I honestly think the ETF should be equal to the discount you get on the phone. So if you pay 200 for a 500 phone, it should be 300.
But...
It should also be a true pro-rate, so the 300 above should be divided over 24 months and go down by that amount after each month. So after 23 months the early termination should only be 12.50 in my example.
But would you ever pay $500 for a phone? Does any phone actually cost anywhere near $500 to make? An 8gb iphone 3g is $600 with no contract, but an 8gb ipod touch, with nearly identical hardware besides the lack of the phone, sells for just $200. If the ETF was the price of the phone minus the subsidized price, we would still have huge ETFs because the price of phones is so inflated.
@(Unverified) Given the $200 iPod Touch example, which we all know Apple is making money on, how much more does the camera, a cellular radio/modem chip, and some additional compliance testing really cost per unit? Or the better question is how much of the $600 you pay for a contract less iPhone 8GB goes back to Apple or any other manufacturer of a phone bought off contract? How much does the carrier keep or profit with the inflated price? I find it hard to believe that AT&T would be hurting if you paid $199.99 for a 16GB 3GS and then paid north of $175 in an ETF. They would be getting $374.99 or $100 more than a 32GB and about $20 more then the cost of a 64GB Touch on Amazon.
So if we are going to crack down on ETF why not first crack down on bloated phone prices that make ETF's and the price they still charge you out the door not look as bad.
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I honestly think the ETF should be equal to the discount you get on the phone. So if you pay 200 for a 500 phone, it should be 300.
But...
It should also be a true pro-rate, so the 300 above should be divided over 24 months and go down by that amount after each month. So after 23 months the early termination should only be 12.50 in my example.
@TrueEddie
But would you ever pay $500 for a phone? Does any phone actually cost anywhere near $500 to make? An 8gb iphone 3g is $600 with no contract, but an 8gb ipod touch, with nearly identical hardware besides the lack of the phone, sells for just $200. If the ETF was the price of the phone minus the subsidized price, we would still have huge ETFs because the price of phones is so inflated.
@m854 You both make great points. The price is inflated on these devices so the manufacturer ( Palm, Apple, Motorola) Can make a profit.
@m854
The over-inflation of phone prices is another story.
@(Unverified) Given the $200 iPod Touch example, which we all know Apple is making money on, how much more does the camera, a cellular radio/modem chip, and some additional compliance testing really cost per unit? Or the better question is how much of the $600 you pay for a contract less iPhone 8GB goes back to Apple or any other manufacturer of a phone bought off contract? How much does the carrier keep or profit with the inflated price? I find it hard to believe that AT&T would be hurting if you paid $199.99 for a 16GB 3GS and then paid north of $175 in an ETF. They would be getting $374.99 or $100 more than a 32GB and about $20 more then the cost of a 64GB Touch on Amazon.
So if we are going to crack down on ETF why not first crack down on bloated phone prices that make ETF's and the price they still charge you out the door not look as bad.