Apple (NASDAQ: AAPL) announced its new iPhone Upgrade Program that starts at $32 per month and allows users to upgrade their iPhone every year. Customers who opt for Apple's new iPhone Upgrade Program get an unlocked iPhone 6s or iPhone 6s Plus with the Tier 1 carrier of their choice, and Apple's AppleCare+ warranty service.
Apple CEO Tim Cook described the new iPhone Upgrade Program as the best option for customers who wish to upgrade to a new iPhone every year.
Apple's new iPhone Upgrade Program is essentially the iPhone vendor's response to the rise of equipment installation plans (EIP) from the nation's wireless carriers. Under those plans, customers typically pay for their device in monthly installments, and have the option to upgrade to a new device. T-Mobile US (NYSE:TMUS) first introduced the concept almost two years ago, and since then all of the major carriers offer EIP plans. And the plans have proven extremely popular with users.
For instance, AT&T Mobility (NYSE: T) offers the option of getting a 16 GB iPhone 6 for $21.67 per month over 30 monthly installments, which works out to $650; customers can upgrade after 24 installments. Sprint (NYSE: S), for its part, has said new and upgrade-eligible Sprint customers can get a 16 GB iPhone 6 for just $22 per month in device costs with its new "iPhone Forever" program. Under the program, which lasts indefinitely, Sprint said anytime customers don't have "the latest" iPhone, they are eligible to upgrade. Customers can bring their iPhone, trade it in and upgrade on the spot, Sprint said. Customers need to purchase the device through the Sprint Lease program with $0 down at signing for $22 per month for a 21-month lease for qualified customers.
Apple's new iPhone Upgrade Program supports service from the big four nationwide wireless carriers: Verizon Wireless (NYSE: VZ), AT&T, Sprint and T-Mobile. Users can purchase one new iPhone every year. Prices for the service start at $32 per month for the 16 GB iPhone 6s and increase to $45 per month for the 128 GB iPhone 6s Plus. The program is financed through Citizens One Personal Loans.
The Apple upgrade program could also undermine the role of carriers by making them more interchangeable. "Because the iPhone Upgrade Program isn't tied to a single carrier, you don't need a multiyear service contract," Apple states on its website. "If you don't have any carrier commitments, you're free to select a new carrier or stick with the one you have."
"Carriers have been doing away with service contracts for EIP and leasing subscribers, but they are protected because of the phone contract," New Street Research analyst Jonathan Chaplin told FierceWireless. "Now there is nothing tying the customer to the carrier."
Along with the option to upgrade once per year, users also get access to AppleCare+ for iPhone, which provides coverage for up to two incidents of accidental damage from handling. That service typically costs $99 outside of the program.
Apple noted the program requires a 24-month installment loan with Citizens Bank.
If successful, Apple's iPhone Upgrade Program could cut into carrier's own EIP efforts.
After Apple announced its iPhone Upgrade Program, T-Mobile announced its own lifetime coverage satisfaction guarantee. For as long as customers use their iPhone 6s or 6s Plus on T-Mobile's network, if they aren't completely satisfied with their coverage experience they can refund the device in the first month of service and get a full refund. After that, T-Mobile said it will unlock the device and refund up to a full month of service.
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Article updated Sept. 9 and 10 with additional information.