The iPhone Is a Nightmare For Carriers 438
New submitter HungryMonkey writes "According to the latest EBITDA numbers from AT&T, Sprint, and Verizon, the subsidies they have to pay Apple in order to carry the iPhone are drastically reducing their profits. From the Article: '"A logical conclusion is that the iPhone is not good for wireless carriers," says Mike McCormack, an analyst at Nomura Securities. "When we look at the direct and indirect economics that Apple has managed to extract from the carriers, the carrier-level value destruction is quite evident."' So one money sucking leech has attached itself to another money sucking leech?"
Perspective (Score:5, Insightful)
Yeah. 66% of AT&T's 4th quarter sales were iPhones. I was on Verizon for years, switched to AT&T only for their iPhone, and stuck with them only for their GSM capabilities worldwide. Sure, your margins are less when you offer a better service. Would you prefer no sales though?
Re: (Score:3, Insightful)
Gag me with a spoon. FTFA:
chalk another victory for Apple's superior product and unmatched level customer satisfaction. Businesses are just as gaga over the iPhone as individuals -- even archconservative firms such as Halliburton have made the switch.
OK, you like Apple. Next time don't put so much sugar in the Kool-Aid.
Basically, he's just wishing that the wireless carriers would just be dumb pipes and let Apple's Goodness permeate the eather unimpaired.
As I said, too much sugar.
Re:Perspective (Score:5, Insightful)
Re:Perspective (Score:5, Insightful)
Would having wireless carriers be dumb pipes really be so bad?
Minor nitpick: If they were "dumb pipes" they wouldn't have to subsidize the cost of the iPhone. You'd pay full price for it and obtain service without a contract.
Re:Perspective (Score:5, Insightful)
Deal. I've wanted this for years.
Re:Perspective (Score:5, Insightful)
Since you have been able to do that for years, I don't think you are telling the truth.
Really? Its possible to do that in the USA with an iphone? I'm calling urban legend on that. As far as I know that is not possible. It MIGHT be that you can either get the phone for "free" and pay $120/month for service or you can pay $600 for an unlocked phone and also pay the same $120/month. Or you can buy the phone and pre-paid / non-contract voice service but no data service.
Re:Perspective (Score:5, Informative)
T-mobile USA? Ever heard of them? They've offered non-contract monthly plans (with data, same options for the same price as the contract plans, but one payment up-front and no ETF if/when you leave) since forever, and they recently (a year or two back) added contract plans that are cheaper if you bring your own phone.
As a bonus, since T-mobile uses SIMs and aren't evil (or at least aren't the class of evil one expects from US mobile providers), if you got on a cheap ($35/mo, a few hundred minutes + unlimited data) monthly plan plan that was offered only for non-smartphones to tether your N800, you can swap the sim to your N900 when you upgrade, then cut it down and swap it to your N9, still pay the same -- I speak from experience.
On the conventional refill-type prepay, I think T-mobile does have some data options for those (not sure) but I know some of the MVNOs have prepaid data options.
Re: (Score:3, Informative)
If you really had to use iPhone on prepaid in US (with data), you have to either buy international version of iPhone and take it to t-Mobile for their $35 - $50 plan or get a Sprint version of iPhone and use it on Virgin Mobile
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I tested an n900 on Tmobile in December for $3/day(Unlimted everything) and ported my permanent # from VZW after a couple weeks of positive results. $60/mth unlimited everything(2GB @ 4g, after is real slow but useful for emails/ssl/streaming audio). VZW charged me $70 for voice alone(900minutes) for most of the last 10 years and I have 'counted minutes' all along. I live on the outskirts and the sole landline provider is sorely outdated, overloaded and unreliable, so wireless is my most reliable option. So
Re:Perspective (Score:5, Interesting)
Actually, it sounds like it's even worse than that.
OK. Charge people more for iPhones or get tough with Apple, got it.
...Wait, what? Yes. Carriers have been hiking prices, but across the board. So now I'm subsidizing the people who want iPhones because the carriers want iPhone users? And iPhone users increase market share but not profit? Am I in bizzaro-world?
The situation here seems to be that not carrying the iPhone is profitable, since the subsidy cost is so high, but carriers *feel* like they need to carry it because otherwise people who won't end up making them profit will complain and not sign money-losing contracts that cause price hikes for non-apple customers that *do* make them money.
WTF???
Re:Perspective (Score:4, Informative)
USA -> USA rates:
$0.17/minute voice
$0.12/text
$0.17/MB data
Holy crap. Nearly $300/month for medium usage (500 minutes + 200 texts + 1 GB data). This is an improvement?
Re:Perspective (Score:4, Informative)
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Now consider that from a mobile telecoms perspective. How about if I buy the phones direct from say 'Foxconn' install Android, brand them as my phones and pocket the profit margin, hmm, screw bloody apple.
Now that's what I think is really going on. The telecoms are taking at long hard look at how the mobile phones that are connected to their network are sourced. By far the most profitable solution for them, is to supply their own branded device, made by contractors and delivered direct to end users. With
Re:Perspective (Score:5, Insightful)
Yes, again, this is bad, why?
Sure, you have to front the $600 for the phone, but your monthly bill is now $20 instead of $80. After 10 months you're breaking even, and after the two years of the contract your're about $700 ahead, enough to pay for a "free" phone upgrade, and then it's gravy from there on out.
Re:Perspective (Score:5, Insightful)
Except most people are horrible at thinking ahead in financial terms.
And companies don't go out of their way to inform them of the relevant details so the customer can make a reasonably informed decision.
oh, and if people had to pay full price, it would probably lower the cost of the iPhone 200 bucks.
Of course allowing consumer to make informed decision cause a decrease in profits, so it isn't good for Apple of the carrier.
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Or the carrier doesn't really offer it. T-Mobile offers pre-paid bring-your-own plans, except that they won't let you transfer from a post-paid plan to a pre-paid plan.
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Couldn't you just migrate your number to Google Voice temporarily? This should have the effect of canceling the existing T-Mobile account. Then create a new pre-pad account, transferring the number back. You'll have no cell phone for a couple of days, of course, but....
Re:Perspective (Score:5, Insightful)
The manufacturers hate this idea because most people would buy the $200 phone instead of the "free" $600 phone.
Re:Perspective (Score:5, Insightful)
Not in the rest of the world. This is how they buy phones.
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Except there is now no price competition on the phone and the service, so the carrier is free to tell you the phone is 600 when the market would bring the price down over time. Cell phones are so common, even smart phones, that I cant see what supports the high prices.
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Re:Perspective (Score:5, Insightful)
Speaking of Apple avoiding non-Apple bloatware, I often smile when I imagine the wailing and tooth-gnashing at the wireless carriers that must have followed negotiations with Apple.
Re:Perspective (Score:5, Interesting)
Yes, again, this is bad, why?
Sure, you have to front the $600 for the phone, but your monthly bill is now $20 instead of $80. After 10 months you're breaking even, and after the two years of the contract your're about $700 ahead, enough to pay for a "free" phone upgrade, and then it's gravy from there on out.
how is it $20 instead of $80. I thought your bill wasn't going down if you bought a phone outright or after your 2 year contract is over(your bill still doesnt drop, supposedly you have paid them back the subsidized portion.
Re:Perspective (Score:5, Informative)
Sure, you have to front the $600 for the phone, but your monthly bill is now $20 instead of $80. After 10 months you're breaking even, and after the two years of the contract your're about $700 ahead, enough to pay for a "free" phone upgrade, and then it's gravy from there on out.
Except that in the US, you would pay $600 up front and still end up paying the $80 each month. US carriers do not offer any sort of discount if you bring your own phone with you.
Re:Perspective (Score:5, Interesting)
Because the carriers are forced to actually compete on price, since people can switch carriers at the drop of a hat. NO LONG TERM CONTRACTS.
Plus carriers only have to cover actual operating expenses, not making back the $500 or so that they "lost" from a heavily subsidized phone.
To give an actual example, a sample plan picked more or less at random, in the UK (Virgin Mobile)
600 minutes, 2500 texts, 2.5GB of data. 21GBP = ~$33.
A similar (but inferior plan) from Verizon in the US
450 minutes = $39.99. Add another $10 for 1000 texts (or $20 for unlimited), and another $30 for 2GB of Data.
Oh, and your're locked in for 2 years.
Re:Perspective (Score:4, Interesting)
Yes, but the UK and the rest of the EU treat mobile phones in a completely different manner. Here you have certain phones for certain carriers (mainly because of the bullshit lolTDMA, CDMA, CDMAMod, and 3 different bands of GSM covering the US. The system here has been retarded since the very beginning. I sold cell phones after I got out of the Army and it was friggin miserable.
Dumb pipe model is the way it really needs to go. AT&T doesn't dictate to me what landline phone I can connect to my home phone service, it shouldn't have to with mobile either.
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That's fine. They'd be forced to cut prices and wouldn't have the excuse of "we gave you a phone" to jack them up.
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Even as dumb-pipes they will want to keep you hooked. You don't buy your Cable Company DVR box, do you? You usually rent it. Dump pipes wireless ISPs may still either subsidize your smartphone for the exchange of a contract, or rent it at very high profit margin.
Actually... a rental model may be a very good one for all. It would be higher profit for the ISP for one. For you, you would never have to give the up-front cost, you may not ever own the device BUT the carrier will have more encouragement to update
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And the DVRs are horribly stagnated and unchanging.
People are still 'renting' their land-line phones from AT&T. It is obviously be more profitable for the service provider.
They would have no motivation to upgrade the firmware if you were renting more than if you own it.
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Like I just did last week. I'm in the UK, paid £600 upfront on PAYG, a £10 top up will last me 2-3 months. 90% of my texting is on data (iMessage and WhatsApp) and there is plenty of wifi around me. My family all have iPhones and tons of minutes so they ring me. I rarely ring others, at work I use the work phone. I use the iPhone more as a Internet Communications device that Steve Jobs described.
Re:Perspective (Score:4, Informative)
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Minor nitpick: If they were "dumb pipes" they wouldn't have to subsidize the cost of the iPhone. You'd pay full price for it and obtain service without a contract.
So I could potentially look for better service deals and prices, especially focusing on who may provide better coverage in my area, all the while I pay 800 bucks instead of 200 for my phone?
SOLD!
Dumb Pipes Are Good (Score:2)
That's basically how European telecom market(s) work. It's good for consumers, lower prices and more competition [than in the US].
Re:Perspective (Score:5, Insightful)
Would having wireless carriers be dumb pipes really be so bad?
Not as far as I'm concerned. The sooner the carriers work out where the future is taking them, the sooner they can change their 'investment' in phone branding to improving their network infrastructure.
Re:Perspective (Score:5, Insightful)
Would having wireless carriers be dumb pipes really be so bad? Regardless of who's "goodness permeates"?
For us? No.
For them? Yes.
I really think they will die if they have to become dumb pipes.
They are running an insanely high profit margin scheme right now. The dumb pipe business is very low profit, relatively speaking. A company can certainly live off doing this, but not a company that is setup to depend on such a high profit scheme.
Call it the Kodak scenario. Kodak is not dying because of relevance, or refusal to adapt. They are dying because their entire structure was setup around extreme profit margins and it is nearly impossible to scale back without dying. Keep in mind scaling back usually means selling factories and real estate (if you find someone to buy them) and firing insane number of employees, all while restructuring your workflow to manage everything with drastically less manpower.
The same will happen to carriers once they are forced into becoming wireless ISPs. They will start struggling to survive, and new companies built from the ground up with a more streamlined structure will become the dominant dogs.
NEARLY 50% MARGIN (Score:5, Funny)
Falls to "ALMOST nearly 50% margin."
Fuck me gently with a chainsaw, Heather. I fail to weep.
Re: (Score:3)
Well, personally, I do quite nicely from AT&T's 6% dividend, so yeah, I'll be weeping a bit if they're forced to cut it due to making less enormous profits.
Re:NEARLY 50% MARGIN (Score:4, Insightful)
That's a rent extraction - not economic value through gain in actual goods or services.
That's why there's a recession/depession - an economy leveraged on wealth-transfer over actual work.
It seems the "free market" wants to be a casino, not a merchantile exchange.
Re:NEARLY 50% MARGIN (Score:4, Insightful)
That's a rent extraction - not economic value through gain in actual goods or services.
You don't consider lending money or investing to be a service? I'd love to see the mental gymnastics you have to perform to square that one away.
In an information economy the intangible can become as valuable as the tangible, and 'actual work' can be performed on bytes, transforming them into some other non-random set of bytes, without coming into contact with the real world - all that is solid melts into air, but the air is still considered valuable. The distinction of rent from payment for labour is really quite a difficult one to make when you consider service to be labour, as many services (say setting up a website) could be considered simply owning the means of production and collecting rent from your users. Things have moved on a bit from 1848 when there was a far more clear distinction between those who laboured and those who had the means to hire labour.
Re:NEARLY 50% MARGIN (Score:4, Interesting)
Certainly, actors within the market want that to be the case.
But they cannot acheive this without cooperation from the government.
Corporations aren't stupid. The easiest way to beat your competitors is to lock them out of your markets with legal power.
Tried setting up a competing GSM network in your neighborhood lately? OpenBSM exists, after all. You _could_ do it. But the FCC (on behalf of Verizon, AT&T, etc) would haul your ass into court.
And who gave Verizon the right to blast their harmful radiation onto your property and into yoru house anyway? You didn't. I don't suppose Verizon would be ok if you parked outside their company headquarters and shined lasers into the windows all day.
What's the difference between them assaulting your property with their radiation and you assaulting their property with yours?
They paid more for the laws than you did.
That's the difference.
Your tax dollars are paying for the police that keep them safe from competition and take you to jail if you _try_ to compete with them.
Is it Verizon's fault for pulling the strings this way? Sure. Isn't it your fault for agreeing to be a marionette?
Re: (Score:3)
cellular service isn't a service
Wow, I guess that you must be right since the words you say make absolutely no sense at all. Here you go tough guy [unicornbooty.com]
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He said Apple, not Apple fan boys. So comparing it to Google fan bois is disingenuous at best, and just poor reading comprehension on your part at worse.
Apple blamed the carrier and the users. At least the had the decency to then quietly fix the issues on their side.
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So we measure sales figures as representing product quality? You do realize you're essentially admitting that W
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Considering the massive loss that Apple mandates the carrier eat on each unit sold, yes, they probably would prefer no direct sales.
Apple's not going to move many direct-to-consumer iPhones for the amount they charge the carriers, though. The end user is conditioned to think their subsidized price is the real price.
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I always think back to a conversation I had with my uncle YEARS ago. He was fairly high up in one of the cell carriers that Verizon bought. By his estimate, pricing on cell phones would be a flat $30, for unlimited service in 10 years. That conversation was close to 20 years ago. I think the carriers are making a LOT of money off of everyone, and keeping their prices inflated, not realistic.
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By his estimate, pricing on cell phones would be a flat $30, for unlimited service in 10 years. That conversation was close to 20 years ago. I think the carriers are making a LOT of money off of everyone, and keeping their prices inflated, not realistic.
$20 for republic wireless for an android phone if you're one of the luck beta testers like myself. Works great so far... Wish the handset had more than 128 megs of memory. Coming from an ipod touch its very weird to go back to tiny storage space and drive like mentality, like going from linux back to msdos, other than that, all good. Isn't the cheapest iphone plan $120/month? Thats an extra $100/month they're paying. Hope they're getting an extra $100 worth of service...
Formerly was pay as I go virgin
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But, should that change airtime costs? My airtime costs, before data, are pretty damn high, still!
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By his estimate, pricing on cell phones would be a flat $30, for unlimited service in 10 years. That conversation was close to 20 years ago.
Your uncle forgot to take into account greed. There are two ways of increasing your margin:
1. Build better infrastructure so the service costs you less in the future and you can make more profit even if you charge the same.
2. Charge more for the same service without upgrading infrastructure.
Option 1 is costly at first, but it pays for itself over time. Option 2 is very shortsighted, but results in huge profits in the short term. We know there's collusion when it comes to cell service: they all simultane
Losses one time, revenue forever... (Score:4, Informative)
Sprint announced a large upswing in new customers last quarter -- all because of the iPhone. However, their losses increased, too -- all because of the iPhone.
The losses are a single quarter. The revenue the new customers bring lasts for two years.
And after that there's a great chance Sprint gets to keep them as customers (if they manage things well).
So it can make a LOT of sense to take some loss now for quite a lot of potential future gain (and a lot of the gain is not just potential, but pretty much assured).
Problem? (Score:4, Insightful)
Then why... (Score:5, Insightful)
Don't carriers drop Apple? "We'll lose money on every transaction but make it up in volume" has nevevr worked.
Or, is it that profits are reduced, not eliminated? Value destruction means losing money, not reduced margins. Pretty important to distinguish. If they were losing huge buckets of money, we wouldn't see carriers clamoring to carry the devices. OTOH, selling at reduced margins at high volume can potentially be profit maximizing (e.g., Wal*Mart).
Re:Then why... (Score:5, Informative)
Re: (Score:3)
The summary is wrong. The article isn't claiming that EBITDA is falling (which would imply that profits are being reduced). It's claiming that EBITDA /margins/ are falling (i.e that EBITDA as a percentage of revenue is falling).
So it's as you described, they're selling more, at a lower margin, to get a higher overall profit.
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They're making it up on volume. Just making slightly less. But selling significantly more.
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It does work if the cost goes down as volume goes up. It fails when costs are static; which is why it failed in 01.
People with the old school mind set applies it to a situation where volume as little impact in overall costs.
People succeeded when they looked at companies where volume had a minimal impact on the need to higher more people.
Re:Because the iPhone is selling like crazy (Score:5, Insightful)
. . .That was sales not actual devices active. In other words because a huge number of people updated their iPhone in that time period they sold more than Android did. It didn't change the US market share makeup. Apple is still hovering around 30% and Android around 50%.
Nightmare? (Score:2)
If it was a nightmare, Verizon and Sprint would not have jumped at their chance to carry it. Surely Apple would have been happy to not produce a CDMA version, if no one wanted it.
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Yeah 8 whole months. And none of that could at all have had to do with having to make a different CDMA model, right? Oh and let's forget that Verizon announced getting the iPhone a month before the exclusivity ended, right? Yeah they totally didn't jump at the chance...
Hahaha (Score:3)
It's rent-seeking parasitism all the way down!
So? (Score:4, Insightful)
"Money sucking leech"? (Score:2)
"from the greed-begets-greed dept."?
Ugh.
Is there a way to block stories by editor?
Re:"Money sucking leech"? (Score:5, Informative)
Yep! Check your account options in the upper right. People used to take advantage of this feature to block the infamous "personalities" JonKatz and michael.
Re: (Score:2)
I has forgotten about the crap heap known as JonKatz.
Thanks for the reminder... jerk.
Poor babies. (Score:5, Insightful)
Apple drug these backward-ass bozos kicking and screaming into the modern phone era, so cry my a river.
When I think of the punitive overage changes these carriers have for data, roaming, SMS texting... It warms my heart to think of their financial discomfort.
For what we pay for cell service in the US we should have a state of the art infrastructure and widespread 4G access.
Really? (Score:5, Insightful)
Carriers are crying all the way to the bank. Anyone selling the iphone has seen their sales jump as people ditch their carriers in a mad scramble to get the hottest phone on the market.
A story came out last week detailing that Apple is now one of the biggest phone makers on the planet. This is from a company who's primary market was computers. Clearly, they are doing something right if everyone wants what they are selling.
If the carriers don't like the iPhone, stop selling it, and watch all your business dry up. That's how the free market works, capitalist pigs.
And yet they continue to carry it (Score:5, Insightful)
Which tells me it must make business sense to do so.
Re: (Score:2)
So you assume everything business does always make business sense? are you daft, or just ignorant?
Drastically reduced profits? (Score:5, Insightful)
Between 2009 and 2010, Verizon (VZ, Fortune 500) averaged EBITDA service margin of 46.4% per quarter. In the first quarter that the iPhone went on sale, that fell to 43.7%. Last quarter, when Verizon sold a record 4.2 million iPhones, its margin plunged to 42.2%.
Gee, margin "plunged" from 46.4% to 42.2%. It sounds like their profits have dropped from really, really obscene to just really, really obscene. I need to get out my tiny violin and start playing it for them.
Re:Drastically reduced profits? (Score:4, Funny)
DID YOU KNOW that the execs' kids had to swim in a gold-rimmed pool? How are kids supposed to learn to swim without a platinum-rimmed pool!?
They all wept into their caviar and took a private jet to a sad violin concerto in Italy.
Re: (Score:3)
It also tells me that this metric is based on an old business model in which people changed their phone far less often.
I'd be interested to see a statistic which broke down how much the iPhone subsidy was costing them, vs how much additional revenue they were getting from new subscribers and data plans.
As with anything, there's lies, damned lies, and statistics ...
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It's even more ridiculous than that. The plunge was from 43.7% to 42.2%.
WTF??? (Score:5, Insightful)
How is this Apple's fault? The carrier needs to buy the phones from Apple, and they have a cost.
In order to get people to sign up for contracts, they give you the handset at a cheaper price, but you have them locked into a 2 year (or whatever contract).
If Microsoft (or anybody else) came out with the new Super Duper Happy Fun Phone that everyone suddenly wanted ... they'd be in the exact same boat. Because most people aren't going to pay the full cost of a new phone outright. Phones have always been expensive.
Subsidizing the phone cost is a loss leader, which is exactly what is happening. However, over the next two years, how much profits are they going to make by gouging people for the wireless service/bandwidth they've signed up for? I bet it far outstrips the cost of the phones ... it just happens that a lot of people are moving to those kinds of phones right now.
The problem is that the carriers have been unwilling to invest in their own infrastructure to keep up with growth, and now they're whining that the device that people want to have costs more than they can afford in one shot.
I fail to see why Apple (or any phone manufacturer) needs to come down on the price in order to ensure the carriers make money. They can raise the price they sell the phones for, or let another company do it and lose out on the potential business.
If the carriers are giving too much of a subsidy ... well, that's kinda their problem, isn't it? Apple never told them to give it away.
I'm betting the latest, shiniest phones from Microsoft, Samsung, Nokia, and pretty much everyone else are pretty damned spendy. If you give away expensive things, that's what happens.
Wireless Carriers are like Airlines (Score:2)
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leeches and centipedes (Score:3, Informative)
So one money sucking leech has attached itself to another money sucking leech?
It's more like a "Human Centipede" relationship.
Is it iphones, or smartphones? (Score:5, Insightful)
The carrier subsidy on the Android phones, especially the fancy ones, also appears to be huge. An unlocked 8 GB Galaxy S2 at Amazon is $600, while a 16 GB iPhone 4S from apple is $650.
Yet AT&T charges $150 for the S II, and $200 for the 4S. So if the carrier subsidy is related at all to the gap between the contract price and no-contract price, the carrier subsidy for an iPhone is no worse than an Android phone.
So its probably not the "iPhone", but just the general trend to expensive smartphones compared with lower subsidy needed feature phones.
Apples Warranty (Score:3, Informative)
One of the way the iPhone is hurting carriers is that Apple only offer a 12 month warranty as standard, sure you can extend it with Apple Care, but no one bothers even if they take out the iPhone as part of a 24 month contract.
A customer will phone up over 12 months into an 18 or 24 month contract to say their iPhone is faulty, all we can offer is a chargeable repair as the phone's out of warranty, naturally they're not very happy ("I got it from you, not from apple!") and they'll either want to cancel their contract without any sort of termination fee or get a working phone, 99% of the time if they complain enough they'll get a free of charge replacement iPhone just to keep them happy in the hopes that they'll upgrade at the end of their term (and it works out cheaper than having the call escalate further). This is happening hundreds if not thousands of times a day where I work, sure it happens with other brands too, but to a lesser extent and normally with lower price handsets.
I'm shocked that so many people are willing to accept a 12 month warranty on a product that markets its self as the best in the market.
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Here's what you have to do:
"Listen, I can't make that judgement for you, but if you call [Mr. Boss] at local [local] he'll probably give you a new phone if you complain enough. You didn't hear that from me, all right?"
Don't worry about things you can't change and can't control. If it's not in your authority range, IT IS NOT YOUR RESPONSIBILITY.
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Becasue they bought it from you.
And that's how business works. If I walk into a show store and buy a pair of nike, and there is an issue, I go back to you, not Nike.
So either you must offer a warranty, or sell apple care. Alternatively, your corporation must make an overall policy decision, and streamline the implementation. If it's no replacement, then enforce it, if it's replace then make it easy for the employees to do so.
You're haltered isn't about apple, its about how your company handles the situation
They could stop carrying it... (Score:2)
And Apple could start selling phones that weren't locked to a carrier, only for real (GSM/CDMA).
The early adopters and heavy users would still buy them even at $650+, and they'd be able to switch carriers faster than every two years, on the basis of performance and customer service rather than contract expiration.
Be careful what you whine for... you just might get it, good and hard.
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Apple does sell unlocked phones [apple.com] for $650.
The problem is that in the US, showing up with your own phone doesn't get you a discount on the service plans. You still have to sign a 2 year contract and pay the same amount as someone with the subsidized phone. Oh, and in the US, unlocked phones only work on GSM networks which leaves you with either AT&T or TMobile.
Oops, typo in the article... (Score:5, Insightful)
There, fixed that for you.
Carriers brought this on themselves (Score:5, Insightful)
Carriers shouldn't have any control over which phones work on their network. They should stop selling cell phones altogether.
Sell sim cards. Period. Offer some cheapo phones you don't really care about in your store. But make it obvious that users should really get the actual phone somewhere else especially if it's a smart phone.
AT&T used to sell or even rent land line phones in the early days. If you wanted a phone you had to buy one from the phone company. Today, if you want a landline phone you pick one up at practically anywhere for between 10 dollars for the cheap ones to 200 for the really fancy ones. That's what the wireless carriers need to do.
When they do that apple can't charge a fee anymore. It's just selling a phone. A bit of hardware. And the carriers aren't selling a phone. They're selling a data plan. Because I imagine that "minutes" are going to be a thing of the past at some point. At what point does it become more practical to just skype everything? Does skype cost the carriers more money then a regular phone connection? I wonder. They're obviously turning it all into data anyway. In any case, once all phones have internet the typical phone/voice connection becomes redundant. Just give everyone a data plan. People will stick to email and text most of the time to save on connection charges and that has to use much less bandwidth then a voice conversation.
Just sever the relationship entirely between phone and carrier. Sell sim cards. Then the carriers can anti trust apple or something if apple gets snippy about letting some carrier's sim cards work and others not.
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This would eat into their profit model in the same fashion that they are crying about here. Here's why (using numbers that are by no means exact):
$200 for a phone, contract for 2 years with subsidy ($450)
$70/month * 24 months = $1,680
$1,680 - $225 = $1,455 / year without overage charges for service.
Now, the customer doesn't realize they have a subsidy in that monthly charge, and after the two-year period they don't upgrade, and continue paying the $70/month. The carrier then gobbles up the part of that $7
Well, no one forced Verizon... (Score:2)
...to jump on the iPhone giving apple everything they wanted and then some, but some stupid exec felt they just HAD to have it at any price, even though they were doing exceptionally well with Android phones and making way more money to boot. So, they got a few more iPhone subscribers, but now are losing money. Boo hoo. Apple needed Verizon more than Verizon needed Apple, and yet Verizon acted like the guy desperate for the girl. So, they lost. Any normal person could have predicted that action, but som
Re: (Score:3)
Yeah, some stupid exec who realized that large numbers of people were badgering them to say, "When will you have an iPhone?" and large numbers of existing customers were switching to AT&T to get an iphone.
Those stupid execs, trying to retain customers so that revenues don't crash. Apple did NOT "need" Verizon. They were making ridiculous profits selling just through AT&T in the US. Adding Verizon & Sprint allow them to make ridiculous-er profits, but in no way were those additions the thing t
I feel so bad for them.... (Score:2)
I will play a violin and cry for their loss.
Ran out of worlds smallest violins (Score:5, Funny)
Wow, first the RIAA complaining about unfairness, and now telcos complaining they don't make enough profit.
I think the store just ran out out of Worlds Smallest(tm) violins!
Time to break ... (Score:3)
I buy a phone. Who cares what type. I go to my carrier and subscribe to a voice/data plan. They give me a SIM and I plug it into my phone. They don't know what brand. The phone manufacturer doesn't know from whom I'll be buying my bandwidth. Nobody kicks money back to anybody. Everybody makes money based upon the value of their product or service.
End of story.
Re: (Score:2)
I am amused that, between a summary including "Bull****" yesterday and this one with "money-sucking leeches", Slashdot has abandoned even the thinnest pretense of giving an impartial treatment to each story in the summary.
Re: (Score:3, Insightful)
Re: (Score:2)
To be fair if you look at AT&T and Sprint their profitability has taken a nose dive by carrying the iPhone and while I don't begrudge anyone for it I do recognize the reality is that those who opt to own Android or Windows Mobile or Blackberries are paying substantially more to off-set the huge price that Apple demands for their handsets. It's a complicated business practice and the only victor is Apple sadly. This is a form of corporate welfare where all customers are forced to subsidize a relatively
Re: (Score:2, Insightful)
Re:Ya know what would be really funny...? (Score:4, Interesting)
Even better, if mobile phone carriers stopped selling phones altogether. Most of the smaller ones in the UK have stopped already. Just buy a phone, buy a SIM, combine the two yourself.
Of course, if you look at SIM-only plans, you see how much you're actually paying for the 'free' phone. My carrier, for example, offers a £12 SIM-only plan and an identical £30 smartphone plan. The SIM-only deal is a 1-month contract, the smartphone plan is a 12-month contract. So, if you use it for the minimum period, you've paid £216 more than if you were on the SIM-only plan. The smartphone plan comes with a few choices of phone. The first one I looked at, the HTC Desire S, costs £154 (new) unlocked, on Amazon. Probably less if you shop around.
So, the 'subsidised' 'free' phone actually works out as a loan with an APR of about 40%. If you buy it now on your credit card and pay the bill at the end of the year, you'll still be better off...
Re: (Score:2)
AT&T sold 7+ M iPhones last quarter (75% of smartphones sold)
VZ sold 4+M iPhones last quarter (50% of smartphones sold)
S sold almost 2M iPhones last quarter
What do you think those companies would look like if they threw out half of their business?
Re: (Score:2)
Uh huh. Just like how the iPod, iPhone and iPad were going to be huge flops? Does anyone still give these predictions by bitter neck beards any credence?
Re: (Score:2)
Make some concrete, testable predictions - say, market share, profit share, stock-price or something of that nature - and I'll see you on 8th Feb 2013.