Apple iPhone Upgrade Plan Doesn't Threaten Partners

Many large carriers are touting their reimagined approaches to billing and mobile device upgrade plans for customers. Now Apple is throwing its hat in the ring and challenging telcos with its iPhone Upgrade Program that will allow customers to finance their iPhones through Apple, independent of their service provider or contract.

Announced yesterday during Apple's special event, the iPhone Upgrade Plan lets customers purchase unlocked iPhones direct from Apple that can run on Verizon, AT&T, T-Mobile and Sprint networks. Customers can pay Apple for their phones over a 24-month period.

Despite a two-year payment schedule on Apple's iPhone Upgrade Program, customers will be able to get the latest iPhone once every year. After 12 payments starting at $32 a month, customers can trade in their device for a new iPhone and begin a new upgrade program, according to Apple's Upgrade Program website.

[Related: Partners: New iPad Pro Will Drive Much-Needed Apple Tablet Refreshes]

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Camera Corner Connecting Point, a Green Bay, Wis.-based solution provider that partners with Verizon and Apple, doesn't see the newly unveiled program as a threat to the channel, said Brett Baierl, sales manager for the company.

Camera Corner Connecting Point sells iPhones to its customers through its partnership with Verizon. Unlike Apple's approach with its iPhone Upgrade Plan that will charge customers interest on their phones, partners that sell devices through carriers don't charge interest. They are charged the base price of the phone -- $650 divided by 24 months -- so the cost ends up being cheaper for the end customer, Baierl said.

"I don't see this plan affecting business too much because customers will pay roughly $27 a month for a phone through [CCCP], instead of $32 per month [from Apple], which comes out to $768 for the iPhone over 24 months," he said.

For years, customers have grown used to signing a contract -- often two years -- with a carrier that would often include a deeply discounted mobile device. While some customers balked at the idea of waiting 24 months for a mobile device upgrade, others enjoyed getting a new device for less than half the sticker price.

Some carriers, like T-Mobile, have done away with contracts in favor of device "leasing" programs that spread the cost of the device over the length of the plan. Verizon recently announced that it is abandoning its two-year contract option for new customers. Sprint and AT&T offer both device leasing programs that let customers pay monthly for their phones, as well as the traditional two-year contract option with one subsidized phone payment.

The trend away from contracts is picking up steam as more carriers get on board. "We had a feeling something like this was coming from Apple," said Andrew Hartwyk, solutions architect for MOBI, an Indianapolis-based enterprise mobility management solution provider. MOBI partners with Apple, as well as with several carriers, including Verizon, AT&T, Sprint and T-Mobile.

But Apple will have to play nice with carriers if it wants its Upgrade Program to be successful long-term for business customers, Hartwyk said. Many business customers will want one bill, instead of one from a carrier and one from Apple. "I'd be surprised if the program lasted long without Apple allowing the program to be single-sourced, on carrier paper," he said.

And many business customers still will prefer to buy devices at a subsidized rate from their trusted business partner, CCCP's Baierl said. "I know a lot of our business customers will prefer to do the traditional two-year contract and pay $199 for the phone," he said.

According to Apple, the iPhone 6S and iPhone 6S Plus still will be available starting at $199 on-contract.

But Apple's plan will allow customers to get a new iPhone every 12 months, something Verizon doesn't allow until the phone is completely paid off. "With some of our Apple customers, they want that new device as soon as it comes out, but we just tell them to pay off their remaining balance so they can get a new phone and sell their old phone," Baierl said.

While Apple's plan may not affect the channel, carriers might not be immune, MOBI's Hartwyk said.

"I think the Apple Program will have an impact on how many devices the carriers end up selling," he said.

AppleCare+, Apple's device protection plan that's included for device purchases made through the new program, also will be appealing to customers, Hartwyk said. "This could hamper carriers' relationships with third-party providers that resell warranties," he said.

But while device sales may dip, the Apple Program won't necessarily impact the carrier's bottom lines too much, Baierl said. "These customers that might buy from Apple are still going to remain with their carriers," he said.

The iPhone Upgrade Program is available to qualified customers and is financed through a 24-month installment loan with Citizens Bank, according to Apple.

Apple said it will still give customers the option of buying iPhones at full retail price. The pricing for the new iPhone 6S and iPhone 6S Plus will remain the same as last year's model, starting at $650.

Neither Verizon nor AT&T responded to CRN's request for comment before press time.