Saturday, September 01, 2012

Weird economics - why our kids end up with expensive iPhones that make me nervous

The US mobile market may not be quite as bleak as Canada's, but it's pretty bad. What I really want is to be able to buy a full-price iPhone and then buy metered data services separately (oh, and some voice too). Unfortunately, that's hard to do here. We're stuck in a market where the economically rational thing to do is buy a new device as soon as AT&T or Verizon allows (typically ever 12-18 months depending on how much money you spend during a 24 month contract). 

If we don't buy new, we pay the same data rate as someone whose data rate includes their phone payment. Sucks really.

This has some odd side-effects -- lots of used iPhones.

These can be sold, but only at a fraction of their original $660 cost [1.] Amazon, for example, will currently buy a 16GB iPhone 4 for $300 and a 32GB for $320. That's good money, but it's comparable to the cost of a 16GB iPod Touch (@$250)[2] and the iPhone includes phone and much better camera capability.

So it makes some sense to give the old iPods to the kids [3], who tend to lose them or drop them in the toilet. Which drives me kind of crazy because these are, in some sense, $500 devices and we're not Romney-rich.[5],[7]

If iPhone economics weren't so weird we wouldn't do this. We'd give the kids cheap disposable phones and an iPod Touch (less cost) or iPad Mini (harder to lose/drop in toilet) [6]. Given iPhone economics though, they end up with overpriced phones which they can't take to school [4].

Weird market.


[1] $300 initial plus $15*24= 660
[2] Target has cut the price of an 8GB Touch to $180. They call it an "MP3 Player", which is like calling my iMac a DVD player. The price crash on this pocket computer isn't getting much attention. 
[3] We pay $10 a month for each 12+ kid for their texting and voice services, no data.
[4] If they really need a phone we put the paygo SIM in a disposable plain phone. They each have persistent Google Voice numbers through the family Google Apps domain, so we can route calls as needed. 
[5] Romney rich is when not working doesn't significantly alter your net worth. Below that is simply rich, where not working means you become comfortably upper middle class but do need to sell the mansion. Then there's us and I'm not complaining. Interestingly, in terms of power and security, the merely rich have more in common with the 99% than they have with the Romney Rich.
[6] Very cheap game consoles and media devices because all the real costs are shared across multiple devices. 
[7] At which point they inherit the tail-end device or have to help pay for a used iPod Touch ($130 or so now!) while we wait for a new iPhone to trickle down. 

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