Despite what Apple and your carrier may tell you, your iPhone doesn’t cost $US199.
That price, which you’ll see all over the ads and other marketing materials for the iPhone, is actually the subsidized price of the phone when you sign up for a two-year contract with your carrier. The real cost of the iPhone is $US649 or higher, depending on the model you choose.
On Friday, Verizon announced a bombshell that will likely affect the way Apple markets the next iPhone. Verizon has ended service contracts, which means new subscribers won’t be able to get an iPhone or any other smartphone for the subsidized price. Instead, you’ll have to pay the entire cost of the device up front or agree to pay it off a little at a time in monthly installments.
It’s a great move from Verizon, one that will bring more transparency to your monthly bill. Before, Verizon would stuff the rest of the cost of your iPhone into your monthly bill, but you’d still have to keep paying the same price, even after two years when your phone was supposedly paid off. The new system ensures you can keep your phone for over two years and not have to worry about paying more than you have to.
Since Verizon is the largest wireless carrier, it puts Apple in a sticky situation this year — it probably won’t be able to say you can get the iPhone for $US199 and up. Plus T-Mobile, the third-largest wireless carrier, hasn’t had contracts since 2013.
So, what will Apple do? If it says the iPhone 6S — or whatever the next iPhone is called — costs $US649 and up, it will seem to many that the iPhone is suddenly $US450 more expensive than it was last year.
Instead, Apple will likely play up the monthly payment plans Verizon, T-Mobile, and the others offer. (AT&T and Sprint still have contracts, but also have monthly payment plans for phones.)
We don’t know specifically how Verizon’s phone payment plan will work, but it will likely be similar to T-Mobile’s system, which lets you get an entry-level iPhone for $US0 down and about $US27 per month for 24 months.
The most likely scenario at this year’s iPhone event: When Apple brings up the new iPhone pricing on the big screen, it will probably say something like “Starting at $US0 down” instead of “Starting at $US649.” That will be easier to swallow, and, in a strange way, could make the iPhone look even cheaper than it was before.
But the bottom line is this: No matter what a smartphone maker or carrier says, your smartphone will always end up costing you hundreds more in the long run than what you see advertised.
Business Insider Emails & Alerts
Site highlights each day to your inbox.