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When Did the iPhone Become the "Must Pay"?



September 19, 2012 – Comments (3) | RELATED TICKERS: AAPL

Board: Macro Economics

Author: yodaorange

Several months ago I found myself at a free standing cell phone store for one of the large national carriers. I noticed an ATM machine in one corner of the store. I thought it was out of place but did not think about again until a young lady came in to use it. I couldn’t look over her shoulder to see what she was doing, so I asked one of the salesmen about it. I asked why a customer would come to a cell phone store to get money from the ATM instead of one of the drive through ATM’s at banks.

The salesman explained that customers were NOT taking money out of the ATM, they were making their cell phone payments. The salesman said that customers would do “whatever it takes” to insure their cell phone service was not cut off. He said it was particularly true for iPhone users. They would wait until the last day to make their payments, because they were broke.

After that experience, I started asking iPhone users about their usage habits. Two comments were the norm:

1) “I could NOT live without my iPhone.”
2) “I will always pay my iPhone bill even if I do NOT have enough money to pay other bills”

I asked many iPhone users how much money they were saving for their rainy day fund or retirement fund. Typically I would get a look like “what planet are you from? I don’t save anything every month.”

I naively hoped that my data was bad due to a small sample size. Unfortunately, it appears that my sample was part of the regular distribution. This week a new study was released from based on interviews with 2,310 adults. [1] A few highlights:

Nearly half (46 percent) of mobile phone owners surveyed pay $100 or more per month for their mobile phone service. More than one-in-ten (13 percent) pay $200 or more per month.

For some U.S. adults with mobile phones, the costs of their service plans are higher than many other household expenses. More than one-in-five (21 percent) of mobile phone owners said they pay more for their mobile phone service plan in a typical month than they do for groceries. When asked which other typical expenses they spend less on their mobile phone service, U.S. mobile phone owners said the following:

• Basic utilities like water, gas and electric – 33 percent
• Cable TV – 57 percent
• Internet service – 71 percent

Undoubtedly, iPhones can and do improve the business productivity for many users. I am having a hard time seeing how checking Facebook every X minutes or playing Zynga updates business productivity.

Cool- Yes. Fun-Yes. Keeps you in the “In crowd”- Yes
A “must have” item to make life worth living in 2012- Yoda’s opinion= NO

As you might surmise, my success rate in convincing folks to dump their iPhones and save their $100 per month is ZERO. Better to be broke with an iPhone than have a few dollars stashed away in the rainy day fund.

And we wonder why the US savings rate hovers around zero . . .


(Who does NOT have an iPhone)

[1] Coupon Cabin cell phone survey

3 Comments – Post Your Own

#1) On September 19, 2012 at 12:34 PM, constructive (99.97) wrote:

You can get iPhone service for $35 a month with Virgin Mobile ($58 per month if you amortize the cost of the phone over 2 years).

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#2) On September 19, 2012 at 5:06 PM, NajdorfSicilian (99.80) wrote:

US savings rate is not zero, it's been closer to 5% for a while. It's even higher if you count longer-term purchases like housing and cars as 'capital investments' instead of considering them akin to bubble-gum purchases.

 Online surveys are not scientific. As clearly shown at the link provided.

 Money is fungible. You could say the same about cable. Or car payments [why doesn't everyone drive a used Tercel?] Or vacations instead of saving. Etc.

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#3) On September 20, 2012 at 2:08 AM, awallejr (34.86) wrote:

I dunno it really is between the iphone5 and the samsung s 3 for me.  I am leaning towards the samsung now.  Am just waiting until after there are iphone5s on display to compare.

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