Finally, an iPhone Trade-In Program From Apple... but Is It Too Late?

In June, Bloomberg released a story suggesting that Apple (NASDAQ: AAPL  ) was in the process of rolling out a trade-in program for its coveted iPhone. With the introduction of the next generation of iPhones now expected on Sept. 10, 9to5Mac is reporting that the program should finally go into effect on August 30. The timing makes sense, seemingly set to coincide with the release of the iPhone 5S and the iPhone 5C. The wrinkle, of course, is that everyone seems to be coming to the secondary market party at the same time -- this is a major driver of the wireless carrier "early upgrade" plans -- so you will want to watch the relative success of the Apple plan and those offered by T-Mobile (NASDAQ: TMUS  ) , Verizon (NYSE: VZ  ) , and AT&T (NYSE: T  ) .

The Apple program
According to 9to5Mac, the new initiative will be called the "iPhone Reuse and Recycle Program," and will give current iPhone owners a mechanism by which to receive a discount on a new iPhone when the old one is turned in. The specific amount that you can receive for your traded-in iPhone will be based on factors including age, model, and condition, but the implication is that the trade-in values are likely to be less than what competing programs, like Gazelle, currently offer. The prices paid are expected to fluctuate with demand, but through Apple's partnership with Brightstar, the turned-in phones are expected to be recycled in the U.S. -- Apple is continuing with its U.S.-centric push .

The early upgrade options
Over the few last months, early upgrade options have been rolled out by three of the major U.S. wireless carriers. There are subtle differences between the three: T-Mobile's JUMP! Allows you to upgrade twice a year for a monthly fee, AT&T allows for only one upgrade per year for a monthly phone payment, and Verizon will allow two upgrades a year once you've paid off at least 50% of the device you currently carry. Despite these differences, however, the common theme is that by helping the carrier significantly reduce the subsidies that are paid under two-year contracts, you can upgrade your phone with far greater frequency. One important consequence of this change: all three carriers will soon start taking in inventories of smartphones for the secondary market.

Why Apple may be too late to the game
While I think the trade-in program from Apple will offer a nice level of convenience for consumers who want to buy their iPhones from the Apple Store and remain in the longer-term contract model with their carrier, these new programs from T-Mobile, Verizon, and AT&T are likely to redefine the entire industry in ways that may make the Apple program irrelevant. While not everyone will switch to frequent-upgrade plans, the incentives for joining are not insignificant -- I wonder if classic plans will survive if these new options that largely eliminate subsidies are embraced.

Leaving aside the longer-term plans (at the expiration of which your phone will have relatively little value anyway), if you want a new phone often, the options from the carriers are more attractive in most cases. The cost can be spread out across a course of months, and the total payout will likely be better. In July, CEO Tim Cook made clear that he would like to see more iPhone sales come from Apple stores. Ultimately, the iPhone Reuse and Recycle Program is good news for some Apple customers, but, in my opinion, is not likely to drive business as Cook hopes.

While this program may not be meaningful to Apple's bottom line, remember that Apple has a history of cranking out revolutionary products... and then creatively destroying them with something better. Read about the future of Apple in the free report, "Apple Will Destroy Its Greatest Product." Can Apple really disrupt its own iPhones and iPads? Find out by clicking here.

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