Some people are complaining about the initial cost of the iPhone.
The AT&T plan closest to what I get on Verizon is $99/month. Over a two year contract that’s $2376. But people don’t think of cell phone contracts in lump sums. It’s the monthly cost they look at, just like the mortgage and other bills.
If I’m looking at a $100,000 house on a 30 year note, I don’t say “well that’s a bad deal because that house will cost more than $300,000 over the life of the loan.” No, I say “great I can handle a $1000/month payment.”
I wonder why people don’t look at the cost of the iPhone hardware over two years. $25/month. No big deal really, especially compared to the cost of the plan.
A service business will drive the initial costs of a service down, even subsidizing entry to the service, to capture the customer. We see this all the time: new customer discounts, Subsidized cell phones, apartments and storage units with first month free rent offers. Businesses, especially monopolistic utilities, engage in rent seeking. AT&T has no competition for the iPhone, and while they’re the only iPhone carrier they’re going to milk it for whatever they can get. I’m actually surprised the rate plans aren’t much worse.
Over time, like all phones the iPhone will drop in price, or add features to maintain a price point. Or both.
