“Apple Inc. said that almost one out of every six iPhones sold may have been unlocked to run on unauthorized wireless networks, surprising analysts who had estimated the problem wasn’t as widespread,” Connie Guglielmo reports for Bloomberg.
“Chief Operating Officer Timothy Cook said yesterday that 250,000 of the nearly 1.4 million iPhones sold may have been bought by users with the intention of unlocking them, or modifying the device to work on a network other than AT&T Inc.’s,” Guglielmo reports.
“Customers who aren’t signing up with AT&T, Apple’s approved service provider in the U.S., are preventing the two companies from collecting monthly mobile-phone fees. Analysts had estimated that between 10,000 and 100,000 iPhones had been unlocked since Apple began selling the device in June,” Guglielmo reports.
“Some buyers have been purchasing five phones at a time at Apple stores in the U.S., modifying the software that locks it to AT&T’s service, and then reselling the unlocked iPhones overseas,” Guglielmo reports.
“Apple’s sales totals include phones that are in AT&T’s stores and warehouses and haven’t yet been handed to customers, AT&T spokesman Michael Coe said. ‘We do agree with Apple that the vast majority of phones that haven’t been activated on our network are going overseas,’ Coe said. In the U.S., the iPhone can only be altered to run on one other national wireless service, Deutsche Telekom AG’s T- Mobile USA.,” Guglielmo reports.
Full article here.
Phillip Elmer-Dewitt reports for Fortune, “One day after Apple trumpeted its quarterly sales of 1.12 million iPhones — for a total of 1.4 million sold so far — AT&T reported that it has activated 1.1 million of the devices. Most of the 300,000 gap between those two numbers, according to Apple, can be accounted for by iPhones purchased to be unlocked and used with another wireless service.”
Elmer-Dewitt reports, “Buried in Apple’s Q4 report yesterday was a $118 million line item called ‘iPhone and Related Products And Services,’ which is where the company tucked the proceeds from its revenue sharing deal with AT&T. Piper Jaffray’s Gene Munster, who’s been trying to unravel the terms of that deal ever since it was announced, estimates from the Q4 report that AT&T is sending Apple $18 per month per subscriber.”
Full article here.
“Apple’s sales totals include phones that are in AT&T;’s stores and warehouses and haven’t yet been handed to customers,”
This just goes to show you that business accountants can really make number stand up and dance for their executives. You can pretty much make those numbers say anything that you want as long as you leave out some figures here and there. 10,000 to 100,000 is a wide open figure that someone pulled out of their ass.
Alright, there’s nothing to see here folks. Move along!
“Why? so we could have had a feature handicapped iPhone?”
Well, let’s be honest here. The only “features” that AT&T adds to the iPhone are Visual Voicemail and a $20 per month discount on voice and unlimited data.
I’m speculating here, I admit, but I’m willing to bet that AT&T has some say over what goes on over their network. Why are you not be able to buy music on iTunes via AT&T’s network? Because AT&T wouldn’t allow it. If people are buying music over AT&T’s network, they want a piece of the action. Apple wouldn’t give it to them, so AT&T said, “Then you can’t use our network.”
With an unlocked phone, Apple would have been able to offer whatever services they wanted on whatever network the user purchased.
I’d also point out that the competition would have been pretty entertaining to watch. All those people walking out of an Apple Store on Day 1 would have been positively assaulted by AT&T, T-Mobile, and a raft of the regionals, trying to sign you up. “Have an iPhone? Sign up with T-Mobile!” “You just bought the most amazing phone on the planet. Now sign up with the most amazing network–AT&T!” “Hook your iPhone to Iowa Wireless for only $39.95 a month!”
The only thing you’d end up forgoing is Visual Voicemail. And Apple could publish the protocol and leave it to the people who are trying to attract iPhone buyers to implement it.
I bought my iPhone mainly for use in Europe. However, AT&T;isn’t totally losing out on me. I’ve got an AT&T;account (through my brother) that I use on my numerous trips to the US…
Regarding iPhone demand in Europe, I’ve seen it. I’ve had numerous requests from colleagues and friends to bring iPhones (and iTouches). I know of several people who have brought back 3 or 4 iPhones. A friend in Kiev told me that they’re going for a much as US $1,500.
Why didn’t Apple just make AT&T;its “preferred” carrier. Apple could have allowed customers to choose their service provider, and then included AT&T;-only features on the iPhone to entice customers to use AT&T;. Not only would this get rid of the resentment towards Apple and AT&T;that many iPhone users have expressed, it would increase sales of the iPhone and positive customer opinions of AT&T;.
Five years will be a LONG time for Apple and AT&T;to have to deal with this unlocking issue. I think that we will either see a change of course by Apple — in which case they will undoubtedly have to pay a heavy penalty to AT&T;for breaking all or part of their contract — and/or some lawsuits of high profile “unlockers” by Apple lawyers.
Some people still don’t get it. Apple is trying to work within the US telecom system as bass ackwards as it is. The complete user experience that you now enjoy( visual voice mail, being able to use wifi, checking stocks and weather at a glance and checking multiple email accounts would not have been possible with an unlocked phone because All carriers have competing services that they nickel and dime you for to add to their bottom line.
The only other way for Apple to go would have been to become like Virgin mobile or ESPN mobile (now non-existent). That would mean becoming a carrier themselves and look at the complaints and law suits they have now with a damn good product. Imagine the complaints they would get with their own branded wireless network and having to roll that out world wide. Sheesh …some people will never be satisfied. Thank God Steve Jobs is one of those people but he also has vision and knowledge most of the complainers aren’t privy to which make it better for the rest of us.
@bobchr
Hey bob,
We all get it. Sure, we’d like to have VVM and all, but we can live without it. Our hacked iPhones are better, in many respects, than nonhacked iPhones. And they are certainly better than any other non-iPhone phone out there. My RAZR was really cool when I first got it 9 months ago, but it’s rather blah since I got my iPhone up and running on T-Mobile and with real, native third-party apps.
I gave the RAZR to my 3 year old as a new toy, sans battery.
I’m loving my iPhone here in Canada and the knowledge that when I take it to Scotland next year for two weeks, I can get a local carrier SIM card and use it while there to avoid roaming fees.
Even when the iPhone comes to Canada officially, I’ll still want an unlocked on for that reason.
@Luke
Obviously, you don’t get it.. Apple could not maintain creative control with an unlocked iPhone.. As Bob stated, the carriers would then be able to determine what features and what costs they would allow.. The iPhone experience would vary greatly from carrier to carrier.
Furthermore, Apple is demanding revenue from AT&T;, something they could not do without an exclusive deal.
There is a uniform and unified approach in everything Apple does, from the Mac, to the iPod and now to the iPhone. You may criticize them for this, but it is the very reason they are so successful.. Apple does best and delivers the best products and services when they are in CONTROL. Take away that control and you end up with products like Microsoft and Motorola deliver.
If Apple doesn’t have the technology to make a cell phone work with multiple carriers while also maintaining “creative control” of the product, then I’m REALLY concerned. Cell phone companies have been doing that for many years while also negotiating successful contracts, as we all know. So let’s not say that Apple had no choice.
This is strictly a profit issue, which is fine, but it’s only a short term strategy when profits are inflated at the expense of what consumers want. Eventually demand dwindles and I’d hate to see that happen to a company as great as Apple. Also, I think in the end that Apple just doesn’t play well with others and they’re better off going it alone (a la Madonna), which doesn’t bode well for the iPhone.
@MikeK
Obviously, you don’t get it.. Apple could not maintain creative control with an unlocked iPhone.. As Bob stated, the carriers would then be able to determine what features and what costs they would allow..
No, all of that could be worked out in negotiations. It’s done all the time during business transactions. Do you think Boeing gives the same terms on their contracts to United, American, Southwest and all the other airlines? Of course not.
The iPhone experience would vary greatly from carrier to carrier.
You say this like it’s a bad thing. There’s a reason I went with T-Mobile instead of ATnT in the first place.
Furthermore, Apple is demanding revenue from AT&T;, something they could not do without an exclusive deal.
This simply is not true. Apple could get $18/month/subscriber from both ATnT and T-Mobile. Instead of having 1.1 million subscribers, they’d probably have 1.7 million (or more) subscribes. As it is now, Apple’s losing revenue because a lot of people aren’t willing to switch to ATnT. I sure wouldn’t have bought an iPhone if I couldn’t have hacked it to work on T-Mobile.
There is a uniform and unified approach in everything Apple does, from the Mac, to the iPod and now to the iPhone. You may criticize them for this, but it is the very reason they are so successful.. Apple does best and delivers the best products and services when they are in CONTROL. Take away that control and you end up with products like Microsoft and Motorola deliver.
That’s just your opinion. Personally, I love my iPhone as it is now with the great service I get from T-Mobile, and all the 3rd party apps. I’m glad I don’t have to pay ATnT, T-Mobile or Apple to send text messages. I’m glad I can play Super Mario Brothers (and a whole lot of other games) while waiting on a connecting flight. I’m glad I can arrange my iPhone’s desktop to suit my needs and not what Apple thinks I need. Etc., etc., etc…
Use the force Luke!
@Luke
No, all of that could be worked out in negotiations. It’s done all the time during business transactions.
Well obviously, It couldn’t.. Do you really think it was Apple’s idea to be bound into a multi-year exclusive contract? Of course not. However, that was the price they had to pay for At&T;to accept Apple’s terms.
You say this like it’s a bad thing. There’s a reason I went with T-Mobile instead of ATnT in the first place.
Could be good, could be bad, that’s what I mean by the user experience would vary. Ultimately, the experience would be out of Apple’s hands, and that goes against Apple’s whole philosophy of “controlling the whole widget” which is what they do in every one of their product lines. Mac/OSX, iPod/iTunes, iPhone/Controlled carrier.. Get the picture?
This simply is not true. Apple could get $18/month/subscriber from both ATnT and T-Mobile. Instead of having 1.1 million subscribers, they’d probably have 1.7 million (or more) subscribes. As it is now, Apple’s losing revenue because a lot of people aren’t willing to switch to ATnT. I sure wouldn’t have bought an iPhone if I couldn’t have hacked it to work on T-Mobile.
Again, obviously they couldn’t. Paying the handset maker a portion of the carriers revenues is something that has never been done before. As Uncle Walt said “Even so, Apple had to make a deal with the devil to gain the freedom to offer an unimpaired product directly to users. It gave AT&T;exclusive rights to be the iPhone’s U.S. network for an undisclosed period of years.”
That’s just your opinion. Personally, I love my iPhone as it is now with the great service I get from T-Mobile, and all the 3rd party apps. I’m glad I don’t have to pay ATnT, T-Mobile or Apple to send text messages. I’m glad I can play Super Mario Brothers (and a whole lot of other games) while waiting on a connecting flight. I’m glad I can arrange my iPhone’s desktop to suit my needs and not what Apple thinks I need. Etc., etc., etc…
It’s not an opinion, it’s a fact. Every system Apple creates is completely controlled by Apple, the iPhone is no different.. Now whether that’s a good or bad thing may be subject to opinion. I personally think it’s a good thing. You obviously don’t, so maybe you shouldn’t buy Apple’s products…
And regarding your hacked phone, well good for you! If it works fine and you can deal without visual voicemail and future upgrades then more power to you!
Cheers.
You know, I really am getting tired of all this hoo-hah about unlocking phones.
If you don’t like what Apple does, please spend your money somewhere else. I’m a shareholder, too, and don’t you think I would want Apple to sell as many phones as possible, but I’m willing to accept lower revenues so you whiners can go somewhere else. I certainly don’t want to run into you at the Genius bar complaining about how your iPhone doesn’t have all the features in the last upgrade because you have unlocked it.
“Do you really think it was Apple’s idea to be bound into a multi-year exclusive contract?”
As a matter of fact, yes I do. One of the first things that Steve Jobs did upon returning to Apple was create a 5 year contract with Microsoft (1997 or 1998). The contract included making Internet Explorer the default browser for Macs, to the horror of many in attendance at the announcement of the agreement. The contract also included a commitment from Microsoft for then future versions of Office, to the delight of the audience. Furthermore, the agreement had Microsoft owning something like 250,000,000USD of Apple stock (non-voting shares) and a patent sharing agreement spanning the length of the contract. Incidentally, I’ve always wondered if Microsoft is entitled to joint patent rights on the iPod. Parts of the contract were renewed for another 5 year period sometime in the early 2000s.
In other words, Steve Jobs will make long term agreements with other companies when it suites his purposes. Indeed, if he was able to use his RDF to convince the Mac faithful to accept a 5 year partnership with nemesis Microsoft, anything is possible! A 5 year agreement with ATT regarding the iPhone seems like “small potatoes” compared to deals that Jobs has made in the past.
“Open” ends up being good for everyone. Except AT&T;, which doesn’t deserve it.
Funny how it took a computer company to drag the first carrier out of an antiquated voicemail system.
What the sightings of iPhones all over the world indicate is that an unlocked iPhone would probably sell a squillion overnight – which is impractical from a supply standpoint.
Then there’s the issue of the cut Apple makes from the plan, which, as the recent price-cut indicates, is where the money will be made.
What’s interesting is, once the iPhone’s potential has been demonstrated, there’s nothing stopping Apple from signing 2 to 3 carriers in subsequent deals overseas, assuming more than one carrier is interested. On the other hand, Apple will try for a cut that is painful enough to get only one carrier interested in an exclusive deal – which maximizes Apple’s revenues at the expense of a faster penetration of the market.
Translation: Apple is confident that its device can overcome a lack of carrier competition in any market at a slight inconvenience to the user. The reason for that is simple: the other phone makers are seen as far behind in terms of offering a competitive product.
See? It’s all in the tea-leaves.
@unsurprised
Your point is not a point at all…
Steve Jobs did not “make” a 5 year contract with Microsoft, he AGREED to a 5 year contract with Microsoft because at the time Apple was nearly bankrupt and in dire need of what Microsoft was able to offer (financial relief and Office for the Mac..)
Flash forward to current topic..
Steve Jobs did not seek out to sign an exclusive contract in which Apple would be bound to AT&T;for an undisclosed amount of time, he AGREED to an exclusive contract because Apple had a long list of demands that the carrier (AT&T;) would only accept if Apple signed an exclusive agreement.
@j
You know, I really am getting tired of all this hoo-hah about unlocking phones.
Then stop reading about it. We really don’t care.
If you don’t like what Apple does, please spend your money somewhere else.
I’ll spend my money where ever I please, thank you very much.
I’m a shareholder, too, …
Ah! Now it’s clear. Sorry to be cutting into your returns.
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…and don’t you think I would want Apple to sell as many phones as possible, but I’m willing to accept lower revenues so you whiners…
Sounds like you’re the one who’s whining.
…can go somewhere else. I certainly don’t want to run into you at the Genius bar complaining about how your iPhone doesn’t have all the features in the last upgrade because you have unlocked it.
Why would I go to a Genius bar? I know more about Macs and iPhones than most of those teenagers behind the counters. Besides, the 1.1.1 crack is now complete. I’ll probably do the upgrade in the next week or so. Not much that I want really, other than the period feature. You see, the thing is, I don’t want Apple dictating how I use my iPhone. I bought it, it’s mine, and I’ll do with it as I please.
@MikeK
Apple was in dire trouble in the 1990s. I’ll agree with that. However, I think that its a bit hash to say that Apple was almost bankrupt. Apple paid something like 450,000,000USD for Steve Jobs’ company, neXT. An almost bankrupt company could never afford to do that. Don’t misunderstand me. Apple was not the healthy company then that it is today. I was simply trying to establish a pattern of Jobs’ fondness for exclusive 5 year contracts with so-called “8 pound gorillas”. Microsoft was and is undisputed leader in computer software as measured by volume of sales. And ATT has been and continues to be a telecom giant.
HOWEVER, Apple had other choices in both ventures that would also have made sense. Apple could have chosen to go with IBM instead of Microsoft. Indeed, that would have been a natural extension of the Apple-IBM-Motorola Alliance (AIM), which resulted in the PowerPC Microprocessor. IBM also owned Lotus, which could have competed against Microsoft Office if it had been more aggressively developed and better marketed. T-Mobile could have handled the iPhone in its current configuration. And Verizon Wireless and Sprint both have large enough networks to have accommodated the a slightly different iPhone.