Would You Sign a 3-Year AT&T Contract to Get iPhone 3G S at $199/$299 Subsidy Pricing?


No such thing as a free lunch. You don't get something for nothing. Yesterday we linked to Gizmodo's response to iPhone 3G owners "whining" about not getting a second bite at the cheap subsidy pricing for the iPhone 3G S.

Bottom line, you got your discount last year in exchange for a 2 year contract. That contract isn't done in full yet, so you don't get a discount in full yet.

But that got me thinking. I asked this on Twitter and am getting mixed reaction, so I'll ask it here:

What if AT&T offered you full, subsidized pricing anyway ($199/$299) in exchange for another 2 year contract? No, not 2 more years starting now -- that still costs them a year -- but an additional 2 years after the current contract expires, for 3 years total from iPhone 3G S release.

Here's the math: 2 year current contract - 1 year completed = 1 year + 2 years new contract = 3 years total.

Sound crazy? Rogers in Canada has all iPhone 3G owners on 3 year contracts already. 3 years are normal in some parts of the world.

However, the idea clearly doesn't scale, does it? If AT&T offers an iPhone 3G S+ with iPhone 4.0 next year, the same math and model would mean you'd have to sign for a 4 year contract to get subsidy pricing (original 2 years - 1 year + 2 years - 1 year + 2 years = 4 years total).

Sure, it looks nice and linear -- matching OS version numbers even -- but not it can'. Who's going to offer or sign a 6 year contract for iPhone X running 6.0?

Have something to say about this story? Leave a comment! Need help with something else? Ask in our forums!

Rene Ritchie

EiC of iMore, EP of Mobile Nations, Apple analyst, co-host of Debug, Iterate, Vector, Review, and MacBreak Weekly podcasts. Cook, grappler, photon wrangler. Follow him on Twitter and Google+.

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Reader comments

Would You Sign a 3-Year AT&T Contract to Get iPhone 3G S at $199/$299 Subsidy Pricing?


Nope! I can tell you last device I had that long. I'm usually replacing my stuff after a year or so.

No. I am of the idea that, since my contract will be due for an upgrade in December, it's beeter to wait and see what a true iPhone upgrade comes next year, rather than this 3G[s] mid-range upgrade.

I absolutely would commit to extending my contract my 3 years to get the subsidized pricing and I think it would be wise for AT&T to at least offer the option. We'd benefit from lower pricing and they'd benefit from longer contracts.

Absolutely not. The only way I would do it is if I could get subsidized pricing on all future iphone releases.

He$$ no. I called AT&T. To cancel my current contract is $130 at this point (down from $170). So, I have two options.

  1. Cancel my contract and sell my iPhone 3G ($300 for selling my iPhone - $130 cancellation = $170) and buy the new phone for $299. A net cost to me of $129. It's foolish of AT&T to make it cheaper for their current users to cancel their contracts in order to get the new phone.
  2. Or I "may be eligible for a full upgrade" in December and upgrade at the cheaper discounted prices. Of course why would I upgrade in December when Apple will have a new phone in June 2010 with most likely an OLED display and possibly on a new carrier??

Of course there's always the sit tight with my current 3G phone. Let's face it... the 3G phone is a good product. I have no complaints. Do I really need the new phone because it can load The Sims 2x faster...and it has a built in compass that can show me which way I'm facing on Google maps?? Probably not. Do I want the new phone because it's shiny, new and pretty? Of course!!!

No, I'm holding out for next years release. The 3G[S] isn’t worth stacking a contract. It’s a nice improvement to the 3G but not worth the cost to upgrade. I don’t care about a 1 meg pixel camera improvement (video feature is nice), don’t use voice control (I have fingers and don’t need my phone to tell me what song is playing. Hello!!! I put the music on my phone, I’m pretty sure I already know who/what the artist/song is). The faster processor would be nice but I can wait.

Do you guys realize this is what us Canadians have to do? We have to sign 3 year contracts for our phones at the subsidized price :)

Nope. Actually this is exactly why I have been saying I might pass again on upgrading my 2G iPhone because I do not want to be in this situation next year if/when the next version of the iPhone comes out (man I'll be pissed if that doesn't happen next summer!)

Sure. Why not? I travel internationally and AT&T is in most places I go. I'm staying with iPhone, so why not? That said, I'm not doing it during the rush. I just upgraded from my Gen 1 to a refurb 3G, so I'll wait a year and be happy with OS 3.0.

Nope. wouldn't do it. The "new" phone is really not new, a few new bells and whistles, but not worth the money or contract. Apple's problem now is to sell these things. And with most 3G owners mid way in the contracts, I don't see this happening. Which may just explain why this was a modest bump and not a new product. A little history: iPhone 1 owners were allowed a discount to get a 3G. Apple knew the 3G was a big step above the original. Now, all those 3G owners (me included) are mid contract. Apple floats an updated 3G in case any iPhone 1 owners want to move up. Current 3G owners can have the new 3.0 OS and get 90% of the 3GS. Watch out for next summer!!! All the 3G owners will be ready to move up, and I bet Apple will have something realy sweet by then.

I would have rather spent $299 for my 3G 8GB and had a 1 year contract. Maybe this was an option, I should have asked. Anyone know?

Nope... Still dont own one due to the price point.. wont sign another contract esp with AT&T since they suck... everyone inc myself when I was on them gets almost 50% dropped calls.. no thanks... High rates, ok service, but terrible calls. And even though want iphone, im fine with better offers from other carriers. Soon as there is a under $300 iphone with no contract, and hopefully available thru other carrier - I'll get one (ya, I might be waiting a long time eh'? ;) )

nope! i want the 3gs of course but apple is going to be the one to "suffer". i feel like the 10 million + individuals that received their discount last year are the majority of people who are going to/would have already switched to at&t. no way in hell will apple push that many units when they can attribute most likely all of those sales to AFFORDABLE pricing.

No way. The 3G was a significant update to the 1st-gen, but I think they purposely held back a little so that they could really WOW us next year at a time when all the 3G owners would be eligible to jump to the next big thing.

Never not untill they are on another network. Its not worth it for ATT I travel to rural areas often and they don't have adequite coverage.

I proposed that idea yesterday on a forum thread. (www.backtype.com/wolfmore) I am amazed how the comments here this far oppose this idea. I hope you are not the same people whining about how you can't get the 3gs at the subsidized prize because If so then WOW!  really? This would just say you want to have your cake and eat it too.  if so then it would be best you realized the true price Of a top of the line iPhone is $699 not the $299 price tag they see when they are signing a 2 year contract. Oh yeah and don't give me the You ain't complaining about the price but about the fact that the changes are not that big. That is no matter. If the changes are not that significant To you then don't worry about it cause you don't care enough I want to upgrade so there.

Yes. As long as the ETF stayed in the $200-range, I would rather save $400 on the cost of the phone, and take my chances that I am still "satisfied" (if you can call it that) with AT&T for 3 more years. However, I would much rather AT&T give existing owners a ~$200 discount on the cost of the phone (or maybe more if it required trading in your old phone), that way encouraging people to upgrade every year, which would seem to bring them more income in the long run.
I really don't think you can treat the iPhone like a normal phone. Not because Apple users are special and deserve entitlements, but because AT&T themselves deprive us of things because they KNOW the phone is different. Last year I got mugged for my iPhone and couldn't do anything except pay full price for another one, because AT&T doesn't offer insurance. If they are going to rip us off in money and in features, because the iPhone is different than every other phone, then they should offer a fair upgrade path that differs from those available for other phones. It doesn't need to be fully subsidized, just something that gives people a little incentive to drop hundreds of dollars to get the latest version. Make it only available for the first month -- there are ways to manipulate more people to spend money for something they don't really need. It's win-win for AT&T and the loyal iPhone users who want tot upgrade.

@joe I have to agree with you that most people that will want a 3gs are already under contract with AT&T and don't qualify for an upgrade. For this reason i too predict Apple wont have strong Sales of 3gs. Last time 1st gen-owners got the "break"(not really considering they paid full price but anyways) but this year most of the best customers whom are current iPhone owners don't qualify. For all this may there is a chance the prices may fall to buy it outright. Cross fingers.

Isn't the solution here for AT&T to offer the iPhone with less of a subsidy one a one year contract? I would happily pay another $100 to $150 for the phone than sign a 2-year contract. 1 year cell phone contracts used to be the norm, they've only jumped up to two years in the last few years. AT&T could offer the iphone with about 40% of the current subsidy on a one-year contract and cell a new phone each year and probably make MORE money from selling new hardware yearly than they do with the current model.

ummm, no. i will just wait until december when i'm up for renewal and get the subsidized price then. there is nothing wrong with my 3g. just because something shiny and new came out doesn't mean i need to replace it on release day. hell, i just replaced my g4 powerbook a couple of months ago.

Right now? Yes. I've been waiting 2 years to upgrade my Blackberry to an iPhone, but have been holding out because the first couple versions of the iPhone didn't have the specs I wanted. Now the iPhone 3G S comes out and it now has EVERYTHING I want. I've been with AT&T since they were first BellSouth and then Cingular in my area (almost 10 years). I've never had any issues with them as my carrier either (I know... I'm one of the few lucky ones).
I can't wait for my birthday to come in 2 months because that 32GB iPhone I've been pinning for for 2 years now will FINALLY be MINE. Good things DO come to those who wait.

No, but I would upgrade if they would give me a pro-rata subsidy. Since I am half way through my 2 year contract, why not give me half the subsidy to up for another 2 years? They could lock me in for another 2 years and I'd get $100.00 subsidy. Seems like a win-win to me.

@hellfish great idea about AT&T doing 1 year agrements how the factor would need to bee $200. When you buy a subsidized iPhone with a 2 yr agreement you are getting $400 off the msrp or & $200 for each year you agree. This the iPhone 3g that I bought last year for $300 would be $500 with a 1 y commitment. If AT&T had forseen this outcry about upgrading this is fir sure awhat they would have implemented

LOL you could keep adding years on every year till you had a 20 year contract. What's the point? Suck it up and hold on till iPhone 4.0 releases next year and make fun of all the 3Gs people.

Nooooooo! I could'nt do it! At least untill I started seeing a legitimate gap in software apps between the 3G and the 3GS. I know there is the potential to be gaps again when I see a legitamate gap between the 2 then maybe, but by that time it will be time for the 4G and my contract will be up just in time!!!!!!!

So what happens to us iPhone 2G people who didn't take the subsidy last year for the 3G? I bought my iPhone 2G in February of 2008 so that means my 2 year contract would be up in February of 2010. Do I get that subsidy from ATT now since I didn't take advantage of it last summer?

In Canada we already get suckered into 3 year contracts anyway.
What are they gonna do here, a FOUR year contract? LOL

Has no one suggested to AT&T to just add the contract for the 3GS to the existing contract term? I don't give a crap. I'll sign up for like 10 years if they want. I'll just cancel if it comes to it. But for crying out loud, what's the point of making people wait around for 6 months? Just extend the contract term out to keep the subsidy payback thing going and everyone will be happy!

The SOLUTION here is EASY! AT&T should work with Apple and price their phones and rate plans so that they are in sycn with Apple's upgrade cycle, and they only need a 1 year contract. Then, each year when a new phone comes out, everyone can upgrade without any heartache. Why won't that work?
BTW - I just paid the upgrade fee, and got my wife the $199 3GS in white, and added her to my account. Here's what's REALLY interesting: I went to the Apple Store in MacArthur Mall (Norfolk, VA), and they said you can't even really pre-order the phone through them. You have to do it online, and then all you're doing is "reserving a phone", but you still may not get it on the 19th as they may sell out anyhow, and that they will not open unti l0am on the 19th. I also went to the AT&T store there in the mall, and they said since they are not an "AT&T Corporate Store", they cannot preorder the phone either. So, I went to an AT&T Corporate Store, and ordered 2 of them! And, here's the good part: they will have the phones on hand, the morning of the 19th, and on top of that, they will be open 2 hours earlier exclusively at 7am for those who pre-order! Cool stuff.
Yeah, I too was hoping for a better price, but after thinking about it, I did sell my original iPhone last year just after 3G launch day for $470, and bought the new one for $299. So I know I can sell my current phone for at least $300, thereby making my "upgrade price" really $199.

@KingDaddy, "AT&T should work with Apple and price their phones and rate plans so that they are in sycn with Apple’s upgrade cycle...Why won't that work?" - answer: because AT&T, like insurance companies, cares nothing about the end-user experience and everything about maximizing profits. Because Apple has provided them with exclusivity in the U.S., they can continue to lock in customers with every upgrade for longer, more painful periods of time.
Apple, please please bring in some competition for good ol' fashioned capitalism to help us out here.

Screw the 3G S, I'll wait for WWDC 2010 where I hope they release a iPhone HD or 800x480, if Zune can do it so can Apple!
Plus I really feel like they'll role out new phones ever summer but, they will role out moderate updates like that piece of crap 3GS every other year

These contract discussions always amuse me. You do realize that all these carriers are doing is trying to guarantee themselves a revenue stream. That way they don't have to worry about crappy service, treating customers poorly, etc. The contract is all about what the customer is on the hook for and not about what the carrier should be delivering.
Why is it that all these discussions of ETF's is about? Why carriers started feeling pressure to reduce the cost of early termination? It's because customers are pissed off and want a way out. And the surest sign of stupidity in this process is that it is possible to exit our current contract and get the new device (on a new contract) for LESS than what they'd charge us for an upgrade on contract.
Lunacy, pure and utter lunacy. And it doesn't /really/ make AT&T more money, except for the sheep who do as their told and pay more unnecessarily. So all this discussion about "well they have to make money" is moot... by pissing off customers and having loopholes that let customers find cheaper options by work around carriers' processes they only further demonstrate that the actual contract/process needs fixing.
The fun part in all this is that /corporate/ contracts generally bypass all this stupid crap... and through negotiating more sane deals manage to get us affordable upgrades without all this mess. Why carriers find their way to treating consumers like this is beyond me. Smells a lot like healthcare in our country.

I paid $800 for the original i phone, so why do I need to continue to subsidize ATT? They make $1800 a year on my service, so $3600 over 2 years.They made no upgrade available for second edition, and now will not offer the earliest adaptors a price comparable to new customers.
Can't wait for contract to expire, who needs ATT or Apple?
Where's my land line, who needs all of this grief?

My understanding from AT&T Customer Service is ... You can add a new line for $9.99 then get the subsidized iPhone 3GS with a two year agreement. Then you continue to pay $9.99 on the original line until the two year contract is up. Therefore if you had a year remaining on the first contract (the original line) then you are out $119.88 + the subsidized price ($199/$299) of the phone.
Not perfect but very easy to do and AT&T OK's it.

It will never happen and here's why:
It costs Apple an estimated almost $200 to manufacture the iPhone. That doesn't include R&D, software development, advertising, packaging, etc. Part of that "subsidized" contract with ATT pays Apple a portion of every phone sold, or rather every contract signed. This is how Apple are making money. ATT is still just providing service and making money in your 2 year service plan (minus Apple's fees).
If you get a phone at Apple's cost every year and all you do is add another year to your contract, then each year ATT is making less and less off of your contract as they pay Apple out. The alternative is that ATT pays Apple less for each add-on contract signed. For what you are proposing, the math doesn't add up and this is why they don't do it. Someone will lose money. It's simple dollars and sense.
If you remove the contract portion of it completely, you are getting a device that should cost the consumer as much as $4-500.

SO.. If AT&T is recouping the money they lost by offering us a discounted iPhone 3G during the course of our 2-year contract, Then.... if we pay the full price for the new 3GS, then shouldn't the monthly cost go down after the initial 2 years (of the original contract? Since we paid full price for the new phone, there's no cost reduction for them to recoup, so during the course of our new contract, when the date rolls around that marks the 2 year anniversary of our original contract, then the monthly cost should go down... is this not logical?