The Apple iPhone 12 Pro Max is unveiled during a virtual product launch.

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The price Americans will pay for an iPhone 12 depends on what cell service they plan to use it with. The three U.S. carriers are actively competing for subscribers by discounting the new iPhone, which goes on sale next week, hoping to lock customers in for years on their wireless service.

It starts with a $30 discount. For people with AT&T, T-Mobile or Verizon service, an iPhone 12 costs $799 before taxes and other fees. If you want one unlocked, without activating it on a carrier, it’s $829.

Customers can get even bigger discounts for the new devices if they are willing to commit to monthly payments for the next few years, if they get unlimited data plans, and if trade their old phone in. For example, AT&T customers can get as much as $800 off an iPhone 12, nearly covering the entire cost of the device.

“That is the largest promotion we have ever seen on an iPhone launch day, topping the $650 offers by all carriers back in 2016 and topping the $700 that Verizon offered to new subscribers last year,” LightShed analysts Walter Piecyk and Joe Galone wrote this week, saying it heralded the return of the “fat subsidy.”

Verizon and T-Mobile are also offering competing promotions.

For Apple, the wave of carrier promotions could boost iPhone sales in the United States by reducing the cost of a new phone. They could also help shorten Apple’s smartphone upgrade cycle by prompting users to upgrade to a new phone sooner. Apple says the typical life-cycle of an iPhone today is three years, and the company times its new releases accordingly, putting out a fairly major redesign every three years, interspersed with more minor updates.

For carriers, iPhone promotions represents an opportunity to shore up existing subscribers and potentially gain new ones, hoping to cover the cost of the devices over multi-year payment schedules.

The new iPhones also support 5G networks, which are still under construction in the United States. Locking customers into 30-month commitments means that some users won’t be able to switch if one carrier’s network suddenly looks better than the other two.

“We believe that Verizon likely sees this as a way to move customers to higher rate plans as well as a way to make sure deployed mmWave spectrum gets utilized,” Goldman Sachs analyst Rod Hall wrote this week. “We have long expected US carriers to help to drive Apple 5G sales though we believe the economic attraction outside the US is less clear given the lack of mmWave deployment.”

Slight differences

All of the carrier promotions in the U.S. have two things in common: Customers have to trade in an old device with some value — a phone from the last few years that isn’t busted — and they have to commit to monthly payments.

But they differ in how they are targeting new customers and how the mechanics of the deals work. The best deal for any given user depends on their current carrier.

Here’s how they break down:

Back to the good old days

The wave of competing discounts from the three U.S. carriers is effectively a return to carrier subsidies, which was a major factor in the U.S. smartphone market in its early years.

Ten years ago, the price for a new iPhone was often listed at $199, because that’s how much the device cost when users bought it from a carrier with a two-year contract, usually with a hefty early cancellation fee. Those contracts also kept a swath of consumers on a two-year smartphone upgrade cycle.

Carriers started phasing out smartphone contracts in 2013, revealing to many consumers that the up-front price for a premium smartphone is $700 or more, and allowing them to cancel without incurring a big cost.

In the years since, carriers have effectively recreated the same customer lock-in using device payment plans — customers don’t have to pay hundreds of dollars up front for a new iPhone or Samsung Galaxy, but they must commit to paying between $30 and $50 per month for at least two years with a lump sum payment if they cancel early.

Carriers found ways to entice new customers with promotions tied to their device upgrade plans, often by overvaluing a trade-in device. But in the past two years, aggressive promotions became less common and competing carriers often did not match them.

Now, with 5G hyped as a major growth cycle for the telecommunications industry, the three carriers are working to steal customers from the their rivals or lock them in for the next two years using the 5G iPhone.

In the meantime, Apple has boosted its own device upgrade installment plans in several different ways, although it does not offer subsidies like the carriers. People with the Goldman Sachs Apple Card can buy an iPhone and pay over 24 months without paying interest.

Apple also has an upgrade program that combines an iPhone paid in monthly installments with an extended warranty, doesn’t tie users to a single carrier and allows them to upgrade to the newest iPhone after a year.

“One of the things we are doing is trying to make it simpler and simpler for people to get on these sort of monthly financing kind of things,” Apple CEO Tim Cook said last December.



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