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First iPhone 6s Deal Says a Lot About Future Phone Prices

Get ready for rebates, gift cards, and credits!
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As we've mentioned before, cell service providers are moving away from contracts and the subsidization model that many shoppers are familiar with. And as a result, many of us may have to pay full price for our next phone. With this drastic change to the pricing landscape, it begs the question: How will this affect phone deals?

Well, the first promotion for the iPhone 6s might have given us our answer.

No Subsidies Means Paying About $649 for Your Phone

But first, let's review how things have changed.

Prior to the shift away from contracts, shoppers could sign up for a 2-year contract with a wireless provider in exchange for a reduced-cost smartphone. That's why, for the longest time, flagship phones would debut at $199; that was the cost that providers were willing to charge if you committed to their company for two years, usually with a very expensive monthly plan.

But now, only AT&T is left offering subsidies. Verizon, T-Mobile, and Sprint all push contract-free plans, which requires a shopper to pay full price for their phone. You can do that up front and pay about $649 for a top-of-the-line, newly-released phone, or you can opt for an installment plan that, coincidentally, breaks up the cost over a 2-year period of time. (But remember, it's not technically a contract... you just can't leave unless you pay off that phone. It's totally different!)

No More Free Phones

In the past, the subsidization model meant that we would frequently see promotions that would heavily discount these in-demand phones, sometimes even making them "free" when you resigned a 2-year contract. But freebies no longer make sense for carriers to offer if there's nothing binding a shopper to their service. After all, no contracts and no installment payments makes it easier for a customer to fly the coop.

However, it's unrealistic to think that promotions will go away entirely, so what kind of deals will we see in this new, non-subsidized world?

The Future is Gift Cards, Rebates, and Credits

This week, Costco became the first store to offer a promotion for the newly-announced iPhones.

Both the iPhone 6s 16GB model and the iPhone 6s Plus 128GB model are available at full price with a $100 mail-in rebate, which comes in the form of a Costco gift card. (Assuming you use the gift card, that's a net price of $550 and $850 for the phones, respectively.) These models are both offered through T-Mobile, which allows customers to use its installment plan, dropping the 6s to $27.08 per month and the 6s Plus to $31.25 per month.

With this deal, the customer is getting a sizable gift card in exchange for buying (and paying, likely in installments) through T-Mobile. It follows then that we can expect more "credit"-type offers for phones, now that subsidies are a thing of the past.

Promos for phones sold at stores, like the Costco deal, will likely include store gift cards, while buying directly from the carrier may yield bill credits (e.g., $50 off your first three months of service). We might also see manufacturers themselves offer traditional rebates for their handsets, although obviously don't expect Apple to do this. And naturally, deals on unlocked phones, with no carrier involvement, will continue as well.

This is Actually Better Than Past Deals

While the idea of paying a net sum of $550 might be a tough pill to swallow, this is actually a pretty good "first deal" for the iPhone.

In 2013, Walmart was the first store to offer a discount on the iPhone 5s, offering a meager $10 off the subsidized price. The retailer once again was first in 2014, cutting $20 off and offering a $15 gift card.

While it's not apples to apples (ha!), the $100 Costco gift card is a greater value than Walmart's "first deals" from years past. And while you're now paying off the full price of the phone, it can be spread out over two years, and you're free to choose one of the cheaper plans from T-Mobile as well, potentially netting a comparable monthly payment to what you might have had with the subsidization model.

Regardless, it seems possible that gift cards, rebates, and credits will be the main promotional tools that stores and carriers will wield when trying to entice paying customers.

Readers, what do you think? Do you miss the subsidization model, or are you excited about the future of phone deals? Share your thoughts in the comments below!


Director of Content Marketing

Lindsay Sakraida specializes in writing about retail trends and lifestyle subjects. She's also obsessed with music, movies, and tennis. Follow her on Twitter at @LinSakraida.
DealNews may be compensated by companies mentioned in this article. Unless marked as a "Sponsored Deal," the opinions expressed here are those of the author and have not been reviewed or endorsed by the companies mentioned. Please note that, although prices sometimes fluctuate or expire unexpectedly, all products and deals mentioned in this feature were available at the lowest total price we could find at the time of publication (unless otherwise specified).
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17 comments
rush
I'm grandfathered in with AT&T, so I have unlimited text, data & phone. They do offer me a current iPhone at $199 with a two year contract or take flagship phone for $99 etc. Where most people lose is they get caught up in thinking they have to have the latest and greatest iPhone. iPhone 5 still works perfect, definitely won't pay full price for any iPhone. #iphonehype
bigpike
I am grandfathered in to unlimited data from Verizon for $29.99/mo. I am out of contract & never resigned with a Verizon subsidized phone upgrade. I use lots of data. For my past two iPhones, I paid retail. The cost over about a year in "free data" has paid the retail price of the phone.
b2crites
This is terrible for the consumers. All the major companies got together and decided to come out with these plans where you end up paying like $700 for a phone over the course of a few years. Instead before we were paying $200 and signing a 2 year contract. Since most people don't change providers constantly, the companies saw that people would stay with them for two years regardless and now they no longer want to incentivize the contract. They know you will stay. So they jack the phone prices back up, charge the sample monthly rate for service and the consumers are the ones paying for the experience. It is a joke of a business model for us consumers, but it sounds like the providers have already made up their minds on this screw job. First company that goes back to the $200 phone, will be the first company I sign a new contract with.
maydepot
If you don't care about having the latest iPhone then do what most budget conscious consumers do.... buy an android phone instead. You can buy new Samsung Galaxy S6, LG G4 or HTC One M9 for under $400. Or save even more money by buying off brands like BLU, Asus or OnePlus. I bought my BLU Life One 4G LTE phone for incredible $99.

To save even more money go with prepaid provider like Cricket Wireless. Their basic plan with unlimited talk, text and 2.5GB data is just $35/month with auto pay. They also offer family plan 5 lines for $100. Don't have to worry about coverage because Cricket is owned by AT&T.
Jodesi1978
I'm locked in a family plan with Sprint.. Service is pretty good in my area San Tan Valley, AZ. I just pre-ordered my iPhone 6s Plus 128gb and only paid $534 including taxes. My unlimited everything plan is only $60 - an employee discount I get through my work, comes out to a total of $33.00 a month. I actually like the contracts cause I'm not trying to pay 1k for a phone and doubt anyone can beat what I pay now. Guess I'll be keeping my iPhone for the next 5 years unless prices of iPhones drop
Greg the Gruesome
+1 to solarkite's first comment.
https://en.wikipedia.org/..._question#Modern_usage

In this case, it prompts or raises the question.
nestormart
No thank you phone companies, I will keep buying flagship phones that are 1-2 years old and pay a fraction of the price.
foobar
I like the AT&T More Access credit card from Citibank. Pay the $95 annual fee up front, spend $2,000 within 3 months, then buy any phone outright at an AT&T store using the card. The result is a $649 credit on your next credit card statement. So, the 16GB 6s ends up costing $95 ($649 for the phone, $95 annual credit card fee, $649 credit). The 64 GB 6s ends up costing $195, and the $128 GB 6s costs $295. Add $100 for the Plus versions. The best part is, you can count the cost of the phone towards your $2,000 required spend! Sweet deal.
MrLucky
Thanks to Lindsay for a solid report about the changing Cell Phone pricing strategies. Always read her informative marketing columns. It would be so Helpful to know when a Sam's Club, Walmart, Target, or other store offers a New Rebate, in addition to the current Costco deal. Keep us Updated.
satyrrr
This will finally allow the market to work its magic to lower prices. I'm still using a Galaxy Slll because I cannot see the value in paying 400-600 for a phone with only a little bit more functionality IMHO. The subsidies from the 'free' phone allowed artificially high prices. Folks are willing to pay 200-300 for a handset and Samsung/Apple/HTC etc will adjust their offerings accordingly. My son worked for T-mobile and he told me handsets are only designed to work for two years. My Nokia 5190 from 1999 still works...
theTorrey77
I thought T-Mobile was running a pretty decent deal as well. Something like $100 off the price of the iPhone 6s, 16GB version. It was limited time, so maybe it's already over.
yong723
(part 2) I also hear that students no longer purchase their first car - they rather keep their smart phone and its pricy data plan to keep their virtual experience. Yes, I'm blowing it up because I see some truth to it. Is having $100, i.e., compare to $10, promotional discount better than nothing? Yes. But when the phone is now costing consumer $20-30 month, I rather keep my 700 family talk plan with un-limited data. I sincerely hope AT&T doesn't get rid of their 2 year contract deals. Or maybe I should keep this to myself before "THEY" figure it out.
yong723
This article makes several good points and I'm glad to see we might be heading in this direction, i.e., a promotional deals like what Costco offers on new iPhones. I'm current with AT&T and I'm actually noticing price increase in various plans that they offer. For example, AT&T no longer have un-limited data plans and they nickel and dime you on every little extra GB you add to your plan. Also, the overall pricing of the various plan increased over the years. On top of that, all these high end smart phones are now costing (before when it was costing $200 with 2 year contract ... I personally did not think it was expensive) close to $1,000.
pnyberg
I agree with @solarkite- If we are paying the full price for the phone, where is the savings for the consumer? Just seems like cell phone companies are raking in more profit. I think a story covering the "upgrade when you want" model should be included in this discussion. Owning your own phone is useless if you don't have a carrier. I wouldn't hold my breath about seeing more competitive cell phone rates though.
SeecretSqur1s
the 6plus 128GB retails for $950? Wow, just wow.
solarkite
This suggests to me the question, "What does this mean for cell plan rates?" It seems to me we are just paying more for the phone and the rates are basically the same.
solarkite
"Begs the question" is a "circular argument"

http://afterdeadline.blogs.nytimes.com/...in/?_r=0
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