Apple’s iPhone is killing mobile carriers

“If the failed merger of AT&T and T-Mobile taught us anything, it’s how our new smartphone-driven lifestyle is driving mobile carriers to resort to extreme measures in order to slow sinking profits caused by the high cost of pouring data into our pockets,” Adam Clark Estes reports for The Atlantic Wire.

“t’s hard to feel sorry for the companies that impose an estimated 4,090 percent markup on text messaging services — very little data, very high price — but the bottom line doesn’t lie,” Estes reports. “The Wall Street Journal‘s Anton Troianovski pulled some numbers on Wednesday that quantify the race for wireless carriers to acquire rights to the airwaves that will help them deal with the more data-intensive requirements of smartphone applications: the web surfing, the email reading, the Spotify streaming and, yes, the YouTube watching. Troianovski explains that the wireless industry as a whole spent $24.9 billion in 2010 alone to invest in infrastructure that supports more data traffic.”

Estes reports, “Though you might not agree with the principles behind the AT&T-T-Mobile deal, it’s a little bit easier to sympathize with the idea that Apple grabbed mobile carriers by the shorthairs when it decided to launch the iPhone under its own terms. AT&T was the first to carry the iPhone, winning over fanboy customers but also sending its data infrastructure costs through the roof. And it’s only getting worse. One analyst cited in WSJ’s coverage of the trend estimates that AT&T’s profit margins will dip from 44 percent to 30 percent in the fourth quarter of this year. (That same analyst called the ascent of the iPhone ‘a wealth transfer from AT&T shareholders to Apple shareholders.’)”

Read more in the full article here.

32 Comments

    1. The only thing I consider bloodsucking is the cost of text messages. Everything else is reasonable. They would do well to eliminate texting charges and roll it into their basic tariff.

  1. Are you kidding me? The mobile carriers vastly overcharge their customers for cell service, use arcane trickery to force even casual users to pay for unused minutes, expiring rollover minutes, throttle bandwidth for “unlimited” data accounts, etc… 30% of many billions of dollars is still billions of dollars

  2. “That same analyst called the ascent of the iPhone ‘a wealth transfer from AT&T shareholders to Apple shareholders.”

    I like the slight undertone in his comment that somehow it’s either illegal, immoral or some sort of socialist plot.

    To the victor goes the spoils. They sat on their ases milking that cow for years and did nothing to make their customers experience any better. Someone came along and showed them. Too bad.

    They should just feel lucky Apple was unable to pull off the iPhone using their own network. THey’d probably be out of business altogether by now.

  3. What a bunch of garbage. These wireless carriers have subsisted on sub-par networks for years, and now that consumers are demanding more, they’re actually having to invest in their infrastructure rather than sit back and reap profits on overpriced text messages and outrageous fees for overages.

    If anything, Apple, by introducing the iPhone, is forcing mobile carriers to modernize or get out (as in T-Mobile, which will be gone in 2 years either to merger or bankruptcy). Cry me a frickin’ river: carriers raped people for years and now are getting a very little back. Gee, profits down to 30%? Oh, wo is me!

    1. How many people must buy an iPhone before the jackasses stop calling them “fanboys”? And how many Fortune 500 companies must embrace them before the pundits recede? Yes and how many journalists must be discredited before “fanboy” is stricken from their fake-book? The answer, my friend, is…

  4. Let’s all cry for ATT thrown into abject destitution, which apparently is defined as 30% cream (read: 30% overpayment by bilked customers in excess of value provided by ATT).

  5. baloney.

    Notice how he fails to criticize the agreement between att and tmobile which had a breakup fee of $4 billion. Off course they will not since deals like this generate fees for their friends in investment banking.

    Att did not have to do the deal. In fact tmobile did not bother to make a deal with apple because of this deal. These cretins talk of transfer of wealth between stockholder of att and apple, yet fail to criticize the irrecoverable $4 billion loss to att shareholders.

    1. I still don’t get the “breakup fee”. Like, if I broke up with a girl, I’d just walk away. She might keep my awesome mix tapes, a jacket and not much more but why and what the heck is a $4 BILLION dollar breakup fee?

      Regardless, Apple should turn the wireless industry upside down by either buying service providers or entering into contract agreements like they did with the music industry to provide cell/data service to all via an iTunes account:

      A La Carte Apple Wireless Service:

      Voice
      40 min=$15
      200 min=$30
      500 min=$40

      Data:
      2 GB=$20
      Unlimited=$60

      Requires an iPhone and iTunes Account. Add more data and minutes anytime. No contract. No roaming charges, free wifi access. Voice and data minutes don’t expire. Compatible with iTunes gift cards.

      1. IMHO…..
        The real solution would be for you guys in the USA to stand up to your providers and show them what a bunch of con artists they are. Paying to receive calls & text messages is unheard of over here (UK)

  6. But why is Apple’s iPhone being blamed for this alone? There are tens of millions of Android smartphones using the carriers bandwidth as much as the iPhone. Still, isn’t this use of bandwidth something that consumers want? It just seems like a natural progression of how things change for carriers. At one time the internet or world wide web was only being used to send a lot of text and as it grew users wanted images and then video and it started to use up a lot more bandwidth. Users keep asking for more and more and this is where we are today. There definitely needs to be a consolidation of carriers to balance out bandwidth use over multiple carriers. The smartphone era is upon us and bandwidth problems aren’t going to get any better.

    1. Sorry, but consolidating carriers, or expanding to 100s of carriers won’t do anything to balance bandwidth. Its the number of users and the demands that they put on the system, not the number of carriers.

      The answer is for the carriers to actually upgrade and expand their network infrastructure to accommodate the users that will make a difference.

      For far too long the carriers did little to nothing about building out their network in any significant way.

  7. It’s call doing business…….you take risks!!! Some times they pay off & some times they don’t. That’s the free market for you!!!! As many including AT&T preach that is the way……then they need to live with the results.

  8. Far more important is Apple enabling us customers to use the data we are paying for. (WiFi is still doing most of the heavy lifting for me anyway)

    44% was way to high to start with. Call this a necessary correction for carrier profit.

  9. “its data infrastructure costs through the roof.”

    when Steve Jobs was in hospital his doctor said he kept pointing out how the medical equipment in the room could be improved.

    makes me wonder if Steve had run a carrier whether the services and equipment would be more efficient so they would make a reasonable profit while providing good service. (again I’m reminded what the world has lost in Steve Jobs)

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