Shocker: Apple accused of securing preferential terms for iPhone with mobile operators

“Apple used its influence to secure preferential treatment from mobile operators wanting to offer the iPhone, squeezing out competition from rival brands, according to a former senior executive at a major European operator,” Juliette Garside reports for The Guardian.

“The Guardian has been given a detailed description of an alleged three-year contract between Apple and the operator. The source, who asked not to be identified, said some colleagues had concerns about the legality of the contract, but that these were brushed aside because his company decided it needed access to Apple’s bestselling device,” Garside reports. “‘The marketing people were filled with joy about getting the iPhone,’ he said. ‘Our second thoughts from a legal point of view were overruled by the marketing people.'”

Garside reports, “The revelations come as the European commission considers whether to take action over Apple’s contracts with operators. Phone companies are beginning to push for a shift in the balance of power in their relationships with Apple, now that manufacturers like Samsung and Nokia have proved their ability to make smartphones of equal quality.”

MacDailyNews Take: Opinion – and a wrong one at that – reported as fact by The Guardian. About what other topics, if any, is The Guardian reporting opinion as fact?

Garside reports, “It is claimed Apple used the contract in question to state the maximum price a consumer should pay. This retail price was less than the operator paid to acquire the iPhone, and the difference was to be met by a subsidy from the operator. Crucially, the contract is alleged to have blocked more generous subsidies from being given to rival handset makers, using what are commonly known as ‘most favoured supplier’ clauses. Amazon, the online retailer, uses similar clauses in its dealings with publishers. If Apple is found to be a dominant player, this kind of preferential treatment could be challenged as breaching competition law.”

MacDailyNews Take: How can Apple be “a dominant player” when their market share is dwarfed by “Android?”

Garside reports, “Proving Apple’s dominance could be difficult. The world’s most valuable technology company had a 22% share of the smartphone market in Europe last year, according to research firm IDC – a far cry from the 40% usually considered a threshold for dominance.”

MacDailyNews Take: Exactly.

Read more in the full article here.

MacDailyNews Take: No way! iPhone — the smartphone every carrier without a death wish wants and needs, the very device that has topped 9 consecutive J.D. Power smartphone user satisfaction lists, the phone where every successive model becomes the best-selling smartphone in history — was used by Apple to *gasp!* “secure preferential terms?”


You mean LG et al., sans a product that anybody with a brain wanted, weren’t able to “secure preferential terms?”


Welcome to Business 101.

Related article:
J.D. Power: Apple ranks highest in smartphone customer satisfaction for 9th consecutive time – March 21, 2013


  1. The problem as I see it is with the subsidy. Get rid of the subsidy and let the market decide which phone they’re going to buy, knowing what they’re paying for the phone without wrapping it up in some gimmicky carrier subsidy scheme. The carrier should be just a dumb pipe anyway.

    1. The subsidy is not a “problem.” It is simply a method of doing business. Pay for it now vs. pay for it over time. In general, the poorly educated consumer chooses the latter, even if they end up paying more. Too bad for them. In most countries, consumers have the option of buying an iPhone upfront, however, where there’s a choice vs. subsidized plans, relatively few do.

      1. The problem with that ‘choice’ is that it isn’t really a choice here in the US. Sure, I can buy the iPhone outright from AT&T. But what do I get for that? No contract. Oh boy. I still pay the exact same monthly charge. Until there is a difference in the monthly fee I pay, there is little point buying the phone outright.

        T-Mobile is the first one that seems to have done so, but it takes almost exactly two years to recoup the difference so unless you don’t buy a new phone every two years or less, you have saved nothing.

    2. T-mobile did exactly that. You buy your plan, then you decide which phone(s) you want to use with the plan. You can bring your own old device, buy a new one on eBay, buy a new one directly from T-mobile for cash, or buy a new one from them on an installment plan. Depending on your credit score, they will ask you to pay an up-front downpayment, and the rest will be paid in monthly installments over two years, at no interest. The price of the phone you pay is still full ($630 for the iPhone, for example), but it is paid through an interest-free loan.

      Besides the obvious advantage of knowing exactly how much you pay for your phone and how much for the service, there are two additional advantages:

      First, when your phone is paid off, it is paid off. Your monthly wireless bill drops down, since there is no loan installment payment anymore (with the subsidy model, it keeps going, thereby donating free money to the carrier);

      Second, you are NOT being taxed on that phone installment payment. In many US states, taxes on wireless service are quite high (over 20% in NY state). Under the subsidy model, you pay taxes on your entire monthly bill, even though part of it is just meant to pay off your phone. Out of $480 you pay to your carrier for the phone, over $90 represents taxes for wireless service (which those $480 are NOT). Under the T-Mobile model, you are only taxed on the $50 per month wireless service part; the $20 you pay for the phone is an interest-free loan, which is NOT taxed. The only tax you pay for the phone is the standard retail tax (8.5% in NY state, for example), which is paid when you buy the phone. In NYC, the up-front down-payment for the iPhone is somewhere close to $200 ($150 down-payment itself, plus some $50 representing tax on the $630 price of the phone).

      Everything is clear, transparent, easy to understand and most importantly, you don’t donate taxes to your state government for something that shouldn’t be taxed in the first place.

  2. That’s funny. I thought Apple tried and tried but couldn’t get any operators interested, so they had to go with Cingular. Cingular was subsequently bought by AT&T.

  3. The Grauniad, as it is fondly known, due to the excessive number of spelling errors it used to have, is a very left-wing paper, being highly supportive of the Labour Party, and other left-leaning organisations, like the BBC.

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