Bruised mobile carriers fight back at Apple or something

“The iPhone revolutionized the smartphone industry and made Apple the world’s most valuable company. But it hasn’t been all good news for the mobile carriers,” Miriam Gottfried reports for The Wall Street Journal.

“Now that three of the top four carriers stock the iPhone, it looks more of a burden than a differentiator. With Apple charging about $620 for each iPhone, according to UBS, carriers have to offer a subsidy of about $420 in order to sell customers the device for just $200,” Gottfried reports. “That is significantly higher than the roughly $300 carriers pay to subsidize some high-end Android phones.”

MacDailyNews Take: That would be because “high-end Android phones” are mere shadows of the phone they really want to be.

Gottfried reports, “If carriers could lower that cost, they would see a big benefit.”

MacDailyNews Take: Gee, no, ya think? This is some crack reporting by Miriam so far.

Gottfried reports, “The carriers are fighting back.”

MacDailyNews Take: Ooh, here we go, the carriers are “fighting back at Apple,” just like the WSJ’s headline promises…

Gottfried reports, “AT&T’s first move was to change its upgrade policy. In March 2011, it lengthened the amount of time before a customer was eligible for an upgrade to 20 months from 12 to 18 months, depending on the plan. Verizon already had a 20-month policy in place. But AT&T allowed all customers already due for an upgrade in 2011 to do so. The reality of the burden hit home in the fourth quarter of 2011 when all three major carriers reported weaker wireless-service margins. The reason: a flood of customers upgrading to the iPhone 4S. Carriers responded by raising upgrade fees. In February, AT&T doubled its upgrade fee to $36. Verizon Wireless instituted a $30 upgrade fee in April. It also did away with subsidies completely for customers who want to keep unlimited data plans. Sprint Nextel already had changed its upgrade policy to 20 months and doubled its upgrade fee to $36 before it started selling the iPhone last October. The discipline seems to be paying off: Verizon and AT&T both reported record wireless-service margins of 49% and 45%, respectively, in the second quarter. Sprint’s operating margin hit 17.9% from 15.2% the previous quarter. And for all three carriers, customer churn dropped. Without the upgrade policy change, AT&T’s overall earnings would have fallen in 2012 instead of the 9% they are expected to rise, says research firm BTIG.”

MacDailyNews Take: Here’s the condensed version: U.S. carriers with iPhone deals raised upgrade fees except in 2011 where AT&T grandfathered in current subscribers. All U.S carriers with Apple deals benefitted and continue to benefit greatly from iPhone. So, that’s it. That’s “fighting back at Apple,” according to the WSJ. What a bunch of dog-days-of-summer claptrap.

Full article – a silly waste of time under a misleading and sensational headline – here.

MacDailyNews Take: If any carrier doesn’t like Apple’s terms, they should feel free to drop the iPhone and focus on catering to cheapskate and/or ignorant customers with fake iPhones (while they last; court actions pending). Then they, too, can be just like T-Mobile USA. 😉

Carriers without iPhones are, just like the phones they offer, inferior.

[Thanks to MacDailyNews Reader “Edward Weber” for the heads up.]


  1. What Gottfried ignores is that the iPhone is singularly responsible for greater use of data and commands much higher brand loyalty, thereby reducing customer acquisition/retention costs.

    ATT doesn’t even advertise the iPhone, yet the iPhone is its #1 seller.

    Gottfried’s article is a bullshit hit generator.

  2. Hah! If AT&T stops carrying the iPhone, I’ll stop carrying them. I’m sure most current iPhone owners will move to where they can upgrade. This would be a death knell for carriers, look at T-Mobile.

  3. Why the vitriol? The article has a point, is not anti-Apple, and fits in with recent reports that carriers try to stear users from iPhones to Android phones. The vitriol here just makes MDN and people here sound stupid.

  4. Apple appears to do deals where a carrier contracts to sell a certain number of iPhones per year. If they sell that number, then all is well and good. If they sell more, then that’s even better.

    If they would rather sell fewer iPhones, I have no doubt that their rivals would be happy to sell those ‘unwanted’ iPhones.

    The bottom line is that the carriers need iPhones and it would be an unbelievably foolish network that turned away the new iPhone because of a mere hundred dollars of subsidy.

    The carriers may make noises claiming that the deal they get isn’t so good, but they also know how much the iPhone contributes to their overall profit over the following couple of years. The noises are nothing more than a charade to try and get a more favourable deal out of Apple, but Tim Cook is certainly not the sort of person to be fooled by such nonsense.

  5. Don’t carriers pass subsidies on to customers in the form of higher monthly bills? Why would they care as long as the customer foots the bill for hardware? Carriers complain all the way to the bank.

    1. The problem is that they don’t. Monthly plan offerings for iPhone are exactly the same as for any Android out there. Subsidised pricing for the iPhone is the same as popular high-end Android devices ($200 plus 2-year contract). Early termination fees and upgrade eligibility terms are identical for all smartphones, be they iPhone or Android. The only difference is, the iPhone requires higher subsidy than an Android phone (about $150 difference). This means that for each two-year contract, carrier makes at least $150 more on an Android device than they make on an iPhone.

      This is precisely the reason why every single carrier that sells the iPhone has instructed their sales staff to steer customers away from the iPhone and towards an Android device. Those who are determined to get an iPhone will certainly get them, and the carrier will ring up a sale and lock in a subscriber (for at least first two years). But for those who are ignorant enough (probably majority of consumers), the iPhone (i.e. Apple brand) will have lured them into the store, but the sales staff’s schtick will have duped them into buying something else. Carriers are essentially using the power of Apple’s advertising to get customers into their stores, only to strong-arm them into buying something they didn’t want.

        1. Those BOGOs represent an actual discount of about 12%.

          When an Android phone is offered for $100 with plan, that means that the retail price is somewhere around $400 (when you add the $300 subsidy that these phones generally get). So, when you “buy one, bet one free”, you are paying $100 upfront, plus $600 through subsidy ($700) for two phones that normally cost $800 — a 12% rebate. Not bad, but nowhere near “buy one – get one free!”.

  6. US Cellular (one of the last carriers to reject the iPhone because of terms, has been bleeding customers to other carriers for many quarters now. Once the only regional carrier to exhibit substantial growth, they are now in a very weak position no matter how good (excellent) their service is. And, the do carry the Samsung S III (catchy name).

  7. Yes, I really long for the days that my crappy candy bar phone played a fucking V-cast commercial every fucking time I started it up. I also miss the byzantine menu hierchy and shitty “web browser”. I miss the sheer joy of going through my voicemail in the order in which they were left, having to go through several to get to the one I wanted to hear.

    The bully Apple. I should switch to Android to make the carriers feel better while not offering the latest OS for my phone. Maybe they’ll even have some verizon or ATT schmutz on top of the OS to remind me of my loyal, valiant carrier.

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