Comment: iPhone 3G S contract upgrade controversy

Will be the first of many as new handsets come thick and fast

Comment: iPhone 3G S contract upgrade controversy . Biz, Phones, Mobile phone industry, O2, Apple, iPhone, Comment 1 View more images

10 June 2009 13:00 GMT / By Stuart Miles

Apple's latest iPhone announcement and mobile phone operator O2's subsequent dealing of it has highlighted a major problem the mobile phone industry faces in the next couple of years.

How can manufacturers continue to churn out new products at frequent intervals and operators still sell them, while keeping customers happy?

The iPhone 3G S case has highlighted this issue in particular as iPhone 3G owners currently on a contract with O2 are being forced to buy out the rest of their iPhone 3G contract in order to sign a new deal for the 3G S.

The disparity has occurred as more and more mobile phone operators have moved to longer 18- or 24-month contracts in an attempt to earn back the large sums of money they are having to invest to subsidise the latest and greatest handsets, which leaves consumers trapped in a long term contract while a new phone model is tempting them into an expensive upgrade.

Enjoying, as we do, in the UK a "free handset" business model, as long as you are happy to pay higher monthly subscription costs, as mobile phones get more and more advanced - something has got to give.

Presently that has meant operators increase the length of the contract in a hope that the monthly subscription costs and additional bolt-ons like internet or text messaging will eventually reap rewards for the O2s, Vodafones and T-Mobiles of this world and therefore give them a good return on investment for the handset.

This system, whether the consumer likes it or not, has worked well. Operators make their money in the long term, while consumers get the latest phones for free. Until recently (i.e., the last 5 years) the pace of advancements in mobile phones has been fairly slow. 10 years ago we were all playing Snake on a Nokia handset, however now if your phone doesn't offer you the latest consoles games to play on the go it's almost not worth having.

As we move towards wanting our mobile phone to be more than just a device that lets us make phone calls, the urge and pace of technology has meant that we all want to upgrade to the latest handset quicker than ever before.

Who could have guessed even two years ago that there would be not just one, but multiple handsets offering 8-megapixel cameras on the market? Or even handsets that offer a multitude of applications to personalise your phone all at the press of a button?

This, after all is the third iPhone announcement in 2 years. How's that for speed of progress?

So, it's not surprising then that phone operators across the globe have been caught out as to how to fund the urge and pace of this new technology. How could you predict that one of the best selling handsets would, in the space of two years, been updated three times?

Unless the operators start reducing the length of contract or reducing the amount they subsidise handsets, this isn't the last time customers are going to find themselves contractually stuck with only the expensive option of buying themselves out of said contract in order to get the latest handset.

Of course you could argue that is one of the fundamental elements and wonders of the world of technology - that tomorrow will always bring something better.

It's okay if you happen to be one of those early adopters ready to jump in, and the cash to do it, but for those who jumped in earlier they just have to wait their turn -or face the financial consequences.

I personally always see technology as a long train. Jumping on now will get you on your journey, however waiting might get you a better seat.

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Comments

  • Me, I buy the phone outright (usually off eBay) unlocked from the manufacturer and as nature intended; and I have a rolling monthly contract that is sim-only from the operator.

    I get all the perks of a contract in terms of costing, but with the ability to jump ship the moment I discover a better deal elsewhere. I can pop my contract sim into a new phone the moment I decide I want one, or keep 'ye old and trusty' handset long into the future where I don't see a functional deficit.

    For me, it's the best of both worlds. I can source the handset entirely seperate of the operators firmware restrictions and inane service shortfalls, and I'm not paying 45 quid a month for a device that now only does half as much as it was supposed to.

    Yes, it's more upfront to buy the phone outright, but I make sure I'm getting my moneys worth.
    Posted by L.Rawlins, UK
  • I can't see why the 3G to 3GS upgrade is so keenly sought - the 3G will have most of the 3GS perks thanks to the software upgrade, and if you want a cellphone with the best camera in the world you don't want an iPhone anyway, so 2MP to 3MP and video is no great shakes. Other than that voice control is a gimmick - a nice one, but a gimmick nonetheless, and a compass? Big deal. I have an app for that (to paraphrase the advert). The processor speed won't be a major issue because no supplier would be stupid enough to make an app/game that is so processor heavy only the 3GS can run it - that would lock out the majority of their market right away. I can live with a tiny bit of slowdown if it saves me hundreds of pounds in early adopter fees.

    The 3GS is a great upgrade for original iPhone users now at the end of their 18-month stints. The next iPhone will be a great upgrade for 3G users when their stint is up next year. I think the key will be to skip one, then feel like you're getting a REAL upgrade at a good price.
    Posted by Ian B, UK
  • It's the fault of Apple - the new boys on the (mobile) block. Nokia/Sony/LG etc all have multiple models to buy. If you want the latest MP3 player version, get that, want a keyboard - get that model. Those churn every 18-24 months in general. Mobile phone operators (MPO) offer 24 month contracts for cheap/free latest and greatest (of that feature set).
    New boy comes along. Only can make 1 phone model so it stands out. Because they want market share they bully MPO into giving heavy discounts for long contracts. Then they come out with a replacement (note - not an addition) only one year later. MPO are narked because it's they who get the backlash. Customers are narked because they want 'free' not realising that they've only paid for half the phone (assuming 24 month contract). Only winner is Apple.

    Me, I'm the same as L Rawlins - I buy unlocked and write off the cost straight away. New one comes out next week that catches my eye - there I go...
    Posted by adrianaitken, United Kingdom
  • Serves all the idiots who've been thinking they've got something for nothing when they signed up to these highly monthly charge, long contract, FREE phone offers. If you sign up understanding what it is, work out its a good deal for you and don't moan when something better comes along, then fair play to you. However if you sign up and then don't like the fact that you're tied in then tough titties to you. You never ever getting something for nothing in this life, look at how much these phones cost when you buy them sim free, if you want to buy yourself out of the contracts early you have to expect to pay at least the amount left of the price of the phone alone when divided over the contract period.

    The bad publicity also serves the mobile phone operators right for creating this stupid business model in the first place.
    Posted by P Brown, UK
  • @IanB

    "The processor speed won't be a major issue because no supplier would be stupid enough to make an app/game that is so processor heavy only the 3GS can run it - that would lock out the majority of their market right away..."

    http://www.engadget.com/2009/06/10/iphone-3g-s-supports-opengl-es-2-0-but-3g-only-supports-1-1/

    Posted by L.Rawlins, UK
  • if you have signed a contract for 18 months, expect to have it for 18 months, this is not news, its people who want something for nothing,

    this is the same for any other contract handset out there, people who want the latest and greatest handset should stop moaning and be prepared to pay for it.

    nuff said
    Posted by umtsboi, UK
  • From my point of view there are three choices:

    1, Sell your current 3G on ebay say £300 for the 16g 3G, go and buy the new 3GS on PAYG for £440 then drop down your O2 tarriff to sim only when you contract expires. Over the life you will net a saving as you drop down your tarriff and pay out £140 for the new handset. This enables you to upgrade next year without any fuss and again sell your 3GS.

    2, Put up with your current 3G

    3, Put up with your current 3G and jailbreak to get most of the missing developments.

    Just stop moaning though!!!
    Posted by Jay, Uk
  • As an early adopter of the 2nd generation iPhone, I feel bitter about the whole situation as o2 did not offer the iPhone on anything shorter than an 18 month contract. I would have much preferred signing up to a 12 month contract. I had to pay a one-time fee for my phone when I got it, I would have happily added on another "6 months subsidy". Problem is o2 is using the iPhone as a way of getting people to sign up for 18 month contracts when for years the cellphone industry has always done 12 months. Why is this - probably a mix of being able to offer "free" handsets at lower monthly rates (as the subsidy is further spread out) and probably more important to o2 as a way of locking customers into their network for a year and a half instead of just a year.

    So come on o2, stop being greedy, offer the iPhone on a 12 month contract at a higher monthly rate.

    Oh and get rid of the tethering fee - the iphone on contract already has a fair usage clause - enforce it for the tethering and only if people go above your threshold put them onto a paid tethering option!
    Posted by dylan, UK
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