Apple releases details of its new iPhone 7.
Apple releases details of its new iPhone 7.

iPhone 7: Hidden dangers of buying on a plan

SO you want to upgrade to the latest iPhone 7 or iPhone 7 Plus?

But you don't have up to $1200 to fork out.

So you sign up on one of those 'sweet' two year plans which offer a subsidised handset cost.

But the end result is that you could be paying hundreds more than you really should - and locking yourself into a data plan that may become out of date in a matter of months.


Because we've all become much bigger consumers of mobile data - particularly by consuming video and sharing higher resolution photos and videos.

What might be a great plan this year, might not cut it next year, especially as you start playing with your new dual 12 MP iPhone 7 Plus cameras.

Economist, John de Ridder was commissioned by Australia's fourth largest mobile service provider amaysim to explore the true value equation of two year contracts.

Mr de Ridder has warned that Aussies are not factoring in the true 'opportunity cost' of committing to a two-year mobile contract.

"Because you're committing to a set plan, you have to be sure that your usage over the term of the contract will more or less stay the same, and that's a tough call given the huge growth in data usage that's expected in the future."

"The reality is that a lot will change over the next two years, and what Aussies need from their mobile plan in 6, 12 or 18 months is likely to be very different to what they are using today," Mr de Ridder said.

The other enticement used to lure Aussies into a two-year contract, says de Ridder, is the so-called 'subsidy' of the handset itself.

"Don't be fooled by handset subsidies. Two-year contracts which include premium handsets are constructed to look like the carrier is heavily subsidising your new smartphone, but it's often smoke and mirrors."

"By comparing the data allowance of a contract plan with its nearest comparable BYO SIM-only plan, it's clear that the remaining handset costs are simply being offset in the monthly plan fee.

"One carrier's entry-level $40 iPhone 7 plan is $18 more expensive than the equivalent SIM-only plan from the same carrier.

"While the $45 per month handset repayments make it look like you're only paying $1080 for the iPhone 7 128GB (RRP $1229) over two years, that price difference adds another $432 to the contract term - so you're actually paying $1512 in total to get the iPhone.''

The future of mobile

Over the next five years, video traffic in particular is expected to surge, with Ovum estimating that mobile video traffic will increase ten-fold and account for 75 per cent of total 4G traffic by 2020 due to innovations such as VR/AR applications, mobile video, social media video, and 4K UHD video.