Thursday, June 28, 2007

iPhone or iCarrot?

Writer Stephen Bone makes a very good point about the hype surrounding the iPhone and the "deal" that you have to sign up for from AT&T. A story by Wired magazine's Rob Beschizza calculates the minimum you will spend over 2 years for an iPhone and contract is $1974.76. Deal, indeed! A deal for AT&T and Apple. Apple gets you by selling their phone at "full freight" and AT&T gets you for 2 years on a "not so great" monthly contract. Stephen makes the point that this may be the end of the subsidized celluar phone, but certainly not the restrictive and costly contract.

By Stephen Bone
Since the early days of the cellular industry, the justification for multi-year contracts has been handset subsidies. Since the cellular carriers subsidize the cost of the handsets, the argument goes, they need lock-in contracts to guarantee sufficient time to recover the up-front equipment costs. Holes in that story now appear with the iPhone.



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