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.
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.
> 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.
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.
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.
> 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.
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.
http://www.att.com/shop/wireless/devices/apple/iphone/5-16gb...
http://shop.sprint.com/mysprint/shop/phone_details.jsp?prodI...
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.
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.