On the eve of iPhone 6 carriers once again using the media to push back on 'subsidies'

Posted April 23, 201410 yr

Imagine a boss at a company with a really great salesperson who lands all the best, highest valued customers for the company. Now imagine that boss hates having to pay that salesperson their really high commission, even though it's the salesperson who's closing all those deals and ensuring all that money comes to the company. The boss can't afford to lose that salesperson but they're desperate to find anyway they can to cut that salesperson's commissions. Likewise, the salesperson knows their value and insists on being richly compensated for the deals they close. That's the relationship between the carriers and the iPhone, and between the price carriers pay Apple for the revenue the iPhone generates. It's also why the carriers hate Apple and the iPhone, and why when a new iPhone — like the iPhone 6 — is on the horizon, we get articles like this: "As Phone Subsidies Fade, Apple Could Be Hurt". The Wall Street Journal:

U.S. wireless carriers are making unexpectedly fast progress moving their customers away from subsidized phones, a shift that could put further pressure on sales of expensive devices like the iPhone.

Apple Inc. charges more for its phones than many companies charge for low-end laptops. Until recently, American subscribers have been insulated from the sticker shock by carriers that subsidized hundreds of dollars of the cost with hopes of recovering it via two-year service contracts.

What's meant by "subsidies" in North America is "loan". The carriers front you the phone and then add an extra ~$20 a month to your plan to pay it back. That does hide the true cost of the iPhone — which historically starts at $650 for the base flagship model — but the carriers certainly aren't giving anyone anything for nothing. Some carriers have even double-dipped under more recent plans, keeping the ~$20 "loan repayment" in plans and adding an extra "installment charge" on top of it. Lovely people, they.

As to Apple charging more for their phones than low-end laptops, iPhones are computers, and better ones than low-end laptops. That's how premium products — from Apple, Samsung, or any vendor — are priced. It's how typically un-"subsidized" products like iPads and MacBooks are priced.

And the carriers, spin aside, have zero interest in lowering prices for us. They have complete interest in keeping more of our money for themselves. Witness everything from AT&T, Verizon, and Sprint over the last decade, and the more recent antics of T-Mobile.

Best iPhone carrier plans (spring 2014)

All things considered, I find paying Apple more in line with my interests than carriers. They're the ones who manufacture phones to exceedingly hight quality levels, who refrain from festooning them with logos and clogging them up with crapware, who provide services like iMessage and FaceTime that work around often exorbitantly priced carrier cash-grabs. It's a glimpse at what a carrier-as-dumb-pipe world could truly be like.

Which, of course, the carriers know and why, of course, they hate Apple even more. Hence why these types of articles — and articles about Apple raising prices — pop up every time new phones, like the upcoming iPhone 6 start working their way towards distribution.

It's negotiation by media. It's theater. And it's absurd.

Or does anyone here really feel sorry for the carriers, and their having to pay Apple a premium for the premium profits the iPhone delivers them every month?

Note: There's an absolutely valid argument to be made that, in an "unsubsidized" market Apple won't sell as many $450-$850 phones as other vendors will sell budget under-$400 phones. Apple will either have to move into lower segments, as they did with iPod, or content themselves with less market share but more profit share, as they did with the Mac. But that's an argument for a different piece and a different day.

Note 2: It occurs to me I pay $750 on average for a new iPhone every year. (Contracts, until recently, were 3-years in Canada.) That sounds like a lot, but it works out to roughly $60 a month, or $2 a day, for a computer I use every day, all day, more than any other object. Yes, I could get a cheaper one, but cheapness isn't always the most important feature.