Last month, Cricket, a subsidiary of Leap Wireless,
announced that it would start selling the iPhone 4
and iPhone 4S to prepaid customers on June 22 of this year. Unlike
the top national carriers, Cricket has no contracts and offers its
customers a lower per-month service bill, which currently runs $55
for unlimited talk, text and data.
Now, following suit, Sprint's Virgin Mobile will also be offering the iPhone
with a very similar plan. A customer can get unlimited talk, text,
and data on an iPhone 4 or iPhone 4S for as little as $50 a month
(after all possible discounts are applied).
So what's the catch? Why isn't everyone joining Cricket or
Virgin Mobile and cutting their monthly bill significantly? It's
that don't-want-to-spend-a-lot-of-money-up-front syndrome. Signing
up with either provider would mean purchasing the iPhone for its
full market value price, which ranges from $499 to $649, versus the
$99-$199 incentive price the bigger carriers offer.
It's all just a number game. If you purchase the iPhone 4S for
$649 in order to forgo a 2 year contract, you would basically pay
$18.75 a month for the phone over that span of time. Your monthly
bill at that rate would be $73.75 at the most - still less than the
cheapest rate out there for unlimited service. Since Virgin Mobile
uses Sprint's network, it's practically the same as having the
phone with Sprint. But customers don't always see the big
Does our financing culture shape our decisions?
According to Jamie Lendino of PCMag.com, Americans "live in a culture of
financing." It's true; many of us count on a low up front cost,
with the ability to finance later. This is how carriers bank on
getting new customers or keeping their current customers - by
offering an incentive low price with the condition that the
customer commit to two years of future payments. Carriers may take
a hit up front, but they stand to benefit more for their services
in the long run.
It will be interesting to see if Virgin Mobile or Cricket gains
a lot of subscribers for offering the iPhone, or if shoppers will
be deterred by the large up-front price tag.