Why #O2Fail is really ‘iPhone customer Fail’

So, the new iPhone 3G S has been announced and Apple fans are keenly expecting to upgrade upon its release on the 19th of June. Keen, that is, until they find out the cost of upgrading.

In the UK, O2 is telling iPhone customers that they’ll need to buy out of their existing contract before signing up on a new deal for the 3G S. For customers who bought an iPhone 3G on release day last year with 7 months left on their 18 month contract, that’s at least £245 (if you’re on the cheapest monthly price) that you’ll have to pay before signing up for a new contract and maybe paying towards your new phone too.

Last year, there was none of this. Existing iPhone users could upgrade to the 3G version without having to buy out of their existing contract, simply signing up for a new one. It’s understandable that these people were assuming that they could simply do the same this time.

Now they’ve found out they can’t there’s a bubble of anger building. The hashtag #O2Fail is trending highly on Twitter this morning and a petition has been launched asking for “A reasonable way to upgrade to the iPhone 3GS”.

Unfortunately, these people are missing a pretty obvious fact. The original iPhone wasn’t subsidised; you had to pay full price for it. The 3G, on the other hand was subsidised heavily by O2 meaning that part of the money you pay to them monthly covers the price of the handset.

This is how it usually works in the UK. You can pick up a top-of-the-range Nokia for free because you pay for it monthly in your contract. If you want to upgrade early you have to buy your way out of the contract because you committed to it.

Whether it’s a fair system or not, that’s the way it works. Apple fans had it good last year, but O2 doesn’t owe them anything. There’s no way they could take the hit of writing off all the money they spent on iPhone 3G handsets last year just to satisfy their customers’ gearlust. The iPhone offers the best user experience of any phone on the market but that doesn’t make it immune from economic realities.

Tech humour site TechChuff has the right idea. Their alternative petition hits the nail on the head.