Apple takes aim at the carriers with annual iPhone Upgrade Program

“Apple Inc. launched a broadside Wednesday against wireless phone companies, saying it will for the first time finance iPhone sales directly to customers without requiring them to be tied to any particular carrier,” Thomas Gryta and Ryan Knutson report for The Wall Street Journal. “The new finance offer reflects competing pressures on Apple, which seeks more buyers to upgrade their phones each year, and the wireless carriers, which look to keep their customers from switching to a rival. Apple will offer a monthly fee of $32.41 over 24 months for its cheapest iPhone model under the new program announced Wednesday at the latest iPhone launch. The deal allows customers to get a new device each year, as well as select their carrier with each upgrade.”

“Denny Strigl, Verizon’s former chief operating officer, said Apple’s move is a sign it wants to wrest control of customers from wireless carriers. Companies that control the customer relationship have more leverage in pricing and sales, he said,” Gryta and Knutson report. “If customers go to Apple to finance their phones and choose a carrier, for example, Apple will be able to steer that customer’s decision, and possibly guide them toward a carrier with a cheaper service.”

“Mike Sievert, chief operating office of T-Mobile praised Apple’s move, saying it would allow customers to try out other carriers,” Gryta and Knutson report. “Sprint Chief Executive Marcelo Claure said in an interview that the tension between carriers and Apple is less about customer control and more about two year contracts, which discouraged customers from buying new iPhones each year. ‘Apple is trying to do nothing more than shorten the cycle so they can sell more iPhones,’ he said, adding that he believed that’s what customers want, too. Since Sprint launched an annual upgrade plan last month, 90% of new customers have bought it.”

Read more in the full article here.

MacDailyNews Take: Here’s to churn and the frenzied competition it creates! Lower wireless data prices benefit everyone but the dumb pipes.

SEE ALSO:
How Apple’s annual iPhone Upgrade Program works and how much it costs – September 9, 2015

[Thanks to MacDailyNews Reader “Arline M.” for the heads up.]

15 Comments

  1. Actually, Apple’s plan is significantly more expensive than the carriers’ own monthly leasing plan (except, of course, that Apple’s plan also includes Apple Care+). Still, when you do the math, the carriers’ own plans are cheaper…

  2. Is was my impression was that the carriers are trying to get out of the subsidize business. This is just Apple’s way of picking up the ball that the carriers are dropping.

  3. Apple’s plan very neatly inverts what had been happening before. A potential iPhone customer could walk into an service supplier’s shop and the assistant might persuade the customer to buy an Android phone instead. If a customer walks into an Apple store, they won’t be offered anything other than an iPhone, but they may discover that there is a better service deal for them than the one they are currently using.

  4. Dropping subsidies is the biggest strategic mistake the wireless carriers have ever made. The subsidized phone was the consumer lock-in. Now they are just selling a commodity – wireless service. As the rest of the world never really did subsidies, you can easily see the difference in the market. Service outside the US has always been 25-50% less expensive than in the US, and now competition will drive costs down. I will be happy to see ATT and Verizon’s rates race to the bottom.

  5. I don’t quite understand why carriers want to drop subsidizing smartphones. It would seem to be a good business for getting customers. Now they’re playing right into Apple’s hands. Apple has far more money than any carrier around and can certainly afford to subsidize its own iPhones.

    Let’s see what Wall Street has to say now about Apple being downgraded due to loss of carrier subsidies. It will be more of a hardship for smaller companies with less money to subsidize their own smartphones. Apple seems to be in a great position.

    1. They had to. After T-Mobile started it as a way to attract customers , the others had no choice. The carriers worst world is one where the customer is good at math. It has been a long time coming.

  6. AT&T still off subsidies on new 2-year contracts. I don’t turn in my old iPhone’s, I collect them. Last year in the middle of my subsidized iPhone 5S contract, I paid $950 cash (plus tax and $99 Applecare Plus) for my unlocked 128GB iPhone 6S Plus. This year I’m back to a new 2-year contract and a $499 subsidized 128GB iPhone 6S Plus. My NEVER CHANGING monthly service fee is about $75. Did I mention I’m one of the grandfathered unlimited data AT&T customers from back at the beginning of iPhone 3G service?😜😱

  7. Another big picture moment being lost through immediacy. Why would Apple want to ‘wrest control of customers from wireless carriers’ or why would he think ‘Companies that control the customer relationship have more leverage in pricing and sales’?

    Perhaps, but I believe this is only the beginning. Wresting control…yes, control the customer…yes, but not simply to steer them into cheaper plans that ‘others’ control; how about plans that APPLE CONTROLS? Apple could certainly build their own wireless network and then they’d own the whole cellular market. Additionally, how about moving away from cable providers and give Apple TVs cellular capability? Same idea here, Apple would control the streaming, content ecosystem….everything.

    Big ideas…I can see it happening in the not-to-distant future.

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