Jun
22
AT&T: No iPhone Subsidy, But Termination Fees
June 22, 2007 |
It is standard business in the mobile phone industry to subsidize phones and then locking in consumers for one- or two-year contracts. The idea is that the phones are cheaper and the company makes its money back over time. If the consumer wants to cancel the contract earlier, an termination fee applies to make up for the subsidy (somewhere between $150 and $250).
According to the Boston Globe, the iPhone is not subsidized, however, AT&T will ask for a $175 early termination fee:
Even though AT&T isn’t subsidizing the iPhone’s hefty price — $499 to $599, depending on the storage capacity a customer chooses — the company will charge a $175 termination fee for iPhone users who want to break their two-year contracts.
According to AT&T, the reason for this is that
“There are certain fixed costs we incur in serving every customer who establishes service with us,” Siegel said. He refused to specify those costs.
Shouldn’t those costs be covered by monthly fees (fees we don’t know yet, by the way)? How does selling and activating a phone cost AT&T $175?
More coverage here: Ars Technica, Consumerist, MacRumors
Technorati tags: iphone, apple, fees
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