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Apple, AT&T Kick Loyal Customers Where It Hurts

I don't expect special treatment when I've been doing business with a company for a while, I'm generally content to be treated the same as anyone else. But I don't expect to be treated worse than other customers, to get the small half of the pie, the ice cream cone that somebody dropped on the ground. And yet that's what AT&T and Apple are doing with loyal iPhone customers.
I don't expect special treatment when I've been doing business with a company for a while, I'm generally content to be treated the same as anyone else. But I don't expect to be treated worse than other customers, to get the small half of the pie, the ice cream cone that somebody dropped on the ground. And yet that's what AT&T and Apple are doing with loyal iPhone customers.People who rushed out to buy the new model a soon as it was available last year are being told that we have to pay a premium to upgrade, while first-time customers get a sweetheart deal.

When the first-generation iPhone came out in 2007, I drove around San Diego County for four hours looking to buy one. When the second-generation iPhone came out last year, I stood in line for seven hours to buy one. Now, a new generation iPhone is out, priced at $199 for a low-end model, and $299 at the high end -- for other people. For me, and millions of other early adopters, the price tag is $200 higher on each of them.

Thanks a lot, Apple. Thanks a lot, AT&T. That's the treatment I get for being a customer for two years? I'm glad I wasn't a customer for three years, you'd probably charge me an extra $200 and blow your nose on my ham sandwich too.

This is all pretty disappointing to Apple fans like me. I was still on the fence about upgrading my iPhone until yesterday. But when I heard about the new features, including the faster processor and better on-board camera. I started to be won over. When I heard about the new pricing, I was sold. "$299," I thought. "That's not so bad." I was thinking about getting a new pocket-size camera anyway, this new iPhone could be that and much more. I was already making plans to buy an iPhone 3G S in a week and a half, when they go on sale. "This year," I thought, "I'll get there at 7:30 am, so I'm one of the first in line. I'll bring a camp chair so I'm not standing the whole time. I'll bring something to read."

Looks like I'm staying home instead.

The issue, as explained by my colleague Tom Claburn, has to do with contracts. When you buy an iPhone, as with many cell phones, you sign a contract for a specific service period. In the case of the iPhone, it's two years. In exchange for locking yourself in for two years, AT&T gives you a steep discount -- which they call a "subsidy" -- on a shiny new phone. They'll give you another discount when your contract runs out. Until then, if you want to buy a new phone, you don't get the discount.

Some Apple fans are absolving Apple and giving AT&T the blame for this one. ZDNet's Sam Diaz's for example, calls AT&T "the iPhone's anchor." He describes how AT&T is lagging behind other vendors in other countries in offering its iPhone customers features like multimedia messaging and tethering. But I don't let Apple off the hook. The iPhone is Apple's product, they chose AT&T as a partner, and Apple shares the blame for any problems AT&T is causing its customers.

Other people blame the customers, like me, who signed contracts that included the subsidy. Gizmodo's Jesus Diaz says we're a bunch of "whiners". He says we should be happy with the subsidies we received for our earlier phones, and we should just shut up. "In the meantime, do the rest of the world a favor and stop whining about what you are entitled to. We don't live in your pretty me me me ME world."

By the way, you ever notice that the people who talk about "whining" want to go on at length about how your complaints offend them? Of course, when they do it, it's not whining. And the people who accuse you of being self-centered go on at length about how superior they are to you?

Another argument in defense of AT&T: They're a business. They have to make money. Giving out another round of discounts would cut into their profits. I need to understand their position. AT&T's apologists like to lecture AT&T critics about this in oh-so-grown-up tone (see the comments on Tom's article, above), throwing around words like "whiny" and "privileged" and "Whhhhaaaaaa whaaaaaa whhhhaaaaaa," and other catchphrases they picked up while listening to talk radio.

And it's true that AT&T is a business. That's my point: They're not a charity or a church or a social club or the United States of America some other organization that I might feel a personal connection to. I don't owe them any loyalty and I'm under no obligation to understand their position. I'm not going to give them my money if they make it hard for me to do it.

For the record: I can't say I'm outraged by this, or angry. Nor do I feel "entitled," to use another word that Gizmodo's Diaz tosses around (as self-satisfied people are fond of doing).

I'm disappointed, but it's just a phone. And I, and millions of other existing iPhone, will get a prize anyway: We get the iPhone 3.0 upgrade absolutely free when it becomes available June 17.

Still, I expect better of Apple. Apple is a company that wants a long-term relationship with its customers. They're not looking to empty your pockets right away and kick you out the door. They want to take a little of your money this year, and a little more next year, and a little more in five years, and a little more in twenty-five years, and they want you to be happy about giving them your money the whole time. That's why they're giving away iPhone 3.0 software even to existing iPhone users (like me), while selling the software for a nominal $20 to iPod Touch users. That's why Snow Leopard, the next-generation Mac operating system, will be available for a low $29 when it comes due in September. Because Apple knows that a happy customer is a long-term customer, and a long-term customer will keep giving Apple money for a while.

But not me. Not this time. I can afford $300 for a new iPhone, but not $500. So I guess I'll just wait until December, when I qualify for the discount on the upgrade. Or maybe I'll pass on this year's model, and see what Apple has coming in 2010.

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