Apple Turning Cell Phone Market Upside Down?

joek writes "This MacRumors analysis puts some of the iPhone/Cingular pieces together and suggests that Apple may be turning the the cell phone market upside down. Everyone assumed that Apple's $499/$599 prices for the iPhone was subsidized by Cingular. But, it appears that Apple is not allowing mobile carriers to subsidize the iPhone. Why? Because when Apple comes out with the Touch iPod, they don't want it compared in price to a discounted/subsidized iPhone. Add to that rumors that Cingular may heavily discount service (but according to a Cingular rep, they will not be giving away service, as previously suggested) to attract Verizon customers. Without kicking in $100-$200 against the price of the phone, Cingular can discount the service as an incentive. Other cell phone manufacturers will certainly be interested in the outcome of this new model."

Comments

The headline is wrong.

[MarkusQ]

If this is true, and the pricing will be based on the actual cost to produce them and the number sold will be determined by how many people are willing to buy them at that price (supply and demand, anyone?) without all sorts of shell game market manipulation, the headline should read:

Apple Turning Cell Phone Market Right Side Up

It's sad that we've gotten to the point that a rational straight forward pricing model, without games, is considered "upside down."

--MarkusQ

Re:I much prefer...

[squiggleslash]

You make it sound like cellphones have only legal locks and can be listened to in the clear, or just with the help of a particularly powerful computer.

CDMA (both CDMA2000 and W-CDMA based systems like FOMA and UMTS) conversations are practically impossible to evesdrop upon. Even if you have the key (close to impossible), the timings and need for location information make evesdropping unbelievably hard.

On a technical level, the GSM system is easier to tap, but on a practical level it isn't. Early GSM networks used relatively breakable algorithms (at the behest, believe it or not, of British Intelligence who clearly hadn't heard of phone taps...), but after this was cracked most networks were upgraded to much more secure algorithsm. And just to identify a specific handset you need information only exchanged when the phone is turned on. These algorithms are publicly known, and there are as many people who want to break it as, say, SSL.

For all practical purposes, the only time your (post-analog/post-D-AMPS) mobile phone is going to be intercepted is if someone is working at the telco and has a tap on your line. Casual evesdropping is probably non-existant.

You HAM based system on the other hand can, and probably is given the frequencies, intercepted by casual evesdroppers all the time.

I know which I consider more secure.

The iPhone IS Subsudized

[f1f2f3]

The people at MacRumor need to work on their reading comprehension. From TFA:

aren't allowed to subsidize the cost of the phone relative to your contract (i.e. you won't save more by signing a longer contract

Emphasis in the original. This doesn't say Rogers/Cingular can't subsidize, it says Rogers/Cingular can't change the subsidy based on contract length, meaning they can't charge one price for a one-year contract and another for a two-year contract. That still lets them subsidize the phone overall, and sell it cheaper than it's "street" price

Cell phone service evolution

[jpellino]

The cell phone service is going to be the 4th commmunications industry to pass thru this ridiculous hoop.

First was the US Mail - who realized the carriers had to walk the route each day and walk past each house each route. They oculd support fixed message cost, and it made them wildly successful. Sears didn't mind it either.

Next was the data networks, which charged per message, and when we all figured out they weren't epoxying together a brand new tube for each message, went to fixed cost per period.

Then we knocked on the telco's door and told them we figured out that they didn't have to run a new wire everytime we called someone, not even for the first time. They 99% went to fixed cost per period, with some sucker plans for people who still didn't get it and thought they could beat the telco out of the 99% plan. Vonage et. al. pretty much dope slapped anyone who still didn't get it.

Now come the cells. They still make us think that they have to send a squadron of pixies, who subsist on gold and caviar, flying out of the hayloft every time we want to place a call or send a message. Apparently the text pixies have never seen a salad, and the 411 pixies are down-right clones of Roseanne.

In the days of tower buiilding, when no one knew we'd all have these glued to our ears constantly, charging by the message unit was the only way anyone was ever going to let you take a risk like that.

That's all changed. The network is in place. The towers, T1s and infrastructure are all on, all the time - their operating cost is known and predictably rising with the cost of energy, inflation etc. The system scales now. Your unit revenue per user should find a point where it supports the scaling. Energy costs marginally less at night than at daytime, but it's always daytime somewhere in the net.

It's all a matter of who blinks first. Nights and weekends is slowly creeping wider, the others will have to follow. They are slowly, inexorably creeping towards flat monthly, but they're still betting some of us will put up with the sucker's bet.

I hope it works that way - in the telco case we had help from non-traditional suppliers who had nothing to lose and could bust the Bell model. In the cell case, there's the big six(?) who may slowly compete to some equilibrium, it won't be the rest that bust it - as MVNOs they just follow what the biggies do.

Here's hoping, anyway. Nice to see that Apple can make them think about dancing, though.