O2 doubles price of new iPhone, blames lower subsidies

Much to the annoyance of UK consumers, O2 UK plans to nearly double the price of the newly announced iPhone 3G S, making it much more expensive than when the company introduced the 3G iPhone over a year ago. The company claims it cannot afford the previously high level of subsidy applied to the iPhone and has increased prices accordingly.

O2 has stated it will lift the retail price of the 32GB iPhone 3G S handset to over £270, more than a 70 per cent uplift from the old 16GB iPhone handset introduced at £159 on the lowest monthly tariff.

In the UK, however, O2 has gone for higher launch prices. While the old 16GB handset was introduced at £159 on the lowest monthly tariff, the new 32GB model costs £274 (a 72 per cent increase). The new 16GB handset costs £185 on that tariff, compared with the old 8GB model's £99--an 87 per cent increase.

In response to this move a string of Facebook protest groups have sprung up, while some angry customers have set up online petitions and are circulating the email addresses of senior O2 executives in an attempt to force them to reduce prices.

The O2 spokesman said the company was working hard to keep its contract prices stable, and that many existing iPhone owners would be eligible for an upgrade. "All the price plans are the same, it's the hardware that has changed," he said. "We set the pricing on a variety of factors--not least of which is the wholesale price that Apple charges us."

Heaping further cost on to the consumer, O2 has announced it will have to pay an extra £14 per month to use the tethering function of the new iPhone, which enables the device to act as a 3G modem.

For more on this story:
Business Week
and The Guardian

Related stories:
Rumour mill: O2 to lose iPhone exclusivity, but win Palm Pre deal
SIM-only and iPhone boost O2 subscriber numbers
O2 pushes 3G iPhone sales to retain exclusivity 
iPhone prices slashed as operators prepare for new product

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