There’s an upside for iPhone customers, and an upside for Apple.
Apple unveiled a bevy of new devices and services last week, but one announcement in particular will change some iPhone owners’ relationships with mobile carriers: an upgrade program for iPhone customers.
Through the program, iPhone owners can pay for the phone in monthly payments and upgrade to the new model every year for free without additional fees. The announcement was arguably the best news die-hard iPhone fans heard that day.
But why is Apple AAPL doing this? CEO Tim Cook has a simple answer.
“The upgrade plan is really just about recognizing that the process of buying an iPhone could be simpler and that there’s a group of people that would like to upgrade every year,” he told BuzzFeed during a recent interview. “This makes that easier, and I think people will appreciate that.”
It’s no secret that iPhones are costly devices — usually $650 or more for the brand new model. For many years, mobile carriers have given customers “discounts” on the devices themselves by locking them into two-year service contracts.
There are two problems with this approach: First, Apple releases a new phone every year, making it less-than-ideal for fans who want to keep up, but don’t have $650 to shell out every year. Second, mobile carriers have now killed this type of contract. AT&T, Apple’s original carrier ally in getting the iPhone in as many hands as possible, said last month that’s doing away with this approach. Verizon has said it will too, and T-Mobile has been fiercely anti-everything its competitors traditionally do.
Aside from helping customers, Apple’s new upgrade program has a very big upside for the tech company: it locks customers into owning an iPhone for a long time, which will also stabilize phone sales for the company, according to BuzzFeed.