How much does your iPhone or Droid really cost? We don’t know, because the carriers won’t tell us.
CNNMoney pretends to delve into the details behind the $199 price point behind most smartphones. Writer David Goldman gives lots of reasons why unsubsidized prices are so much higher — like $599 for an unsubsidized iPhone — and he takes folks like AT&T at their word when they explain why these phones cost so much:
Phones that tend to eat up more bandwidth — hello iPhone! — add to the carrier’s overhead. Put together the upfront cost of the phone and the back-end cost to service it, and you’re left with the phone’s profit margin. For a model with really tight margins, the carrier might find itself essentially forced to charge more upfront than it otherwise would — it can’t discount the purchase price and still scrape out a profit. That sometimes leads to inferior phones, like the BlackBerry Bold, carrying the same price tag as more advanced rivals, like BlackBerry’s Torch.
But while it’s true that we pay less than the full cost of these phones, we have no idea what that full cost actually is, because the carriers keep it secret.
We’re locked into 2-year contracts with high early termination fees ($350 on AT&T and Verizon) because, we’re told, we need to pay off the subsidy passed on to us by the carrier. So why is our monthly bill the same after we pass the two year mark? Shouldn’t it be lower once we pay off the phone? And shouldn’t we know the true cost of an unsubsidized phone when we’re asked to pay up to $599 for it?
Goldman doesn’t ask many questions. It’s much easier to just parrot the carriers’ talking points.