Annual iPhone Upgrade Programs Should Boost Replacement Cycle with or without Subsidies

| Editorial

$AAPL GraphI've been hearing how sales and replacements of iPhones will be slowing due to a number of things, including the vanishing of subsidized carrier plans. I want to give you the opposing argument, an argument fueled by the ability to upgrade yearly while potentially paying less money and simultaneously satisfying my sweet tooth of having the newest iPhone every year.

In the past AT&T and Sprint made all too much money on me. If I had traded in my phone at exactly the end of the 24th month cycles of past plans, I would only have bought an iPhone only once. But what happened was that I held onto my iPhone 3G about four months too long and held onto my 4S kicking and screaming until the iPhone 6 Plus came out. Realistically, I paid for my iPhone 4S almost twice if you add up the monthly checks I wrote to Sprint.

I was paying Sprint $126 per month and buying AppleCare on top of that. So up front I paid Sprint $399 for my iPhone 4S. If I kept to the letter of the contract and divided that over 24 payments, which I didn't, that would down payment would have added some $16.66 per month. 

So $126 + $16.66 + lets say $5 per month for AppleCare = $147.66 per month, or for two years $3,544. That's what the old subsidy system meant for me, and I think those numbers will resonate with a lot of iPhone users no matter what service they use.

Let's compare that old system to Apple's new unlocked leasing program where I can get a new iPhone every year with AppleCare. For the Plus model, I'd pay $44.91 to Apple + $55 to Cricket for a total of $99.91 per month, or $2,397.84 for two years.

If take the $3,544 from the old system and subtract $2,397, I get a savings of $1,147 over two years—or $573 savings a year—for an unlocked, top of the line phone that gets switched out every year. 

What am I giving up? I don't get to sell the phone since it's never really mine, but that doesn't phase me. What I got for my iPhone 4S hardly made up for the wait and annoyance of not having the latest and greatest. True, I never own the phone, but so what. I'm so invested in the Apple ecosystem, that doesn't bother me at all.

What do I get? An interest free loan where I always have the newest iPhone. And if it breaks, I have AppleCare+ to replace it. If people start seeing the benefits as I see them, it could be a valuable, consistent and profitable revenue stream for Apple, and that doesn't count the refurbish revenue from the units traded in every year.

So get warm and comfortable with leasing. You do it with your music already, now bring that warm fuzzy feeling to your phone. Get a new iPhone each year if you like with no downside. In my eyes, if people embrace this concept it will speed the upgrade cycle rather than slowing it down as more and more people opt for a new iPhone every year instead of the usual every two years.

Rather than hurting Apple, I expect that will help the company.

David Winograd's voiceover work can be found at

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Now if only they’d make upgrades possible outside the US!


Author has just demonstrated the appalling innumeracy that afflicts a significant segment of the US population.  The result of decades of the popular media and literature embedding the idea that math is something to be feared.

Also, you probably mean “faze” not “phase”.


I do not lease music and have no intention of doing so. Nor movies, nor cars. I feel much better actually owning a thing, so I can stop paying for it and still have it and so I have more flexibility in what I want to do with it.

Part of that flexibility is that I can gift my old devices to relatives who want them. If no one does, then I can either keep it around as a testing device, or, if it just gathers dust, eventually decide to sell it. But the point is I have the freedom to do whatever I want.

Also, since I have a corporate discount (just work at a large enough company) the subsidized phone option with 2 year upgrade cycle worked well for me. But the new AT&T Next plans only apply the discount to the small “base” fee and make most of the cost be the “data” fee to which the discount does not apply. So the new way costs more for me, by about $5-10/mo (depending on when I upgrade and how much I sell my old phones for).

It still bothers me that everything I read just says how bad subsidies were and how good the new way is. If that were true, why would the phone companies be switching at all? They must have something in it for them because they generally act like greedy, share-holder-serving organizations so I don’t believe they’re doing it for the good of the consumer who was otherwise overpaying.


When I saw the title I first thought this might refer to Apple’s buy back and trade in programs. How new are those? How much of an effect do you think they will have?

My wife is an extremely thrifty person so the only way I could convince her to upgrade to an iPhone SE is by trading in both her old iPhone 4S and my dust-collecting iPhone 5. We get $50 for hers, $100 for mine.

Interestingly, Apple won’t do a 2-for-1 trade in. They told me to use the buy-back program on their website for one of the phones, which uses a third-party to which I had to mail the device. I am now sitting around waiting (8 days today) for the gift card they’re suppose to send me before I can go back to the Apple store to trade in the remaining iPhone 4S for the new iPhone SE. This seems like a bit of an unfriendly experience, but then most people probably would be trading 1-for-1.

David Winograd

Not subsidizing phones are great for the carriers. They are as greedy as you write, but there are so many iPhones out there, they don’t have to incentivize putting one in your hands. Now the carriers get paid up front. 

So the current plan makes it LOOK like the phones are being subsidized while they are not.

I feel that the Apple trade-in program is horrid. You can get much more of a return selling the phone to third party like

As to your ‘lease’ concern…if you keep the phone for two years (under Apple’s plan) or whatever it is under other carriers plans and do not trade in at the yearly cycle, at the end of the contract period, the phone is yours,. Same as it ever was.

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