AT&T Yields to Critics, Eases iPhone Upgrade Rules

After being pounded for a week by iPhone fans who want a discounted iPhone 3G S and want it right now, AT&T has retreated from its original upgrade pricing rules. But the only way for customers to figure out whether they will benefit from the change is to check their upgrade eligibility in their online AT&T account information.

Under the revised rules, the lowest price of $199 for a 16 gigabyte phone and $299 for a 32 GB version will be available immediately to anyone who is scheduled to become “upgrade eligible” by the end of September. But upgrade eligibility is a complicated business. You automatically become eligible at the end of your two-year contract, but that would not help any iPhone 3G owners because that phone has only been sold for a bit over a year. (Customers who preordered at a higher price and are now eligible for the full subsidy will get a credit for the difference.)

But AT&T uses early eligibility to reward its best customers. Full eligibility, says a company spokesman, “typically occurs anywhere from 12 to 24 months into a two-year contract based on your spending levels, how promptly you pay your bill, and other factors. If you spend more, as iPhone customers tend to, you become eligible for an upgrade earlier. If you spend less, you become eligible later.” iPhone 3G owners who become upgrade eligible in October or later may be able to get half of the full $400 subsidy, that is, buy an iPhone for $399 or $499. People who don’t qualify for any sort of subsidy, which would include those who bought an iPhone 3G recently, pay the full freight: $599 or $699. But again, checking your account status is the only way to know for sure what class you fall into.

    Before it's here, it's on the Bloomberg Terminal. LEARN MORE