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iPhone Upgrade Program could eventually open up beyond Apple Stores, Tim Cook says

Apple would eventually like to expand its new iPhone Upgrade Program so that shoppers can sign up for it without having to come into an Apple Store, Chief Executive Tim Cook said this week.




"We actually solved that problem back in 2007. But then quickly had to change it in order to scale in a major way," Cook said during Tuesday's fourth fiscal quarter earnings call, making reference to the first-generation iPhone, which was sold unsubsidized.

As it turns out, Apple was actually ahead of the curve in 2007 by selling an unsubsidized phone. At the time, users could set up the handset entirely on their own at home after a purchase.

But the following year, with the launch of the iPhone 3G, purchases became largely subsidized through carrier AT&T in the U.S., making the process more complex. For several months, in fact, buyers had to activate their new iPhone 3G in-store, even if they bought it online.

If an iPhone 3G was purchased and not activated within a set period of time, the customer would pay an early termination fee to reimburse the cost of the subsidy— a strategy intended to prevent users from buying, jailbreaking and unlocking the device, which was exclusive to AT&T for years.

Though Apple relented and opted for subsidized pricing starting with the iPhone 3G, in the years since carriers have since moved away from contract subsidies while offering lower monthly rates. Now, carriers prefer that the customer pay the full cost of the iPhone— starting at $649 for an iPhone 6s.

To soften the blow, the cost of the device can be spread out over an extended period, without any interest, as some carrier plans have done.

Apple's new iPhone Upgrade Program takes it one step further, offering an unlocked, contract-free phone with AppleCare+, with an option to upgrade to a new handset after 12 months of interest-free payments. Most carrier installment plans are for locked phones.

The Apple iPhone Upgrade Program is currently accessible only in Apple Stores, presumably due to the financial arrangements involved. Purchasers have to sign up for a 24-month installment period, which is actually an interest-free loan that they must qualify for with a credit check.

Ultimately Apple would like to "have that automated and working with our partners, with service providers," Cook said Tuesday.