In Europe, that's a down payment on a standard financing deal, and after the phone has been paid off, your monthly bill goes down.
In America, that's the price to straight-up purchase the phone. Your monthly bill will be the same regardless of whether you bought your phone from the carrier, or brought your own.
Well compare oranges to oranges then. Nexus 4 is $50 on contract on T-Mobile, and is definitely cheaper than iPhone 5 on any of the three networks.
Also, no law dictates that you have to sign a contract to get cell service in America. One can as well choose from few of the cheaper prepaid services.
T-Mobile charges $200 for a Nexus 4; at least, they did the last time I was in one of their stores. And if there's one thing the Galaxy Nexus has taught me, it's that any Nexus purchased from a carrier will provide a much worse experience than one purchased on Play (due to carrier malware and delayed software updates).
> Also, no law dictates that you have to sign a contract
> to get cell service in America. One can as well choose
> from few of the cheaper prepaid services.
Equivalent service from the same provider is typically charged at the same rate, regardless of whether the customer has a contract. That's my point -- since there's no difference in service price, it's silly to say the phone is more expensive under a contract plan.
If you're comparing different service providers, then of course there will be some who have lower monthly rates and higher initial purchase prices. The tradeoff is that these providers usually provide much lower-quality service.
No they do not. I personally use T-Mobile $30 monthly prepaid plan with 100 minutes/5 GB/unlimited text. The service is no way inferior to any regular service that T-mobile provides.
Whether you buy Nexus 4 from T-mobile for 50 bucks and pay more monthly bill with contract, or choose one of their prepaid plan and pay less TCO, the phone and software is exactly the same. I thought you would know this, you work at Google.
The cell companies do what you have effectively said before, they price differentiate based on who can pay what. Don't have money to buy phone upfront, well we will sell you for cheap and make the difference in contract rate. Have more money? Well then BYOD and get our cheaper prepaid services.
I will concede on one point, the big 4 (except T-mobile) make it incredibly hard for you to find and compare their prepaid services, for obvious reason that contract customer bring in more money over years.
> No they do not. I personally use T-Mobile $30 monthly
> prepaid plan with 100 minutes/5 GB/unlimited text. The
> service is no way inferior to any regular service that
> T-mobile provides.
By using this plan, you're choosing to save money by having very little talk time. That is most certainly an inferior service compared to the post-paid plans, which typically offer unlimited talk time.
> Equivalent service from the same provider is typically
> charged at the same rate, regardless of whether the
> customer has a contract. That's my point -- since there's
> no difference in service price, it's silly to say the
> phone is more expensive under a contract plan.
First, you should educate yourself about T-Mobile's Classic vs. Value plans. For example, the individual "Unlimited Nationwide 4G" plan (also including unlimited talk and text) is $89.99/month for a Classic plan and $69.99/month for a Value plan. Why might that be, do you think? Do you think T-Mobile lets people save $20/month by saying the magic word "value"?
Second, even putting aside T-Mobile for a moment, there are plenty of other cost-of-ownership differences between a contract iPhone and a non-contract iPhone. For instance, absent additional coverage (e.g. extended warranty or equipment insurance), suppose you break it. How much will it cost to replace? If you haven't signed a contract, you have the option of signing one to subsidize the cost of a replacement, but if you have a contract, then what? Or suppose you take a trip overseas. Will you be able keep using your iPhone without exorbitant roaming charges by getting a local SIM? It depends. And so on.
Heck, I'll sell you an iPhone 5 for $1 if you agree to sign up for my 2 year Good Vibes Karma service (I send "good vibes" your way monthly; phone services not included) at $50/month. Cancelling the service incurs an $800 early termination fee. If that's a $1 phone to you, can you direct me to any friends and family who think the same way? I feel I may be selling a lot of $1 iPhones.
The point you're missing is that the paid service is subsidizing the $200 price, much like my useless Good Vibes service subsidizes the $1 price. As both AT&T and Sprint indicate on their websites, the straight-up purchase price is $649.99 for an iPhone 5:
If you don't want to pay the straight-up price, you can subsidize it with a minimum voice and data monthly plan. Then it becomes a bundled package. You cannot separate the phone from the bundle and say that the bundled price is the straight-up price.
For Sprint, their minimum plan (advertised online) is $79.99 a month. So for 2 years, that's a bundle price of $2119.75 for the iPhone 5 and service. If you don't want the bundle price, your only option is to pay $649.99 for the iPhone 5.
Also note that cell phone service is not a requirement. You can use the iPhone as a WiFi iPod and get an inactive SIM so that you can use the phone for 911 calls, to which the carriers must complete all calls even if you have no service.
But most people do not cancel their contract after one month; they just wait out the term because carrier quality rarely changes so quickly that it's worth eating hundreds of dollars in termination fees to switch.
> But most people do not cancel their contract after one
> month; they just wait out the term because carrier quality
> rarely changes so quickly that it's worth eating hundreds
> of dollars in termination fees to switch.
In other words, most people are gambling that they will save money over the course of a contract. They're gambling that:
That they don't break or lose their phone during the contract.
That they don't go overseas for a trip and end up paying expensive roaming charges or not using their fancy new phone.
That they can't save money by switching to another carrier (and this can be unexpected: see T-Mobile refarm).
That their home (or office or other place they care about coverage) doesn't move somewhere where their contracted carrier doesn't have acceptable coverage.
And that their definition of acceptable coverage doesn't change (e.g. being comfortable with HSPA coverage at the start of a contract, but later wanting LTE coverage for their new LTE phone).
That they don't end up in a committed relationship with someone on another carrier (preventing them from saving money by consolidating to a family plan).
And, and, and...
Do plenty of people win the gamble? Absolutely. Do plenty of people lose it too? Absolutely.
But you can't pretend that the gamble is cost-free. There are plenty of costs and strings attached.
In Europe, that's a down payment on a standard financing deal, and after the phone has been paid off, your monthly bill goes down.
In America, that's the price to straight-up purchase the phone. Your monthly bill will be the same regardless of whether you bought your phone from the carrier, or brought your own.