“The iPhone user interface is extraordinary, but the business model Apple has concocted for the iPhone is unprecedented and almost unbelievable. Here’s how it works: Apple sells iPhone hardware at a tidy profit and maintains complete control of its margins across its product line as Apple sets pricing itself without the confusion of carrier subsidies and rebates. Apple gets a cut of the service revenue the hardware generates. Apple maintains a separate billing relationship with the customer and uses that to sell content to users (music, movies and ringtones now, with games almost certainly coming soon) and takes a cut of that revenue as well,” Avi Greengar, Principal Analyst, Mobile Devices at Current Analysis Inc., writes for RCR Wireless News.
“However, like an MVNO [Mobile Virtual Network Operator], Apple doesn’t have to deal with any of the hassles of buying spectrum, building out networks, or maintaining them. Unlike an MVNO, Apple doesn’t even have to worry about managing billing for voice and data, or managing customer service. Apple also gets to piggyback on top of the carrier’s retail distribution network and advertising instead of competing with them. Apple’s model includes all the benefits of being an MVNO without any of the risk, and all the benefits of being a high-margin hardware vendor without many of the usual carrier constraints,” Greengar writes.
Full article here.