting on AT&T and its new scheme. I am sure many people would find this information helpful.

Cell Phones

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Dubai Car Hire
Submitted by BobBlack on Mon, 2009-08-10 14:55

Canceling the contract, dropping $120.. then getting the new iPhone 3GS for $299. Some tactic, huh?
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