I listen to the This Week in Tech (TWiT) podcast. In the most recent episode (September 22, 2013) one of the guest hosts, Brian Brushwood, remarked that even though the subsidized iPhone 5c (16GB model) cost $99 up front, it would end up costing $1,000. So once again we have tech guys showing their inability to understand money.
Let’s break this down:
- Up front costs = $99 + $36 activation charge = $135
- Monthly Charges ( AT&T Nation 450 + 3GB/mo Data Plan) = $70
- Total Contract Cost = $135 + $70 x 24 months = $1,815
- Price of iPhone 5c 16GB without a contract = $549
Subtract the retail price from the total contract cost and we get $1,266. Is all of this attributable to the horrors of being on contract? Well T-Mobile has an unlimited talk & text + 2.5GB of data plan for $60/mo. Verizon has a similar no-contract plan for the same price. So assuming you want somewhere in the range of 2GB+ of data a month your premium for being on contract with AT&T is $10/mo, which adds $240 to the price of that iPhone. That’s not an insignificant amount of money, but it only totals $789, which is $211 short of Brian’s claim of a $1,000 price tag.
Heck, even if you go with one of the cheaper MVNO‘s, say Airvoice Wireless, you’ll be paying $40 a month … but only getting one gigabyte of data! At least in that case, the $30 discount from AT&T will bring you to a total cost of that colorful iPhone of $1,269 if you’d gone with their contract. However, that’s not an entirely fair comparison because you are getting less service for that price (2GB of data less.)
So once again, the alarmist claims that a “discounted” phone is anything but are completely unfounded. Not surprising, since these are tech people; if they understood money they’d be in finance!
Along those lines, I did recently switch to Airvoice Wireless. As I’ve mentioned previously, I really only use about half a gig of data a month so the $60/mo I was paying for the calls and data seemed unnecessary. It wasn’t a seamless process and required about an hour on the phone (using my Google Voice account through Gmail, thank goodness I had a backup!) to actually get things up and running after a half day of no service. Which goes back to another of the anti-contract arguments: you lose the ability to jump from one service provider to another without incurring penalties. I suppose one needs to define “penalty,” because I’ve ported numbers twice now in my life and both times required significant effort on my part to resolve the problems that providers had with the process. Who wants to go through the anguish of changing phone providers all that often?
Well, I guess tech guys, who I imagine are inherently masochistic.