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July 10, 2010

This isn’t news (or shouldn’t be, especially for iPhone users), but it’s fun.  There aren’t any hidden surprise charges with LightYear’s $59.99/month “all you can eat” unlimited-everything plan.  In this train-wreck economy, most people are looking for ways to cut spending, making our prepaid plans very attractive.  You won’t get an iPhone with a prepaid plan (yet), but next month you will be able to get the HTC Hero on LightYear prepaid.

Note the reference to the looming “use an iPhone on another carrier” potential …

5 Ways IPhone Users Get Ripped Off

The iPhone is the most successful smartphone ever. Apple CEO Steve Jobs said recently that the company has sold more than 50 million of them — and that was before the iPhone 4 shipped.

By Mike Elgan on Tue, July 06, 2010
Computerworld — The iPhone is the most successful smartphone ever. Apple CEO Steve Jobs said recently that the company has sold more than 50 million of them — and that was before the iPhone 4 shipped.

Because of that popularity, perhaps, some companies feel it’s acceptable to reach into your wallet, take your money and provide absolutely nothing in return.

Using an iPhone is like taking a holiday to some corrupt country: It may be beautiful and offer simple pleasures, but you’re going to pay bribes to people who shamelessly charge you for what’s free elsewhere.

Sure, nearly all cell phone users get charged something for nothing. For example, many carriers charge extra for text messaging, even though SMS messages don’t cost them anything to provide. And some carriers charge that pointless 15-second recorded set of instructions before every voicemail against your minutes.

But nobody gets ripped off like iPhone users get ripped off. Here are five specific cases where companies charge iPhone users real money, but in return offer nothing.

1. You pay $360 for mobile broadband you don’t use

AT&T offers iPhone users two plans for wireless data. The DataPlus gives you up to 200 megabytes of data per month for $15 additional to the voice plan, and the DataPro plan gives you up to 2 gigabytes for $25 more.

There is no option for zero mobile broadband data.

The reality is, however, that about one-quarter of all smart phone users don’t use any — not a single kilobyte — of mobile broadband data, according to a new Nielsen study.

I don’t know what the numbers are for iPhone users specifically, but some unpublished number of users don’t or wouldn’t use any mobile broadband data, but pay full price for one of the two plans.

AT&T could offer a zero mobile broadband data plan (it would be worth it for many to use only Wi-Fi) but it would rather charge those customers a minimum of $360 during the contract period in exchange for nothing.

2. You pay $325 to not use the carrier anymore

Carriers let you break your contract, but only after charging you an “early termination fee.” The fees vary from one carrier to another, ranging from zero to $50 on the low-end to up to $200 and up at the high-end of the market. Many of these fees are prorated, so the closer you get to the end of your contract, the less you pay to end it.

Days before the iPhone 4 shipped, AT&T dramatically hiked its early-termination fee for smartphones from $175 to an incredible $325. (Verizon (VZ) charges a $350 early-termination fee for its high-end smartphones.)

Let’s step back and consider what’s happening here. At the time it locks in customers for this termination fee, AT&T enjoys a monopoly on iPhone sales. But at some time during this 2-year contract, the company will lose the monopoly.

Customers who prefer a competitor, and want to use an iPhone on another carrier will have to pay the monopoly pricing for early termination — even after the monopoly is over.

Users unhappy with AT&T service will have to pay $325 to not use the service, even if it’s one day before their contract ends.

3. You pay $18 for committing to a new, two-year contract

The timing on the breathtakingly awesome new iPhone 4 couldn’t have been better for AT&T. Just before credible rumors hit that Verizon would offer the iPhone in just six months, AT&T graciously offered to re-commit iPhone customers to two-year contracts early if they pre-ordered new iPhone.

They get the money for the phone and the service, and protect themselves with an early-termination fee. But they also charge an $18 upgrade fee.

What’s that for? AT&T will tell you that it’s to help cover the cost of changing you over to the phone. The truth is that for most customers, the cost to AT&T to service your contract is far below what you pay.

They could simply view any costs to upgrade you as part of the service they provide in exchange for a lucrative two-year contract, during which time you’ll pay well over a thousand dollars.

I say the $18 upgrade fee is money for nothing. They charge it because, well, they can.

4. You pay $240 for the high-end data plan you don’t use

AT&T offers tethering for the iPhone — finally. They’ll charge you $20 per month for tethering, which is a little pricey but fair enough.

The catch: In order to use tethering, you have to pay the more-expensive DataPro plan, even if your data usage is within the limits of the less-expensive DataPlus plan.

In other words, if your data usage is below 200 megabytes per month, your AT&T data plan would cost $15. Tethering costs $20 per month. That’s a total of $35 dollars per month for under 200 megabytes plus tethering.

But AT&T charges you not $35, but $45 dollars.

That extra $10 per month is just money AT&T takes from you and in return provides nothing at all. If you need tethering, but don’t need a lot of data, you’ll pay $240 over the life of your contract for that high-end DataPro plan you’re not using.

5. You pay full price for apps you don’t use

What’s the right price for smartphone apps? That’s a tough call, because the category is so new.

Comparing Android apps with iPhone apps, however, it’s safe to say that iPhone apps tend to be far more expensive on average. And a far higher percentage of Android apps are free of charge.

On the PC, “apps” — inexpensive software from independent developers — is very often free to try. You pay only after you’ve actually used the software. The same goes for most for-pay services online.

However, most iPhone apps have no such trial period. And unlike major applications, such as Microsoft (MSFT) Office, most iPhone apps are too obscure to attract product reviewers.

That means you have to pay for iPhone apps in order to try them or even to find out anything at all about them. If they aren’t what you want, you’re free to delete them. But you still have to pay, in most cases.

The iPhone is great. But be forewarned: Using an iPhone means companies are going to rip you off by charging you real money, and providing nothing at all in return. And there’s really nothing you can do about it.

Mike Elgan writes about technology and global tech culture. Contact Mike at, follow him on Twitter or his blog, The Raw Feed.

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