AT&T Giving iPhone Users A Case Of Sticker Shock

New iPhone users are gasping as the first bills arrive and they read numbers that are significantly higher than they thought they’d be.

One blogger writes:

A $36 activation fee + a $70 a month plan (Including the $10 more for 1,500 text messages) + 8.9% tax does NOT equal $139.73. Yet AT&T has no explanation as to why this costs what it does. It should be AROUND $117.

When I called AT&T on Friday, they said it was part of the plan and there was no way around it. I was told to call back on Sunday and speak with a representative, (which by the way is IMPOSSIBLE to find on their web site, if it exists at all) to find out that AT&T’s customer service department is not open on Sunday.

Ha, ha, ha! Call back on Sunday! That’s hilarious, AT&T. Anyway, the average amount of tax on a cell phone is 16.8%, according to Forbes, so that explains some of it. The rest is likely due to a prorated month of service being taxed on there for people who activated at the end of June. Also, AT&T bills one month in advance for new activations. New iPhone users should see their next month’s bill drop.

If you have questions about additional charges to your bill and what they mean, check out AT&T’s Additional Charges section.

AT&T Ruining iPhone experience… [A Hind-D?! via digg]
(Photo: epicharmus)

Comments

Edit Your Comment

  1. BillyShears says:

    I’m continually floored by how people are reacting to every aspect of the iPhone. It’s like they’ve never, ever seen a cell phone or a cell phone bill before.

    In addition to various taxes, there are various fees tacked onto each bill, so that might make up the final difference in your calculations.

  2. Brilluminati says:

    I’m floored by how people are reacting to the service that they are receiving from ATT/Cingular.

    They had horrible customer service before the merger, after the merger, before the Iphone, and it continues…

  3. Hawk07 says:

    Apple should directly bill customers with the “fad” tax to recoup advertising costs.

    Nobody said it was cheap to be trendy.

  4. Godz says:

    I’m also floored by all of this hype. I like how people will start to get owned by bills.

  5. rekoil says:

    @Hawk07:

    I thought that was built into the sale price…?

  6. Mikew3st says:

    Can we stop with the flooring. Please.

  7. Brilluminati says:

    hehe..or “Fanboy” tax

  8. JRuiz47 says:

    I’m no math major, but ($36 + $70 + $10) x 8.9% is about $126, and yes, the various fees on cell phones and such will cost about $5-10 more, so that would make up for the difference.

    $117, it ain’t.

  9. TheDude06 says:


    Bought apple stock the day iPhone was announced 11@85.
    Sold the day iPhone launched, 11@127.

    Before taxes, thats a $412 gain on $1000 in stock in less than 6 months.

    You guys say “hype tax” as if its a bad thing! It works both ways you know ;)

    I really really was hoping it would hit 138 or so, then i could say that i got an iphone paid for based on its own hype. how zen would that have been?

  10. hc5duke says:

    @JRuiz47: No, the $10 is included in the $70. I’m not even sure if the tax would apply to the activation fee, but even including that, it comes to $115.43. $24.30 seems a bit too high for “additional fees”

  11. uricmu says:

    In addition, AT&T canceled existing discounts on voice plans to existing AT&T customers, arguing that “Apple wanted them to give no discounts”. These are not discounts on the phone. These are discounts on existing voice service. The notion that “you can add 20$ for a data plan” is a hoax. AT&T used this opportunity to make a few more bucks a month.

  12. JRuiz47 says:

    @hc5duke: Well, then, yeah, it’d be closer to $117. Thanks for clearing that up.

    These are my fees and taxes from my $63 service plan.

    Other Charges 3.64
    Taxes, Surcharges & Fees 9.58

  13. @hc5duke: But then, what about the pro-rated month?

  14. chili_dog says:

    I wonder how many of the new iPhone users have never had a data plan before?

  15. Chicago7 says:

    I’m floored. Just floored.

    I drank too much and I can’t get up.

  16. superlayne says:

    The floor is littered with shocked consumers.

    I’m not surprised. I feel kind of like a spectator, watching a bunch of yuppies and business men buy a bunch of gremlins, then feed them after midnight…

  17. anatak says:

    They must have missed the “Federal Mandatory Steve Jobs Recovery Fee” on the bill.

  18. Techguy1138 says:

    So is this actually anything different from usual or is it just that a new group of people are feeling the heat?

  19. CreativeLinks says:

    Err, doesn’t the iPhone have a calculator?

  20. Secularsage says:

    Such is the cost of being an early adopter…

    Companies like AT&T skim the market all the time, assuming that demand is inelastic and people will pay whatever they have to for the status of having the next “big thing.”

  21. Mojosan says:

    Oh, the Haterade is flowing in this thread.

    Got an iPhone last week and I love it. The visual voicemail and threaded SMS is great.

  22. icruise says:

    Up next, physists declare that two iphones can’t occupy the same space at the same time. Customers are floored.

  23. faust1200 says:

    Iphone users need not worry. You only have 23 more months to go! Master of the obvious says: don’t sign a 2 year contract on an unproven piece of technology.

  24. kamel5547 says:

    Funny on my 52.98 bill at T-Mobile I only have 3.69 in taxes and surcharges (about 7%). I don’t know how on earth you’d get an average tax of 16.8%? Taxes are imposed by the government not carriers, I doubt anyone on earth pays more than 10% in actual taxes on cell phone bills.
    However I do wonder how many of those charges fall under “Other Fees & Government-Related Obligation” (T-Mobile’s wording), which is code for carrier imposed additional profit. To be exact 53.4% of the taxes/fees on my bill ar imposed by the carrier and not the government…

  25. Trai_Dep says:

    Sigh. Ladies… Ladies… If it were up to Jobs, he’s have AT&T charge $0.99/mo. So stop your whining about how it’s Apple’s fault. JEEZUS.

  26. edogat says:

    @Kamel5547

    Cell phone taxes can and are charged at the federal, state, county and city level and the range of rates charged is enormous. Be glad that where you live has low taxes. Plenty of other locales have high ones.

    That said, I’m not certain if the carrier imposed fees are included in the average tax rate or not.

  27. swalve says:

    trai_dep- There is no evidence whatsoever of what you say. But there is evidence of what everyone else says.

  28. maevro says:

    I have gotten AT&T CSR’s to waive fees plenty of times. I recently switched my number and they charged me $36. When I got the bill, I called them up and spoke to a nice lady who gave me a $36 credit back.

    Also, last upgrade they charged me $18 and I got that waived too by a CSR.

    This is why I don’t buy phones from AT&T anymore, I just buy them unlocked like I did with my HTC Trinity. No need to deal with them as they always like to screw you as much as possible.

  29. telepod says:

    My question is why does AT&T charge a $36- Activation fee for the iphone as users take the Phone home and Activate it on their own? Just seems like AT&T is taking money for nothing…

  30. kstagg says:

    Amazing. You pay minimum of $499 a pop for these things. These people wait in line, sometimes days in advance to purchase one of these beautiful phones. Can probably quote the features of their iPhone better than Jobs could, and then to cry ignorance when the bill comes in?

    No sympathy here.

  31. Transient says:

    Most new customers completely ignore this fact: the first bill is prorated and thus significantly higher than a standard bill. Unless the iPhone is handled differently, the “high first bill” is not surprising. That no one has mentioned it here yet prior to crying foul play is somewhat telling. Do I guarantee that’s the reason? No. But it’s most likely and I hear it all the time from customers.

    I am interested in the pricing schemes surrounding the iPhone. Even employees don’t get a discount on the service. It almost seems like Apple has a reseller relationship more than a hardware partnership with AT&T. And who really knows. People who are apt to loathe AT&T will blame it all there, folks who hate Apple will blame it there. Me? I’m an equal opportunity hater.

  32. M3wThr33 says:

    The iPhone can’t copy/paste text. No interest. End of story.

  33. mac-phisto says:

    @Transient: ftw!

    it’s all proration. it’s not really a difficult concept.

  34. hobbbz says:

    Ok folks I’m no math wizard either, but my new bill is $135. I activated on the 29th and my bill cycle starts on the 6th so I have a maximum of 8 prorated days. I understand that part. I have the $60 plan and a $36 activation, no other services. Does that sound reasonable with taxes and what not?

  35. Trai_Dep says:

    @swalve: what planet are you from? Apple makes money on hardware. The more hardware they sell, the more money they make.

    Lower telecom fees = higher iPhone sales = more Apple revenue.

    AT&T uses a different business model, one that drives all the revenues that this thread is speaking of. Revenues which Apple sees none of.

    Really, read a high school Economics text book before you hurt yourself.

  36. zibby says:

    @trai_dep: While it’s true that most reports have Apple making a good profit on the hardware end, they also get a continuing low maintainence revenue stream from the at&t deal. If hardware sales were everything, it seems that making the device available to more carriers would have shifted more units, no?

    Looks like DT is the big winner in Europe after Vodafone told Apple to take a hike. I’d really like to know the exact figures in these deals.

  37. Trai_Dep says:

    Read up more. Apple chose AT&T because of Apple’s demanding terms on customer support and back-end functionality to support the new features of the iPhone. I don’t have the inclination to school you on this, but the internets might help you there.

  38. zibby says:

    Nah, sorry. You’re full of crap. No inclination on my part to school you either. Get a Bloomberg.

  39. ExtraCelestial says:

    People are so quick to call iphone users stupid. Prorated does not mean assign numerous arbitrary charges that not even At&t reps can explain, it’s simply a formula used to charge for an incomplete month of cellular use. As I had a different phone number during this period it should be easier to track this extra prorated charge, but the total just doesn’t add up and the charges don’t make sense. Pro rata is not Latin for 2+2= 5. The issue for me isn’t just the excessive amount, it’s the fact that I’ve called, emailed, and even stopped by my local store and no one could tell me why the figures weren’t adding up or even what equation is used to come up with the prorated amount. To their credit they did offer me a refund of the $36 activation fee (totalling a subtraction of $39.06 from my bill dispelling those 16.8% tax rumours) but that’s of little consequence when the refund appears to be more like hush money and less like an actual solution to my problem.