Why are iphones only on a 3 year?

[lola73]

Looking for an iphone for my mother in law and you have some great plans, but only for a 2 year contract.

Why are iphones only on a 3 year plan, which means I can only use the max plan at minimum $55/month?

***Edited to add labels***

[Wufai · Accepted solution]

The answer is quite simple. The iphone series simply costs too much for carriers to make any money with a 2 year plan. That's why as standard practice, most carriers carry iphones plans for 3 years and must attach to monthly plans for at least $55 or more.

But you are in luck! CRTC has heard your prayers and is demand carriers to eliminate ALL 3 year plans, soon you can go to any carrier and get an iphone with a 2 year plan.

But is it worth it?

Right now, a typical carrier will charge you say $180 for a 16gb iphone5 with a $55 plan for 3 years. In the near future you will expect to pay $250 for the same phone and $75 minimun for 2 years.

The truth is no matter how to plan this out. The iphone WILL be expensive. My advice is to just buy the phone at apple store and enjoy the great plans fido has to offer.

*hint, those great plans will not last forever.

[lola73]

Thanks Wufai. I guess just disappointed. We all have iphones so would like to get my mother in law one too, but the 3 year plan and pricier monthly cost might lead us to a Galaxy instead (offer $39/month on 2 year plan).

[credmau5]

iPhones will be available on 2-year contracts starting on August 9, but the plans required will be $75 and up (this info has been posted on a few online forums). If they gave it to you on a $39 plan they'd be losing a lot of money on a $700 phone. 

[10yearfido]

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@justin_Credible wrote:

iPhones will be available on 2-year contracts starting on August 9, but the plans required will be $75 and up (this info has been posted on a few online forums). If they gave it to you on a $39 plan they'd be losing a lot of money on a $700 phone. 

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Not losing any, just not making as much. Completely different concepts. Assuming their iphone subsidy will still be around $500 ( unlikely) and if we take it for granted that they actually paid anywhere close to $700 for the phone at wholesale prices (again, hugely unlikely) then at $39/month for 24 months, they make $436 after repayment of the subsidy. That's absolute worst case (and pretty basic math).  Not much of a gross margin there, but not a loss.

Now, if we remove those assumptions, the picture gets better for Fido. They have not announced a change in contract prices, but it is generally expected. Let's guess and say the iPhone goes from starting at $180 to $250. Well, that is $70 more on their side, so we are at a subsidy of $430 leaving $506 as a gross margin. Additionally, if we assume they do not pay $700 wholesale for the phone and go with a more realistic $600, then the estimated actual subsidy drops to $330, leaving a gross margin of around $600 for the 24 month commitment. Yes there are other costs associated too, but for many of these, they were also reduced for Fido by going to 2 year terms.

It's not the thousands they will be extracting with the new 2 year pricing, but it still not as gloomy for Fido as you make it out.

[10yearfido]

The iPhones were not especially higher in subsidy that the other high end phones, but they are generally more in demand. This allows the to treat them differently. With iPhones, you paid much more and you paid it for much longer, which is simply double dipping. I don't know any other carriers that required iPhone buyers to pay more and longer than all other highend phones. 

As wufai pointed out, 2 year contract are coming. Initially all carriers are massively increasing their prices. We'll see how long this lasts. Customers are not made of money and it seems like the carriers have decide that with 2 year terms, they are going to try to extract 2 years worth of profits. If we got our 3rd year free afterwards or if they simply raised rates to offset the accelerated subsidy repayment, that would be feasible, but it seems like they again want the best of both words. So they will charge you vastly more for 2 years.

This isn't what the CRTC had in mind with their changes, but they didn't impose price restrictions (nor should they have). But with the carriers acting a little like pigs at the trough and using the CRTC rules as a mask to massively and unnecessarily jack up prices, I wonder if that is coming.

[10yearfido]

The 2nd paragraph shoudl have read:

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As wufai pointed out, 2 year contract are coming. Initially all carriers are massively increasing their prices. We'll see how long this lasts. Customers are not made of money and it seems like the carriers have decide that with 2 year terms, they are going to try to extract 3 years worth of payments and profits. If we got our 3rd year free afterwards or if they simply raised rates to offset the accelerated subsidy repayment, that would be feasible, but it seems like they again want the best of both words. So they will charge you vastly more for 2 years.

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