iPhone Subsidy Rules Upset Existing Customers

Apple has unveiled the new model iPhone, the 3G S, while announcing that the price of the standard 3G model will be dropped to $99. But for most current owners, upgrading to the new model will be an expensive proposition.

There are no major shocks in the specifications and features of the new model: as expected it will have a more-powerful camera which now includes video recording, editing facilities for pictures and videos, voice control, and extended battery life. Added security measures include data encryption and the ability to remotely wipe a stolen phone, but be able to restore the data if and when users get the handset back. There are also promises that applications will load much quicker and that battery life is greatly extended.

However, some other key features in the new model won’t be available immediately. The big one – faster connections – will be rolled out gradually as the new HSDPA network takes shape. Multimedia messaging is also currently on hold, while tethering (connecting a laptop to the web via the iPhone) won’t be available until Apple figures out a pricing scheme.

With the original 8GB 3G phone no longer the latest model, its price is halving to $99, no doubt with the hopes of attracting buyers put off by the original price. However, buyers will continue to be required to sign up to an AT&T contract.

There’s also likely to be anger over the news that the $199 (16GB) / $299 (32GB) pricing will only be available to new buyers, or those approaching the end of their service contract. Other existing iPhone users will have to pay an extra $200 for either model – a rule Apple can enforce because of the need to tie the phone to an AT&T contract.

Both sides of the debate believe they are in the right. Buyers feel aggrieved that, in their mind, they are being penalized for their loyalty as existing customers. Apple would likely argue that the iPhone is sold at a deep discount to get customers onto the AT&T contract and that everyone is treated equally by only ever getting the full discount once.