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Does the UK iPhone Plan Add Up?

Posted by Zonk on Thu Sep 20, 2007 03:03 PM
from the extra-tax-for-awesomeness dept.
An anonymous reader writes "Is it just me or is the UK iPhone deal seriously more expensive than the US deal? If you look at what AT&T offers compared to what O2 offers, you get significantly less for your money in the UK than you do in the States. It's also significantly more expensive than other non-iPhone deals in the UK, which offer similar services. Steve Jobs response to the more expensive UK iPhone is that 'it's more expensive to do business in the UK', but what does that mean? As a UK resident I'm disappointed that we didn't get the same plan as the AT&T plan, particularly the free mobile-to-mobile calls. Is there some element of the UK iPhone service that I'm missing here?"
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  • In the US, we pay for incoming calls.

    In other words, our minutes are eaten in half if we make as many calls as we receive. That's probably one aspect right there.
    • Unless I missed something it doesn't state that the inclusive minutes aren't X-network. Given that almost all bundled minutes are X-network in the UK what is the submitter talking about?
    • Plus 17.5% VAT on the iPhone itself and the mobile tariff. Most business customers would be able to claim that back.
    • by Andy Dodd (701) <atd7.cornell@edu> on Thursday September 20 2007, @03:16PM (#20687135) Homepage
      In general, US and European providers have VERY different pricing structures, and so you will not likely ever see parity in plans available.

      Among other things, as I understand it:
      European wireless customers never pay for incoming calls. Calls are charged to the caller, whether the caller is a landline or mobile. U.S. wireless customers pay for all incoming and outgoing calls (well, the calls are deducted from their monthly airtime allowance...), subject to exceptions (mobile-to-mobile on the same carrier, off-peak times)
      European wireless customers only pay for outgoing SMS, not incoming. U.S. customers pay for both, with the above voice exceptions often applying to SMS.
      Few European wireless carriers offer flat-rate data plans, although their pay-per-kilobyte prices are typically far cheaper than U.S. pay-per-KB prices. U.S. carriers offer exorbitant pay-per-KB prices so that anything but a minimal amount of usage proves to be more expensive than the flat-rate monthly plans. This is the big problem with the iPhone in Europe - as a few other articles have indicated, it was basically designed around an unlimited-data plan and in fact AT&T won't sell you the unit unless you get unlimited data service.
      In general, Europeans jumped straight from GPRS to UMTS, skipping EDGE deployment. Bad for iPhone, no UMTS capability.

      To make a long story short - comparing pricing between a U.S. carrier and a European carrier is like comparing apples to oranges. It's much easier to compare pricing schemes between U.S. carriers, which all operate on similar principles. (One exception - I get the impression European plans are a much closer match to U.S. prepaid/pay-as-you-go plans, except they are far more reasonably priced. U.S. PAYG plans are massive ripoffs.)
      • by digitig (1056110) on Thursday September 20 2007, @03:33PM (#20687431)

        European wireless customers never pay for incoming calls. Calls are charged to the caller, whether the caller is a landline or mobile.
        Unless they go to another country (geographically pretty much equivalent to crossing a state line in the USA), in which case incoming calls /are/ charged.
          • Re: (Score:3, Interesting)

            You have to cross a body of water to reach another state?
            From at least one US state, yes -- Hawaii. I can't offhand think of any European state with no land boundary (the UK has a land boundary with the Republic of Ireland, of course), but somebody with better knowledge of geography than me will no doubt be able to think of one.
      • European wireless customers only pay for outgoing SMS, not incoming. U.S. customers pay for both, with the above voice exceptions often applying to SMS.

        And often US carriers do not provide a way to block unwanted text messages, causing me to have spent about a dollar over the life of my phone (I've had it for four years) on ten-cent text messages that someone who didn't know I don't use them sent me.

      • comparing pricing between a U.S. carrier and a European carrier is like comparing apple [apple.com]s to orange [orange.co.uk]s.
        Yeah, they're different, alright.

      • Few European wireless carriers offer flat-rate data plans, although their pay-per-kilobyte prices are typically far cheaper than U.S. pay-per-KB prices


        Well apart from Verizon of course. I heard they had a deal for 0.002 cent/MB which seems amazingly cheap. And you get fantastic customer support to back it up...
            • Re: (Score:3, Insightful)

              The deal with PAYG is that you can CHOOSE to not pay the $30 if you're poor that month and just not talk on the phone as much. It's not a better deal per call, but a more flexible for your wallet on limited funds. Best part is that you can't go huge amounts OVER and get slapped with even more money you can't pay down. Because then they tack on late charges and if you take more than 2 months to pay they disconnect you and charge the contract at $200. With PAYG if you run out of money, you just don't get
        • Re: (Score:3, Informative)

          In some ways it is silly, but I think it rose from pricing structures and regulations regarding landline phones, i.e. a mobile carrier could not force a landline provider to charge the landline user for calls to that mobile carrier's network. There are (or at least were) pretty clear rules regarding what numbers cost money and what don't for landlines, and mobile pricing schemes evolved around those.
        • Re: (Score:3, Informative)

          You charge the cell phone because landline local calls are free. Cell phones in America have no different number system, so you don't know f you are calling a cell or landline phone. All you know is whether it is local on long distance.
  • by LanceUppercut (766964) on Thursday September 20 2007, @03:07PM (#20686909)
    I'm un the US and with my provider/plan I don't get free mobile-to-mobile calls. Moreover, I have to pay for incoming calls and messages. This all depends on the particular provider/plan. It's about O2, not about Apple.
  • Cruel Britannia (Score:5, Informative)

    by samuel4242 (630369) on Thursday September 20 2007, @03:07PM (#20686913)
    Alas, the tax rates are dramatically higher there and they probably sock it to the cell phone folks. There are many things to love about Britain, but it's not known for selling stuff on the cheap. Practically everything costs more there except, perhaps, for warm beer. And if memory serves me right, there was a raft of regulations that kept prices of beer cheap. That's a simple way to buy off the masses.
  • 02 (Score:4, Insightful)

    by SpectreBlofeld (886224) on Thursday September 20 2007, @03:08PM (#20686937)
    "As a UK resident I'm disappointed that we didn't get the same plan as the AT&T plan, particularly the free mobile-to-mobile calls." This has nothing to do with the iPhone and everything to do with your carrier. Virtually all U.S. carriers include unlimited mobile to mobile, iPhone or not.
  • by hattig (47930) on Thursday September 20 2007, @03:08PM (#20686951) Journal
    The free WiFi via TheCloud makes the wifi portion of the iPhone actually useful, as there are thousands of TheCloud WiFi networks around the country. I don't think that there is anything similar for the US iPhone.

    Also the unlimited data usage is probably underestimated. Sure, they say 1400 pages a day, but how big is a web page these days (excluding Flash)? 100KB? That's 140MB a day, which would cost a tonne over here with many other deals.

    The talk and text limits are rather poor of course. I pay £10 a month for 500 minutes and 100 texts with Three, so when £35 only has 200 minutes and 200 texts and no phone subsidy you have to worry.
        • by hattig (47930) on Thursday September 20 2007, @06:06PM (#20689685) Journal
          Don't forget VAT!

          £35 is £29.80 without VAT, or $60 for 200m/200t/wifi, or £23.83 / $48 for the 200m/200t only. Also because you don't lose minutes on incoming calls, that's effectively 400m/400t when comparing to the US if you get as many calls as you make. And the contract is 18 months long instead of 24.

          The lifetime cost of the iPhone is £269 + £35*18 = £900. That's $1532 taking off tax and translating into US dollars. That compares reasonably very well with the lifetime cost of the iPhone in the states. And you don't need to buy a new iPod.

          Apart from that the situations are so different it is pretty pointless to compare the plans.
  • Try lowering VAT (Score:3, Insightful)

    by iamacat (583406) on Thursday September 20 2007, @03:11PM (#20687013)
    Then you can expect similar iTunes store or iPhone pricing as in US. Long-established british companies have probably learned on how not too pay the tax as many times on the same item as a foreigner new to the area would.
    • VAT's not a cascade tax. Any company with a turnover greater than £40000 p/a will be reclaiming the VAT on their inputs as a matter of course.

      It's simple accounting. Mind you, the UK's simple accounting is different to the US's. Everyone uses double entry here.
      • So how does that work? Say I am a company selling cell phones and I need to buy some expensive office equipment to do business. I also have to pay higher salary to my employees because most of the things they buy will be subject to VAT. Can I really reclaim both of these expenses on account that my own product is subject to VAT?
  • by Jethro (14165) on Thursday September 20 2007, @03:11PM (#20687025)
    Apple pushing a product that's more expensive than competitors and expecting people to flock over and buy it just because of they style and hype surrounding it? Why that would NEVER work!
  • by Enlarged to Show Tex (911413) on Thursday September 20 2007, @03:12PM (#20687027)
    I was given this rule prior to my first overseas trip, and I've found it to be generally accurate for the UK:

    Take an item in the US, and it will probably cost the same in GBP in the UK as it does in USD in the US. With the current exchange rate, this means that most items cost a little over twice as much in the UK vis-a-vis the US.
    • by StikyPad (445176) on Thursday September 20 2007, @04:41PM (#20688587) Homepage
      Which is why coming to the States to shop for "expensive" items is a booming industry right now. Back when the AUD was roughly 55% of the USD, I did the same thing there. As a side note, the USD is flushing even further down the international toilet with the recent Fed rate cuts. Enjoy.
  • Rip-off Britain (Score:5, Informative)

    by payndz (589033) on Thursday September 20 2007, @03:15PM (#20687115)
    Everything is more expensive in the UK than in the States, even though wages are lower on average. Why do companies charge more for the same product over here?

    Because they can.

    British consumers have become numbed to paying more for less over the years, so companies clap their hands with glee at the thought of increasing their profit margins by 50% or more over the US for exactly the same product. "Oh, but you use PAL." "Oh, but you use 240 volts AC with three-prong plugs." "Oh, but you have VAT." Always the same excuses, and they're pretty much bullshit - but nobody questions them any more. We've been ground down by decades of being ripped off.
    • by Anonymous Coward on Thursday September 20 2007, @03:21PM (#20687231)
      I have no idea if the parent is correct or not but I'm British, God damn it, and I demand the right to go red in the face and get outraged about being ripped off.
    • Re: (Score:2, Interesting)

      Last I read the UK average wage was around £25k ($50k) a year, and the US average wage was around $40k a year. I'd hazard that was due to poor states dragging the average down?

      However once you take tax into account then what you say is true. I don't know what US income tax rates are, and I know US goods have (~8%) sales tax applied over the sticker price unlike here, but with the UK's 22% income tax (not including first £5k earnings) plus 12% National Insurance, and then 17.5% VAT on most goods
      • Re:Rip-off Britain (Score:5, Insightful)

        by vidarh (309115) <vidar@hokstad.com> on Thursday September 20 2007, @04:03PM (#20687941) Homepage Journal
        Actually, someone making an average salary in the UK will pay 16% income tax - the tax free allowance and the 10% band pulls it down quite a bit.

        And because of the primary threshold on NI, they'll pay 8.8% national insurance (11% between the primary threshold and upper earnings limit).

        So income tax + NI for an average earner is below 25%. Of the remaining 75%, a typical family easily spends a third on things like mortgages or rent and other things that are not subject to VAT. That leaves about 50% of their money that they pay 17.5% VAT on, or 8.75% of their income. Add it up, and the tax burden including VAT is more like ca. 34% total rounded up.

        For comparison, a US average earner at $40k would pay about 19% federal income tax and social security tax (FICA) after deductions. Depending on which state they live in they'll pay anything from nothing (8 states) via 3% flat (Vermont) to around 7-8%, I believe (some states have higher max state income tax rates, but only at higher income levels). So that gives a tax range from 19% to around 26-27% plus sales taxes.

        Of course these figures are not at all directly comparable to UK tax levels, since UK national insurance actually includes comprehensive health insurance and partial dental, to the point where only a tiny fraction of British taxpayers see any value in private health insurance.

        But in any case, when you add up local taxes (in which case you need to take into account council tax in the UK too, though certain cities in the US have local taxes that can far outstrip the UK council tax), state taxes and federal taxes in the US, the UK and US have pretty similar tax levels even ignoring the fact that NI includes health insurance.

        I did the math for myself a couple of years ago, and realized that moving to the US (which was an option due to work) would not have saved me any tax at all unless I moved to some backwater I wouldn't be prepared to live in - in fact I might have ended up paying slightly more, and I would have ended up paying a lot more if I wasn't in a field where full health insurance typically is provided as a benefit.

  • "laws" (Score:2, Insightful)

    by Anonymous Coward
    If I had to guess, I would bet it has something to do with the fact that the UK has these things called "laws" that protect consumer rights. In the long run, that costs corporations money that would otherwise be acquired through shafting the consumer.
  • by The Mutant (167716) on Thursday September 20 2007, @03:18PM (#20687171) Homepage
    Consumer Protection Laws are far more rigorous [tradingstandards.gov.uk] in the UK than the US.

    I'm American but have lived in London for ten years. Yes, (some) things are more expensive here. I was curious and looked into it. Excepted from the above link:

    When you buy goods from a trader, such as a shop, market stall, garage, etc, you enter into a contract, which is controlled by many laws including, the Sale of Goods Act 1979 (as amended by the Sale & Supply of Goods Act 1994 and the Sale and Supply of Goods to Consumers Regulations 2002). The law gives you certain implied, or automatic, statutory rights, under this contract.

    The Sale of Goods Act 1979 (as amended) says that goods should be :

    • Of satisfactory
    • Fit for the purpose
    • As described


    Store policies don't matter; this is the law and retailers must incorporate this cost into selling prices.

    • How is this any different from the Uniform Commercial Code Article 2, which covers contracts over the sale of goods?

      2-314. Implied Warranty: Merchantability; Usage of Trade.

      (1) Unless excluded or modified (Section 2-316), a warranty that the goods shall be merchantable is implied in a contract for their sale if the seller is a merchant with respect to goods of that kind. Under this section the serving for value of food or drink to be consumed either on the premises or elsewhere is a sale.

      (2) Goods to be

      • Re: (Score:3, Informative)

        The difference is in the very first clause of the very first section: Unless excluded or modified

        A consumer's statutory rights may not be excluded or modified in the UK. A retailer can only grant additional protection to the consumer, NEVER remove a statutory right

        US retailers can put up a sign saying: "no returns on sale items." In the UK this is utterly unenforceable. US retailers, as a matter of course, print post-partum conditions of sale on the receipt that they hand you after you have paid for th good

  • The answer (Score:5, Informative)

    by Mr_Silver (213637) on Thursday September 20 2007, @03:20PM (#20687199)

    Is it just me or is the UK iPhone deal seriously more expensive than the US deal?

    It's not called Rip Off Britain [rip-off.co.uk] for nothing you know.

    Seriously though, yes our prices include VAT at 17.5% which people often forget to take into account but, even so, there are plenty of products which have such a colossal additional mark-up on them (Windows Vista is twice as expensive which tax and shipping costs cannot explain away) compared to our European and American counterparts that it is hard not to feel cheated.

    The Wikipedia article [wikipedia.org] on it is worth reading and notes that these items cost significantly more in the UK:

    • CDs and DVDs
    • iTunes Store songs, tv programmes, iPod, and iPod games
    • Computer Software - the most notable example being Microsoft Windows Vista
    • Books
    • Electrical Goods
    • Houses
    • Petroleum and diesel fuel

    Unfortunately as we put up with paying those prices, we allow companies to continually screw us.

    • Fuel is a special case and has little to do with companies wanting to screw us - the fuel prices in the UK consists of about 70% taxes, and it's a conscious policy to tax fuel that high, as in most of the rest of Europe (though UK is towards the high end even in Europe).
    • I really wish people would stop parroting these Daily Mail catch phrases. They're so bad at them. Surely people can come up with something that isn't completely lame. The current one just asks for the "well move somewhere else then" response.
    • There is, of course, the translations part.. translating Windows can't be cheap; though it surely can't be -that- expensive either.

      Note that Adobe and Autodesk also have vast price increases up to well over 2x as expensive; not including the 17.5% / 19% VAT that gets added on top. With the sucking U.S. dollar, that's only getting worse and worse. It'll be interesting to see if Adobe / Autodesk / etc. will adjust their non-U.S. pricing to adjust for this, as currently it is much cheaper to import from the
      • Re: (Score:3, Insightful)

        There is, of course, the translations part.. translating Windows can't be cheap; though it surely can't be -that- expensive either.

        What translation? It's not like they offer Windows in Welsh or Gaelic.* Microsoft cares so little about Britain that they can't even be bothered to take five minutes to change "color" to "colour". No, I don't think they can claim translation costs are what's pushing the price up.

        * Yes, I know a Welsh interface pack does finally exist now, and a Gaelic equivalent is apparently

  • O2, not Apple (Score:3, Informative)

    by saterdaies (842986) on Thursday September 20 2007, @03:34PM (#20687449)
    Looking at O2's website, we see this breakdown in plans: 200min plus 400 text: 25pounds 750min plus 100 text: 35pounds 1350min plus 100 text: 50pounds http://shop.o2.co.uk/tariffs/18_months/Talker [o2.co.uk] http://shop.o2.co.uk/tariffs [o2.co.uk] THESE ARE ONLINE-ONLY SPECIALS. One has to assume that the iPhone will cost 10pounds more per month than the normal plans (since they cost an extra $20 more per month over here). So, the iPhone charges 10pounds more at the 200min level (but you loose half the texts), 10 pounds more at the 750 minute level (loosing 150 minutes, but gaining 400 texts), and 5pounds more at the 1350 minute level (again loosing 150 minutes and gaining 400 texts). They MIGHT be a worse deal than the AT&T plans over here, but not by much. They're pretty much standard O2 rates plus 10 pounds. Since the AT&T plans are the standard AT&T plans plus $20, that's pretty equivalent. NOTE: In both cases, the premium you're paying for an iPhone plan is getting you unlimited data and so if you're already paying for that, you might not consider it an increase in fee at all.
  • It's hard to imagine how a country that pays more for everything is surprised that the iPhone's service plan isn't the same price as the US version. Of course, that gives the ignorant shills an opportunity to spew such silliness as "Apple takes 40% of O2's revenues!!!" and other made up factoids.

    BBC Prints Irresponsible Rubbish on Apple [roughlydrafted.com]
    The BBC has joined the London tabloid press in printing a series of articles skewering Apple over invented suppositions based entirely upon misinformed speculation and some o
    • "It's not just the American media that is desperate to publish misleading or downright false information in attempts to prevent the erosion of existing barriers to innovation"

      But the iPhone doesn't innovate. It's actually an extremely limited handset that uses outdated connection formats at a time when people want 3G, picture messaging, video messaging and downloadable content. The nokia N95 does much more than the iphone and is several hundreds of pounds cheaper.

      "Apple takes 40% of O2's revenues!!!"

      The iPh
  • Steve Jobs is still mad at Gordon Brown because of that incident last month.
  • not comparable (Score:5, Interesting)

    by fermion (181285) on Thursday September 20 2007, @03:39PM (#20687511) Homepage Journal
    I doubt that an arbitrary wireless plan in the US can be compared to an arbitrary wireless plan in Europe. For instance, the ATT plan allows free roaming around an approximately 3 million square mile area, as well as roll over minutes, and lots of free times. Saying that a UK plan does not offer such luxuries or that the US plan is cheaper makes no sense as the market features are not the same.

    There is nothing special about a Mac or iPhone or iPod. The Mac provides me a great deal of value, so I buy it. The iPhone does not provide the value that the additional costs would warrant, so I won't buy one. I think people miss this simple point when they complain about the price drop of the iPhone. Current users effectively spent $2000 for the phone. This amount of money meant that the phone must have had some significant value to them, especially those that bought the first week. The $200 discount then represents a mere 10% discount, and 10% is an exceptional price to become an early adopter. I was not an early adopter my normal tolarance for contracted costs is about a third of what Apple and ATT wanted.

    I hope we don't have to endure another year of moaning about the cost of the phone, or the cost of the plan, or the cost of early adoption. Those who have it find some value in it, and that is really all there is to it. Apple sells expensive machines, and those that need or want them buy them. Those that do not don't. If one needs or wants an iPhone, the costs will be worth it. Otherwise buy something else and apple will out the costs until it is low enough to attract the expected number of consumers.

  • by BlueParrot (965239) on Thursday September 20 2007, @03:43PM (#20687563)
    I'm sure the European commission will LOVE apple locking the iPhone to O2, and I'm sure they will LOVE how it will operate together with iTunes. I'm also sure the European market will LOVE that it has shoddy 3G support. Also, I'm sure the lack of big Telecom monopolies in most EU countries will make it just as successful to do this over here as in the US. Don't get me wrong. Apple will make money here. It just won't be because the iPhone or the price plan, or service, or provider will be any good, but rather because the marketing and the hype will be. In short, they are going to offer a very sucky deal combined with a massive marketing campaign, and a lot of idiots will think the iPhone is actually remarkably innovative, when it really isn't even equal to a lot of phones already on the European market.

    Then, if it actually does become a large success the EC will want to have something to say about the relationship between the iPhone, iTunes and the iPod, and also the deal with O2. If they actually decide to do something about it then a bunch of people who can barely find Europe on the map, let alone know anything about its legal history, will moan and accuse the EU of being partial against US companies, and as a result get flamed on slashdot [for great justice]. Politics at its finest...
      • Re: (Score:3, Informative)

        But they are required to unlock the phone for no charge at the end of the contract (which may be well before the end of the initial contract period if the terms & conditions are changed to the user's detriment partway through). So they're going to have to provide an official mechanism for unlocking iPhones.
  • Who cares? (Score:4, Funny)

    by Anonymous Coward on Thursday September 20 2007, @03:46PM (#20687599)
    You're the douche who bought an iPhone.