Each week Adam Frucci takes a closer look at the latest gadget buzz in his column, Shift.
The iPhone looks pretty sweet. Yep, it's got that fancy touchscreen that you can use two fingers on, it changes direction depending on how you hold it, and it can tell when you're trying to enter a number and when it's rubbing against a pack of smokes in your pocket. It's certainly one of the coolest phones ever designed, if not the coolest, and it's pretty much a guaranteed hit.
You can't really fault Apple on the design unless you want to be really nitpicky, but that's not to say they did everything perfectly. Apple is one of the only device manufacturers on the planet that has the sway to change how the cell-phone business is done, and the iPhone gave the company an opportunity to really change the American cell-phone market for the better. However, when that opportunity knocked, Apple decided to ignore it, leaving the consumer to foot the bill for their laziness.
In Europe and Asia consumers aren't faced with these choices. If they want to switch phones or carriers they can do so whenever they please. Switching phones is as easy as swapping SIM cards, and they pay their cell-phone bills month to month. The catch is they also have to pay a premium for their devices, but they're used to it. There are no free phones for signing a contract in Europe, and the notion of having a device subsidized by a carrier is foreign to them.
Here in the States, however, people expect to get their phones for free or close to it. They sign these awful two-year contracts, but in exchange for their promise to pay hundreds of dollars in usage charges to a single carrier, they get $500 phones for less than half their "official" prices.
You might be saying, "Yeah, but if there was no two-year commitment, the phone would cost over $1,000!" Not true. The iPhone costs Apple about $250 to manufacture, so half of the retail price is profit. That means the two-year contract isn't subsidizing anything and whatever money would go to lowering the cost of the device is just icing on the cake.
So what are we left with? A situation worse than when Apple entered the market. Now we're stuck with the idea that it's just fine to drop $600 for an unsubsidized phone and be forced into signing a two-year contract on top of it. Will this give other phone manufacturers the chutzpah to start keeping the contract subsidies for themselves? Let's hope not. The last thing we need is for one of the most blatantly anticonsumer industries in this country to start thinking they can rip us off even more. Thanks, Apple. Somehow we expected more from you.
UPDATE: We clarified the statement about the iPhone being 50% profit.