Gadgetory

what's up guys John rettinger here there's a lot of confusion over the iphone 3gs pricing and a lot of outcry over the upgrade policy so I'm going to try and break it down for you explain why 18t lap and Apple are doing this and possibly give some suggestions as to what you can do about it before we get started it's important to understand what the terms subsidy means most you probably know but if you don't subsidy is an economic incentive for a purchase so what that means in terms of AT&T is if you buy a phone any phone let's say not even the iphone 4 for free you sign a new contract you get a free phone certainly that foam that you just got has value to it it's not zero there's rd hardware costs but you're paying zero what 18teen most other carriers are doing is they're taking a loss on the price of that phone they bought it from the carrier but their knowing that they're going to make that loss up over the term of your contract so essentially what they're doing is giving you an incentive to sign new two-year contract so in the first iphone launched it was subsidy free meaning 18t wasn't taking any of the cut off it that's why I when the iphone first launch was 599 600 bucks was a lot of money the price dropped a little bit later but even then it was still an unsubsidized price when the iphone 3g launched 18t was able to subsidize it and take a little bit of a loss because they hadn't for the previous generation of phones so anyone who had an iphone 18t didn't lose any money by giving a discount on that phone that's one of the reasons it was so expensive so they conditions to the 3g they can afford to give you a discount anticipation of having everyone who bought a 3g have a two-year contract now if you're following me this is where things get a little bit tricky with the iphone 3g s since 18 p gave everyone an incentive and a subsidy to purchase the iphone 3g they can't give another subsidy for the iphone 3gs well physically they could but it would be a huge economic hit they would lose millions and millions and millions of dollars by giving another subsidy so it's actually what they would be doing is taking a loss on one phone taking a loss on a second phone and those two losses would not be recouped on the term of a contract so having the iphone in there Staple would actually be losing proposition for them that's the big reason why 18teen didn't offer a subsidy or is not offering a subsidy for current 3g owners and those already on a contract think about it like this let's take the iphone out of the equation let's say six months ago you want AT&T and you've got a new phone you signed a new contract and you've been really happy with it six months later you want to get a new phone you probably don't expect a tnt to give you another discount on a new phone six months later because they haven't recoup the cost of this count they gave you on the first phone and the same thing is applying to the iphone 3gs so let's get into the pricing of the 3gs for just a minute here it's going to run you 199 if you're eligible for an upgrade for the 16 gigabyte version or 299 for eligible for the 32 gigabyte version if you're a current 3g owner or you're already on contract the 16 gig is going to run you 499 or the 32 is going to run you 599 those you keep it track at home there's a $300 price difference so AT&T is subsidizing the price of your phone by three hundred dollars so there is something kind of interesting that you can do and I'm not recommending that you do this because there could be some little squirrely things that happen but let me explain them least give you guys some options AT&T and all other carriers have what's called an early termination fee so what that essentially means you can terminate your contract and so you lose your phone number and you can start a new contract it means you're also eligible for and you line up service so before I go through and do the math about this let me tell you I know a lot of people are talking about early termination fees I don't recommend doing this there's a time lapse in between terminating your phone and getting a new line of service that may not make you eligible to even open a new line you may have to do it under a different name or have a parent's open it for you it can be very very very difficult not to mention the fact you're going lose your phone but there is a lot of discussion over the early termination policy so I'm going to explain it to you essentially what the early termination policy for AT&T is it's a hundred and seventy five dollars at the start of a contract so you sign a contract today you have 30 days to make up your mind at 31 days if you want to cancel your contract you have to pay a hundred and seventy five dollars what they'll do is sorry hundred seventy five dollars what they'll do is every month after that they'll take five dollars off the cost early termination fee so over a 24-month period you could sexually take off one hundred twenty dollars over the early termination fee so there would be fifty five dollars to cancel a day before your upgrade was available so if I've got some some math in front of me here so bear with me so let's say for argument's sake that you've got a full early early termination fee you have to pay 175 dollars so the difference between the unsubsidized iphone and paying full price would be 125 dollars so let's do the math here $125 plus 1 99 for what would be a new contract for the 16 gigabyte iphone equals 324 bucks which is actually a hundred and seventy five dollar savings over the 499 that you'd have to pay for the 32 gig it's 125 bucks savings again plus a 2 99 gives you the same one hundred dollars more savings of 424 I'm sorry total of four 24 and still the same savings of 175 so I just want to explain the math to you so technically would be saving money but you might not be eligible to start a new contract you're going to move even if you are you might have a lapse and it's going to be very difficult to start a new contract so I'm not advocating going out and terminating your contract I'm just explaining it to you since I've been getting a lot of questions about contract termination so I hope that made sense essentially if you could in a perfect world terminate your contract and start a new one the same day you would save 175 bucks over the iphone 3g upgrade price of 499 or 599 that being said it's not worth it if you want an iphone 3g it's probably better unfortunately to pay the full unsubsidized price 500 600 bucks are respectively I know it is a lot to swallow from a consumer perspective like I said in previous videos I understand the out pride Apple give you a discount on three gene you want that same discount for the 3gs but from a business standpoint you just can't do it and you have to understand it just a little bit you don't expect a discount of everything you get and if you take the 3g out of the equation you can't expect a phone call phone company to give you a discount every time you want to upgrade it's an anchor the beefs that new technology comes out there's going to be an update to the iphone 3gs in probably a year it's going to be an update after that for that after that and unfortunately if you want to be on the cutting edge of technology it's going to cost you money and people get a little sensitive when it comes to their wallets so I can get the consumer al cry but from a business standpoint it's just not smart business sense I always probably get a piss a lot of people off but it's the truth I know you're there's a lot of emotion involved of getting a new phone because you love the iphone or you feel strongly about Apple but from a business standpoint ett just can't do it doesn't affect Apple one way or another whether or not AT&T subsidizes that they get it they would get a price of a lung check a bathroom from AT&T you know what Apple could do is make the phone a little bit cheaper component-wise haven't been torn down yet but I assume there's a big profit margin built in but that profit margin doesn't account for all the R&D that's research and development that went into the iphone so this is a little more technical and math and like to get in my videos but i didn't want to explain the pricing and how it worked and the reasoning behind why AT&T is doing it I'd be a little upset too again I understand it from but from a business standpoint it just does not make sense for another substitute for the 3gs now we meeting it was the next phone will be subsidizing after that would be subsidized and it really would get to be a very long and negative process for the carrier and this would be true if the iphone was on any other carrier who is on brides and sprint or t-mobile the Curia just could not afford to subsidize every vice every year so I do I hope this helped answer some of your questions for exclusive content and you want to ask me some more iphone related questions follow me on twitter twitter com / John for lakers link will be in the sidebar I will see you guys in the next video bye bye