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One thing I've never understood is the fact that AT&T (NYSE: T) wants to charge iPhone customers a $175 "termination fee" if the two-year contract signed when activating that shiny new iPhone is broken. Apple's (NASDAQ: AAPL) iPhone handset is not subsidized at all by AT&T, unlike every other phone the wireless carrier offers. That $49 generic handset you may have gotten when you signed up for cell phone service costs way more than that to make, but the lucrative two years of service you sign on for gives the carrier time to recoup that cost and more. If you leave the contract early, you pay a cancellation fee to make up for that lost revenue. With the iPhone, you're paying a full, unsubsidized price up front -- but for some reason, there is still a cancellation fee. That perturbs me, and I don't even own an iPhone or have a AT&T subscription.

What kind of goofy tactic is this? Welcome to Apple's world, folks. While I highly admire the company's innovative and stylish products, they do operate in a closed vacuum most of the time. Can you use any other music service outside iTunes with the iPod? Nope. How about using any other wireless company other than AT&T for that new iPhone? Nope. Apple loves creating the best overall user experience by tightly controlling all aspects of its products once they reach the consumer.

This is opposite to many companies that market the "use anywhere with any service" precept to consumers as a marketing pitch. The wireless carrier industry is different, though. Wireless carriers in the U.S. have tight control over the phones they sell and deny control to the consumer. It's all about maximizing revenue and providing a consistent user experience -- not giving the customer freedom. This is nothing new for most phones sold in the U.S., iPhone or not.

The difference here is that AT&T is not losing a thing if you buy that iPhone -- it's marked at full retail. This is not a "free phone" that requires a calling contract to ensure the money is made elsewhere. It's an undiscounted retail purchase that should come with no contract and in an unlocked version that allows any iPhone customer to use that new piece of equipment with any compatible carrier. This is not the case with the iPhone, though, and the locked ecosystem Apple and AT&T created to control the customer experience is now biting them both in the butt a little. Will the iPhone's stance change as a result? Of course not. At least not until 2012, when the AT&T exclusivity contract ends.

AT&T's iPhone fees don't make sense originally appeared on BloggingStocks on Thu, 12 Jul 2007 11:39:00 EST. Please see our terms for use of feeds.

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