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The iPhone Is a Nightmare For Carriers
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?"
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...
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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.
I work in a London Apple Store. Two things:
1) Stop referring your customers to our Genius Bar without an appointment. We just call you out as incompetent, which leads to 2...
2) When you send customers to us, we tell them how we do contracts with all the big carriers in-store, don't get commissions, and will give you unbiased advise on whom to sign up with. Oh, and we're more likely to have the latest iPhone in-stock when a new model hits.
Yeah, that 12 month warranty/24 month contract sucks. Maybe you should sell your customers AppleCare, or at least your trashy in-house insurance. (Unless you're with one of that carriers that don't do that. If not, why not?)
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.
TODO: Something witty here...
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.
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?
My opinions are my own, and do not necessarily represent those of my employer.
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???
"Murphy was an optimist" - O'Toole's commentary on Murphy's Law