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FAQ: The new iPhone brings changes to activation, price plans

Apple, AT&T change the game with in-store activation, higher monthly fees

June 11, 2008 12:00 PM ET

Computerworld - The more we know about Apple Inc.'s new iPhone 3G, the more questions we have.

Is it really cheaper? What's the plan on plans, Stan? Can I still put up my feet and activate with iTunes at home? Those are some of the questions that have had us scratching our heads since Monday, when Apple CEO Steve Jobs held up the iPhone 3G.

We've been digging into the nuts and bolts, particularly how customers in the U.S will activate the new model when it goes on sale July 11 and how much the service plans will cost. So let's get started.

Is it true that customers will have to activate the iPhone 3G at the store? Yes, at least in the U.S., where AT&T Inc. remains the exclusive mobile service provider selling Apple's phone.

According to an AT&T internal memo obtained by Gizmodo, the "iPhone 3G will be activated at the point of sale when the device is purchased, in store." That means Apple, too, will be activating the iPhone 3G in its stores. (We can't imagine that AT&T would agree to, essentially, simply send business to Apple's stores by allowing anything else.)

This is, of course, a major departure from the unusual -- in the cell phone handset business anyway -- method that Apple had used since June 2007, which was to allow buyers to activate their new iPhones at home, online, via iTunes.

You sure about this? Absolutely. And if you think you're bummed, look what happened to the company that provided the online activation services, Synchronoss Technologies Inc. It took a drubbing on the market this week, and as of Wednesday's close, its stock was down 26% for the week.

I liked the online activation. It got me out of the store pronto, for one thing. Why the change? No one's saying, but analysts have been quick to connect the dots between online activation and unlocking.

By requiring in-person activation -- which is, remember, the way most phones are sold -- AT&T locks the customer into a two-year contract before he or she exits the store. There's no longer a way to buy an iPhone, then hack it -- "unlock" it in the parlance -- and then use it on another carrier's network.

"Sadly, AT&T has forced Apple to drop this unique feature, now requiring in-store activation of the phone, presumably to ensure that it earns back its iPhone subsidies from subscriptions," said Carl Howe, an analyst at Yankee Group Research Inc., in a blog post on Wednesday. "This is one of the rare circumstances where Apple has decided to degrade the customer experience to please its carrier partners."

Other markets may or may not also require in-store activation; the details are murky. (Though, again, it would seem odd, to the say the least, that the rules would vary country to country.) O2, Apple's exclusive partner in the U.K., will also reportedly use in-store activation only.



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