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The iPhone Is a Nightmare For Carriers

Unknown Lamer posted more than 2 years ago | from the greed-begets-greed dept.

Cellphones 438

New submitter HungryMonkey writes "According to the latest EBITDA numbers from AT&T, Sprint, and Verizon, the subsidies they have to pay Apple in order to carry the iPhone are drastically reducing their profits. From the Article: '"A logical conclusion is that the iPhone is not good for wireless carriers," says Mike McCormack, an analyst at Nomura Securities. "When we look at the direct and indirect economics that Apple has managed to extract from the carriers, the carrier-level value destruction is quite evident."' So one money sucking leech has attached itself to another money sucking leech?"

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Perspective (5, Insightful)

Effugas (2378) | more than 2 years ago | (#38969295)

http://arstechnica.com/apple/news/2012/01/82-percent-of-atts-q4-2011-sales-are-smartphones-66-percent-are-iphones.ars

Yeah. 66% of AT&T's 4th quarter sales were iPhones. I was on Verizon for years, switched to AT&T only for their iPhone, and stuck with them only for their GSM capabilities worldwide. Sure, your margins are less when you offer a better service. Would you prefer no sales though?

Re:Perspective (3, Insightful)

ColdWetDog (752185) | more than 2 years ago | (#38969393)

Gag me with a spoon. FTFA:

chalk another victory for Apple's superior product and unmatched level customer satisfaction. Businesses are just as gaga over the iPhone as individuals -- even archconservative firms such as Halliburton have made the switch.

OK, you like Apple. Next time don't put so much sugar in the Kool-Aid.

Basically, he's just wishing that the wireless carriers would just be dumb pipes and let Apple's Goodness permeate the eather unimpaired.

As I said, too much sugar.

Re:Perspective (5, Insightful)

Aerorae (1941752) | more than 2 years ago | (#38969481)

Would having wireless carriers be dumb pipes really be so bad? Regardless of who's "goodness permeates"?

Re:Perspective (5, Insightful)

Shakrai (717556) | more than 2 years ago | (#38969625)

Would having wireless carriers be dumb pipes really be so bad?

Minor nitpick: If they were "dumb pipes" they wouldn't have to subsidize the cost of the iPhone. You'd pay full price for it and obtain service without a contract.

Re:Perspective (5, Insightful)

wed128 (722152) | more than 2 years ago | (#38969731)

Deal. I've wanted this for years.

Re:Perspective (0, Flamebait)

geekoid (135745) | more than 2 years ago | (#38969825)

Since you have been able to do that for years, I don't think you are telling the truth.

Re:Perspective (4, Insightful)

vlm (69642) | more than 2 years ago | (#38969913)

Since you have been able to do that for years, I don't think you are telling the truth.

Really? Its possible to do that in the USA with an iphone? I'm calling urban legend on that. As far as I know that is not possible. It MIGHT be that you can either get the phone for "free" and pay $120/month for service or you can pay $600 for an unlocked phone and also pay the same $120/month. Or you can buy the phone and pre-paid / non-contract voice service but no data service.

Re:Perspective (4, Insightful)

Tyler Eaves (344284) | more than 2 years ago | (#38969735)

Yes, again, this is bad, why?

Sure, you have to front the $600 for the phone, but your monthly bill is now $20 instead of $80. After 10 months you're breaking even, and after the two years of the contract your're about $700 ahead, enough to pay for a "free" phone upgrade, and then it's gravy from there on out.

Re:Perspective (4, Insightful)

geekoid (135745) | more than 2 years ago | (#38969881)

Except most people are horrible at thinking ahead in financial terms.
And companies don't go out of their way to inform them of the relevant details so the customer can make a reasonably informed decision.
oh, and if people had to pay full price, it would probably lower the cost of the iPhone 200 bucks.

Of course allowing consumer to make informed decision cause a decrease in profits, so it isn't good for Apple of the carrier.

Re:Perspective (2)

whoever57 (658626) | more than 2 years ago | (#38969985)

Except most people are horrible at thinking ahead in financial terms.

Or the carrier doesn't really offer it. T-Mobile offers pre-paid bring-your-own plans, except that they won't let you transfer from a post-paid plan to a pre-paid plan.

Re:Perspective (4, Insightful)

vlm (69642) | more than 2 years ago | (#38969933)

The manufacturers hate this idea because most people would buy the $200 phone instead of the "free" $600 phone.

Re:Perspective (1)

Microlith (54737) | more than 2 years ago | (#38969763)

That's fine. They'd be forced to cut prices and wouldn't have the excuse of "we gave you a phone" to jack them up.

Re:Perspective (0)

Anonymous Coward | more than 2 years ago | (#38969839)

Either the carriers deal with Apple or Apple turns and sells the iPhone outright unlocked and carriers have no control over anything. Apple does that and all the other device manufacturers would follow in a nanosecond. No special pricing for Tether or other add on bullshit. Just minutes, SMS, and data.

I am sure that Apple and Google could lobby Congress to pass a law that suits them over the carriers. Hell, they could probably buy up T-Mobile and a bunch a regionals, get a wad of spectrum and roll their own LTE/UMTS network and put the big 2 in the ground.

Re:Perspective (1)

Tharsman (1364603) | more than 2 years ago | (#38969967)

Even as dumb-pipes they will want to keep you hooked. You don't buy your Cable Company DVR box, do you? You usually rent it. Dump pipes wireless ISPs may still either subsidize your smartphone for the exchange of a contract, or rent it at very high profit margin.

Actually... a rental model may be a very good one for all. It would be higher profit for the ISP for one. For you, you would never have to give the up-front cost, you may not ever own the device BUT the carrier will have more encouragement to update your firmware with the latest OS.

And hey, depending on how greedy or generous they are, they may grant ownership of the device if you rent it for 2 years.

Dumb Pipes Are Good (1)

andersh (229403) | more than 2 years ago | (#38969713)

That's basically how European telecom market(s) work. It's good for consumers, lower prices and more competition [than in the US].

Re:Perspective (4, Insightful)

Dusty (10872) | more than 2 years ago | (#38969785)

Would having wireless carriers be dumb pipes really be so bad?

Not as far as I'm concerned. The sooner the carriers work out where the future is taking them, the sooner they can change their 'investment' in phone branding to improving their network infrastructure.

Re:Perspective (5, Insightful)

Tharsman (1364603) | more than 2 years ago | (#38969853)

Would having wireless carriers be dumb pipes really be so bad? Regardless of who's "goodness permeates"?

For us? No.
For them? Yes.

I really think they will die if they have to become dumb pipes.

They are running an insanely high profit margin scheme right now. The dumb pipe business is very low profit, relatively speaking. A company can certainly live off doing this, but not a company that is setup to depend on such a high profit scheme.

Call it the Kodak scenario. Kodak is not dying because of relevance, or refusal to adapt. They are dying because their entire structure was setup around extreme profit margins and it is nearly impossible to scale back without dying. Keep in mind scaling back usually means selling factories and real estate (if you find someone to buy them) and firing insane number of employees, all while restructuring your workflow to manage everything with drastically less manpower.

The same will happen to carriers once they are forced into becoming wireless ISPs. They will start struggling to survive, and new companies built from the ground up with a more streamlined structure will become the dominant dogs.

Re:Perspective (-1)

jeffmeden (135043) | more than 2 years ago | (#38969565)

Apple provided the "superior" customer-satisfying product while AT&T provided the product that scores the lowest in terms of customer satisfaction... Is it any wonder that carriers are desperate for any handset (i.e. Android) that offers them the ability to mitigate the risk of a power-hungry monolith like Apple? Apple successfully blamed away every last issue with the iPhone and somehow stuck it in peoples heads that it was all AT&Ts fault. Just because you are the best at playing the blame game, doesn't make your product automatically superior.

Re:Perspective (-1, Troll)

Desler (1608317) | more than 2 years ago | (#38969721)

Just like how the fandroids always shift the blame for any Android woes to everyone but Google? Waaah! Waaah!

Re:Perspective (1)

geekoid (135745) | more than 2 years ago | (#38969947)

He said Apple, not Apple fan boys. So comparing it to Google fan bois is disingenuous at best, and just poor reading comprehension on your part at worse.

Apple blamed the carrier and the users. At least the had the decency to then quietly fix the issues on their side.

NEARLY 50% MARGIN (4, Funny)

Jeremiah Cornelius (137) | more than 2 years ago | (#38969725)

Falls to "ALMOST nearly 50% margin."

Fuck me gently with a chainsaw, Heather. I fail to weep.

Re:NEARLY 50% MARGIN (2)

NatasRevol (731260) | more than 2 years ago | (#38969805)

Well, personally, I do quite nicely from AT&T's 6% dividend, so yeah, I'll be weeping a bit if they're forced to cut it due to making less enormous profits.

Re:NEARLY 50% MARGIN (3, Insightful)

Jeremiah Cornelius (137) | more than 2 years ago | (#38969903)

That's a rent extraction - not economic value through gain in actual goods or services.

That's why there's a recession/depession - an economy leveraged on wealth-transfer over actual work.

It seems the "free market" wants to be a casino, not a merchantile exchange.

Re:NEARLY 50% MARGIN (-1, Flamebait)

NatasRevol (731260) | more than 2 years ago | (#38969953)

Good thing interest hasn't been around long then!

And did I mention how I got my money to buy T? Actual work.

So go fuck yourself and your idiotic rantings.

Re:Perspective (-1, Flamebait)

pak9rabid (1011935) | more than 2 years ago | (#38969951)

The problem with the anti-Apple crowd is its sheer ignorance of reality just to make their distorted views seem accurate. The fact of the matter is that in the mobile market Apple simply has the best products, as is evidenced by sales figures [ijailbreak.com] and customer opinions [changewaveresearch.com] . I know the truth hurts, but put on your big boy pants and accept reality for what it is.

And for the record, the Jonestown incident (which I assume you're referencing) used Flavor Aid [wikipedia.org] , not Kool-Aid.

Re:Perspective (0)

Anonymous Coward | more than 2 years ago | (#38969405)

that wasn't the point of this article. Most (if not all) carriers are making huge profit on our asses. 1 could argue for a very long time that these services, when you look at their prices, are questionable. So in the end, they cry cause they can't make profit. So I consider the whole article as ironic. It should serve them in any case.

All i can say it "TAKE THAT"

Re:Perspective (0)

Anonymous Coward | more than 2 years ago | (#38969545)

If they are losing profits, maybe they should consider raising their prices... most of the people at my work would pay anything to have their iDevices.

Re:Perspective (1)

atrain728 (1835698) | more than 2 years ago | (#38969755)

I'm quite certain Apple sets the price for their wares, which is why during the holidays you see iphones/ipods 'discounted' with free gift cards.

Re:Perspective (1)

Rifter13 (773076) | more than 2 years ago | (#38969603)

I always think back to a conversation I had with my uncle YEARS ago. He was fairly high up in one of the cell carriers that Verizon bought. By his estimate, pricing on cell phones would be a flat $30, for unlimited service in 10 years. That conversation was close to 20 years ago. I think the carriers are making a LOT of money off of everyone, and keeping their prices inflated, not realistic.

Re:Perspective (1)

vlm (69642) | more than 2 years ago | (#38969791)

By his estimate, pricing on cell phones would be a flat $30, for unlimited service in 10 years. That conversation was close to 20 years ago. I think the carriers are making a LOT of money off of everyone, and keeping their prices inflated, not realistic.

$20 for republic wireless for an android phone if you're one of the luck beta testers like myself. Works great so far... Wish the handset had more than 128 megs of memory. Coming from an ipod touch its very weird to go back to tiny storage space and drive like mentality, like going from linux back to msdos, other than that, all good. Isn't the cheapest iphone plan $120/month? Thats an extra $100/month they're paying. Hope they're getting an extra $100 worth of service...

Formerly was pay as I go virgin mobile, held my nose at the stinky marketing and sent in $20 every 2 to 3 months.

I would imagine most of the carriers money goes into advertising (gotta spend as much as all the other carriers) and rather substantial commissions for salespeople and retailers, but most of the money probably goes into billing. Before the death of pay per minute old fashioned wired long distance, most of the per minute cost was the billing overhead, not providing the service or even advertising it. It costs big bucks to nickel and dime people.

Re:Perspective (1)

TheRaven64 (641858) | more than 2 years ago | (#38969907)

Keep in mind that 10 years ago mobile data usage was tiny. Ignoring termination costs (i.e. the cost of calling other networks), providing voice + SMS to everyone with a mobile phone is pretty cheap. Voice on GSM only goes up to 13Kb/s, which is a pretty tiny slice of the 3+Mb/s that HSPA can provide. When people start streaming videos to their phones, however, the usage goes a long way up...

Re:Perspective (1)

Rifter13 (773076) | more than 2 years ago | (#38969945)

But, should that change airtime costs? My airtime costs, before data, are pretty damn high, still!

Re:Perspective (1)

amoeba1911 (978485) | more than 2 years ago | (#38969935)

By his estimate, pricing on cell phones would be a flat $30, for unlimited service in 10 years. That conversation was close to 20 years ago.

Your uncle forgot to take into account greed. There are two ways of increasing your margin:
1. Build better infrastructure so the service costs you less in the future and you can make more profit even if you charge the same.
2. Charge more for the same service without upgrading infrastructure.

Option 1 is costly at first, but it pays for itself over time. Option 2 is very shortsighted, but results in huge profits in the short term. We know there's collusion when it comes to cell service: they all simultaneously increase their prices. The barrier to entry is incredibly high so there is not much outside competition, so they're free to sell you the shitty service for ever increasing fees without worries about getting usurped by a newcomer.

Capitalism is great, but it is ruined by collusion and barrier to entry. The free market doesn't work when the market is rigged.

Re:Perspective (0)

Anonymous Coward | more than 2 years ago | (#38969479)

AT&T's profits so high they decide to buy T-mobile for 30 billion. Poor AT&T loosing money.

Re:Perspective (1)

ticker47 (954580) | more than 2 years ago | (#38969563)

This has little to do with offering better service and more to do with offering a product that is universally wanted. AT&T is typically regarded as the worst of the wireless carriers (in the US), but they still have the iPhone and have had it far longer than anyone else. Apple knows that people want the iPhone and can charge whatever they want for it and since the carriers know that people want the iPhone, they'll risk lower profit margins (per device) in the hopes of higher sales and hopefully come out ahead.

Re:Perspective (1)

RollingThunder (88952) | more than 2 years ago | (#38969681)

Considering the massive loss that Apple mandates the carrier eat on each unit sold, yes, they probably would prefer no direct sales.

Apple's not going to move many direct-to-consumer iPhones for the amount they charge the carriers, though. The end user is conditioned to think their subsidized price is the real price.

Subsidies (1, Insightful)

Anonymous Coward | more than 2 years ago | (#38969339)

So my android phone is subsidizing your iphone. Nice.

Re:Subsidies (0)

Anonymous Coward | more than 2 years ago | (#38969363)

So my android phone is subsidizing your iphone. Nice.

You're bankrolling mine too. Thanks!

Re:Subsidies (2, Insightful)

spire3661 (1038968) | more than 2 years ago | (#38969495)

Gotta love the implied righteousness of this post.

Problem? (3, Insightful)

zoloto (586738) | more than 2 years ago | (#38969357)

I can't see the problem with this. Phone carriers, internet carriers too since many seem to be doing both, should be dumb pipes. There's no dark side to that.

video (-1)

Anonymous Coward | more than 2 years ago | (#38969359)

good video izle [videoizleten.com] thanks you

Kneejerk reaction (0)

zonker (1158) | more than 2 years ago | (#38969369)

A logical conclusion is that the iPhone is not good for wireless carriers

Good. Screw them. Not a single tear shed from me.

Then why... (5, Insightful)

TrailerTrash (91309) | more than 2 years ago | (#38969375)

Don't carriers drop Apple? "We'll lose money on every transaction but make it up in volume" has nevevr worked.

Or, is it that profits are reduced, not eliminated? Value destruction means losing money, not reduced margins. Pretty important to distinguish. If they were losing huge buckets of money, we wouldn't see carriers clamoring to carry the devices. OTOH, selling at reduced margins at high volume can potentially be profit maximizing (e.g., Wal*Mart).

Re:Then why... (-1)

Anonymous Coward | more than 2 years ago | (#38969449)

Amazingly, TFA asked such a question. Here's the response:

Carriers' financials were particularly bad last quarter, after Apple had its biggest product launch ever with the iPhone 4S.

So why do carriers insist on selling the iPhone? Verizon, AT&T and Sprint all declined to comment directly on that question for this article, but the companies have said in the past that having the iPhone is a major selling point for their brands.

In an interview with CNNMoney in October, just after Sprint announced it would begin selling the iPhone, Sprint CEO Hesse said the No. 1 reason why customers had left Sprint prior to October was because it had no iPhone.

"It comes down to, 'Do you want to be with them or bet against them?'" he said. "Apple is arguably the best global brand in the tech space."

Re:Then why... (0)

Anonymous Coward | more than 2 years ago | (#38969549)

Because this article is dumb. While there is upfront cost to the iPhone, it brings in all the High-End and High Paying Customers. Fortunately these companies are looking past short term results for long term profits and that is why they carry the iPhone. There are plenty of other metrics that support that the iPhone is cheaper overall for the carriers, they have smaller return rates and last much longer than most other phones.

Re:Then why... (4, Informative)

Kenja (541830) | more than 2 years ago | (#38969561)

They (the carriers) dont lose money on each transaction, they just make less. So in that case, less profit per unit by more units is a sustainable business model.

Re:Then why... (2)

Kelbear (870538) | more than 2 years ago | (#38969757)

The summary is wrong. The article isn't claiming that EBITDA is falling (which would imply that profits are being reduced). It's claiming that EBITDA /margins/ are falling (i.e that EBITDA as a percentage of revenue is falling).

So it's as you described, they're selling more, at a lower margin, to get a higher overall profit.

Re:Then why... (-1, Offtopic)

na1led (1030470) | more than 2 years ago | (#38969765)

I use US Cellular because they have excellent service in my area and very competitive cost. They don't offer iPhones but who cares; I have a great Android phone that does everything an iPhone can do and more. AT&T should just follow other successful caries that don't need iPhone and still do very well.

Because the iPhone is selling like crazy (-1, Offtopic)

bonch (38532) | more than 2 years ago | (#38969843)

The iPhone 4S was such a huge hit that it passed Android's marketshare [reuters.com] at the end of 2011 (it wouldn't surprise me if people didn't know, since Slashdot refused to report it). But, see, we're not supposed to focus on the facts. We're supposed to rant about these "money sucking leeches" like the submitter wanted.

Re:Then why... (1)

NatasRevol (731260) | more than 2 years ago | (#38969851)

They're making it up on volume. Just making slightly less. But selling significantly more.

Re:Then why... (1)

geekoid (135745) | more than 2 years ago | (#38970013)

It does work if the cost goes down as volume goes up. It fails when costs are static; which is why it failed in 01.
People with the old school mind set applies it to a situation where volume as little impact in overall costs.

People succeeded when they looked at companies where volume had a minimal impact on the need to higher more people.

Nightmare? (2)

Dog-Cow (21281) | more than 2 years ago | (#38969385)

If it was a nightmare, Verizon and Sprint would not have jumped at their chance to carry it. Surely Apple would have been happy to not produce a CDMA version, if no one wanted it.

Re:Nightmare? (1)

EraserMouseMan (847479) | more than 2 years ago | (#38969633)

They jumped at the chance? When Apple's contract with AT&T was over it was quite a while longer before the iPhone was available at Verizon. Even longer for the other carriers.

Re:Nightmare? (1)

Dog-Cow (21281) | more than 2 years ago | (#38969815)

Do you think Verizon was waiting for the hell of it? Just because contract A is up doesn't mean that contract B is instantly ready to go, nor does it mean the hardware is available.

And besides, the terms of AT&T's contract were never made public. The point in time that the exclusivity clause ended is speculation.

Re:Nightmare? (1)

Desler (1608317) | more than 2 years ago | (#38969905)

Exactly. And considering they announced getting the iPhone a month before exclusivity did end means they had to have been in negotiations for months before that. To say that they didn't jump at the chance just because it took 9 months to get a CDMA model is just the ravings of a butt hurt fandroid.

Re:Nightmare? (2)

Desler (1608317) | more than 2 years ago | (#38969847)

Yeah 8 whole months. And none of that could at all have had to do with having to make a different CDMA model, right? Oh and let's forget that Verizon announced getting the iPhone a month before the exclusivity ended, right? Yeah they totally didn't jump at the chance...

Hahaha (2)

GameboyRMH (1153867) | more than 2 years ago | (#38969389)

It's rent-seeking parasitism all the way down!

So? (3, Insightful)

viperidaenz (2515578) | more than 2 years ago | (#38969391)

Its an expensive phone. Are Apple forcing them to give it away? sounds more like "Carriers business model is destroying their profits"

Money sucking leech?? (0)

tomboalogo (2509404) | more than 2 years ago | (#38969401)

No really, stop beating around the bush, tell us how you feel about Apple!! Jeez some kids won't grow up!

Re:Money sucking leech?? (1)

tripleevenfall (1990004) | more than 2 years ago | (#38969433)

I am amused that, between a summary including "Bull****" yesterday and this one with "money-sucking leeches", Slashdot has abandoned even the thinnest pretense of giving an impartial treatment to each story in the summary.

Re:Money sucking leech?? (0)

Anonymous Coward | more than 2 years ago | (#38969747)

no.. what is even more amazing is that Slashdot has been overrun by corporate assholes so much that when someone with a non-corporate conformist opinion comes in and expresses an opinion they get offended.

Re:Money sucking leech?? (0)

Anonymous Coward | more than 2 years ago | (#38969861)

I am amused that, between a summary including "Bull****" yesterday and this one with "money-sucking leeches", Slashdot has abandoned even the thinnest pretense of giving an impartial treatment to each story in the summary.

Truth is like rain, it cares not who it falls upon. It is what it is.

Re:Money sucking leech?? (-1, Troll)

bonch (38532) | more than 2 years ago | (#38969739)

In the last four years, Slashdot has become a troll-heavy advocacy site. If you praise Apple even a little bit in the comments, you get modbombed and accused of shilling. It's like Engadget's muddy runoff seeps through here like a rainy ditch, hating everything mainstream and popular. It's really sad, because this site used to be a lot more fun.

Ya know what would be really funny...? (0)

Anonymous Coward | more than 2 years ago | (#38969419)

Do you know what would be really funny as shit?

If all of a sudden, AT&T, Verizon and Sprint said "enuff" and ditched the iPhone all at once, leaving it to the small regional carriers only.

Re:Ya know what would be really funny...? (1, Insightful)

spire3661 (1038968) | more than 2 years ago | (#38969537)

Apple would BUY them at that point or just roll their own. Apple is sitting on a MOUNTAIN of cash.

Re:Ya know what would be really funny...? (1)

Desler (1608317) | more than 2 years ago | (#38969597)

Yes especially when they'll then have customers leaving in droves.

Re:Ya know what would be really funny...? (3, Interesting)

TheRaven64 (641858) | more than 2 years ago | (#38969729)

Even better, if mobile phone carriers stopped selling phones altogether. Most of the smaller ones in the UK have stopped already. Just buy a phone, buy a SIM, combine the two yourself.

Of course, if you look at SIM-only plans, you see how much you're actually paying for the 'free' phone. My carrier, for example, offers a £12 SIM-only plan and an identical £30 smartphone plan. The SIM-only deal is a 1-month contract, the smartphone plan is a 12-month contract. So, if you use it for the minimum period, you've paid £216 more than if you were on the SIM-only plan. The smartphone plan comes with a few choices of phone. The first one I looked at, the HTC Desire S, costs £154 (new) unlocked, on Amazon. Probably less if you shop around.

So, the 'subsidised' 'free' phone actually works out as a loan with an APR of about 40%. If you buy it now on your credit card and pay the bill at the end of the year, you'll still be better off...

Re:Ya know what would be really funny...? (1)

NatasRevol (731260) | more than 2 years ago | (#38969885)

AT&T sold 7+ M iPhones last quarter (75% of smartphones sold)
VZ sold 4+M iPhones last quarter (50% of smartphones sold)
S sold almost 2M iPhones last quarter

What do you think those companies would look like if they threw out half of their business?

"Money sucking leech"? (1)

mike260 (224212) | more than 2 years ago | (#38969425)

"from the greed-begets-greed dept."?

Ugh.

Is there a way to block stories by editor?

Re:"Money sucking leech"? (4, Informative)

bonch (38532) | more than 2 years ago | (#38969753)

Is there a way to block stories by editor?

Yep! Check your account options in the upper right. People used to take advantage of this feature to block the infamous "personalities" JonKatz and michael.

Re:"Money sucking leech"? (1)

Dog-Cow (21281) | more than 2 years ago | (#38969845)

Has been for years. Are you new here?

Poor babies. (5, Insightful)

Picass0 (147474) | more than 2 years ago | (#38969441)

Apple drug these backward-ass bozos kicking and screaming into the modern phone era, so cry my a river.

When I think of the punitive overage changes these carriers have for data, roaming, SMS texting... It warms my heart to think of their financial discomfort.

For what we pay for cell service in the US we should have a state of the art infrastructure and widespread 4G access.

Re:Poor babies. (0)

spire3661 (1038968) | more than 2 years ago | (#38969553)

Huge landmass, with a giant density hole in the middle.

Re:Poor babies. (0)

Anonymous Coward | more than 2 years ago | (#38969959)

Then avoid the middle?

Really? (4, Insightful)

tekrat (242117) | more than 2 years ago | (#38969505)

Carriers are crying all the way to the bank. Anyone selling the iphone has seen their sales jump as people ditch their carriers in a mad scramble to get the hottest phone on the market.

A story came out last week detailing that Apple is now one of the biggest phone makers on the planet. This is from a company who's primary market was computers. Clearly, they are doing something right if everyone wants what they are selling.

If the carriers don't like the iPhone, stop selling it, and watch all your business dry up. That's how the free market works, capitalist pigs.

And yet they continue to carry it (4, Insightful)

93 Escort Wagon (326346) | more than 2 years ago | (#38969511)

Which tells me it must make business sense to do so.

I`m tellin ya...Apple is circling the drain. (0, Flamebait)

fatbuckel (1714764) | more than 2 years ago | (#38969519)

Just a matter of time. Don`t get mad at me, just bookmark this and review it in a year.

You're not alone... (0)

Anonymous Coward | more than 2 years ago | (#38969647)

You and Michael Dell..

Re:I`m tellin ya...Apple is circling the drain. (2)

Desler (1608317) | more than 2 years ago | (#38969671)

Uh huh. Just like how the iPod, iPhone and iPad were going to be huge flops? Does anyone still give these predictions by bitter neck beards any credence?

Re:I`m tellin ya...Apple is circling the drain. (1)

mike260 (224212) | more than 2 years ago | (#38969873)

Make some concrete, testable predictions - say, market share, profit share, stock-price or something of that nature - and I'll see you on 8th Feb 2013.

Drastically reduced profits? (5, Insightful)

tomhath (637240) | more than 2 years ago | (#38969523)

Between 2009 and 2010, Verizon (VZ, Fortune 500) averaged EBITDA service margin of 46.4% per quarter. In the first quarter that the iPhone went on sale, that fell to 43.7%. Last quarter, when Verizon sold a record 4.2 million iPhones, its margin plunged to 42.2%.

Gee, margin "plunged" from 46.4% to 42.2%. It sounds like their profits have dropped from really, really obscene to just really, really obscene. I need to get out my tiny violin and start playing it for them.

Re:Drastically reduced profits? (3, Funny)

GameboyRMH (1153867) | more than 2 years ago | (#38969703)

DID YOU KNOW that the execs' kids had to swim in a gold-rimmed pool? How are kids supposed to learn to swim without a platinum-rimmed pool!?

They all wept into their caviar and took a private jet to a sad violin concerto in Italy.

Re:Drastically reduced profits? (2)

gstoddart (321705) | more than 2 years ago | (#38969711)

Gee, margin "plunged" from 46.4% to 42.2%. It sounds like their profits have dropped from really, really obscene to just really, really obscene.

It also tells me that this metric is based on an old business model in which people changed their phone far less often.

I'd be interested to see a statistic which broke down how much the iPhone subsidy was costing them, vs how much additional revenue they were getting from new subscribers and data plans.

As with anything, there's lies, damned lies, and statistics ... in this case, it's a specific metric which has fallen, but I bet overall they're still coming out ahead.

I have a hard time viewing this as anything other than how the sales numbers are being presented to make it look like the subsidy (they chose to give) is costing them money, while on the other hand they're raking it in from contracts. Smells like Hollywood accounting that says that they've lost huge money on the most popular movies ever created.

Re:Drastically reduced profits? (0)

Anonymous Coward | more than 2 years ago | (#38969857)

EBITDA is not the same as profits - particularly when you're talking about large telecom companies who have spent tons of money building a national network.

Re:Drastically reduced profits? (2)

Dog-Cow (21281) | more than 2 years ago | (#38969871)

It's even more ridiculous than that. The plunge was from 43.7% to 42.2%.

WTF??? (4, Insightful)

gstoddart (321705) | more than 2 years ago | (#38969595)

How is this Apple's fault? The carrier needs to buy the phones from Apple, and they have a cost.

In order to get people to sign up for contracts, they give you the handset at a cheaper price, but you have them locked into a 2 year (or whatever contract).

If Microsoft (or anybody else) came out with the new Super Duper Happy Fun Phone that everyone suddenly wanted ... they'd be in the exact same boat. Because most people aren't going to pay the full cost of a new phone outright. Phones have always been expensive.

Subsidizing the phone cost is a loss leader, which is exactly what is happening. However, over the next two years, how much profits are they going to make by gouging people for the wireless service/bandwidth they've signed up for? I bet it far outstrips the cost of the phones ... it just happens that a lot of people are moving to those kinds of phones right now.

The problem is that the carriers have been unwilling to invest in their own infrastructure to keep up with growth, and now they're whining that the device that people want to have costs more than they can afford in one shot.

I fail to see why Apple (or any phone manufacturer) needs to come down on the price in order to ensure the carriers make money. They can raise the price they sell the phones for, or let another company do it and lose out on the potential business.

If the carriers are giving too much of a subsidy ... well, that's kinda their problem, isn't it? Apple never told them to give it away.

I'm betting the latest, shiniest phones from Microsoft, Samsung, Nokia, and pretty much everyone else are pretty damned spendy. If you give away expensive things, that's what happens.

Wireless Carriers are like Airlines (1)

jdastrup (1075795) | more than 2 years ago | (#38969599)

They take a service that everyone wants and many need, yet they still go bankrupt.

Re:Wireless Carriers are like Airlines (1)

amoeba1911 (978485) | more than 2 years ago | (#38970003)

They have creative accountants that can make even the most lucrative business seem like a failure. Going bankrupt is sometimes more profitable than actually making a profit.

leeches and centipedes (3, Informative)

jduhls (1666325) | more than 2 years ago | (#38969697)

So one money sucking leech has attached itself to another money sucking leech?

It's more like a "Human Centipede" relationship.

Is it iphones, or smartphones? (4, Insightful)

nweaver (113078) | more than 2 years ago | (#38969743)

The carrier subsidy on the Android phones, especially the fancy ones, also appears to be huge. An unlocked 8 GB Galaxy S2 at Amazon is $600, while a 16 GB iPhone 4S from apple is $650.

Yet AT&T charges $150 for the S II, and $200 for the 4S. So if the carrier subsidy is related at all to the gap between the contract price and no-contract price, the carrier subsidy for an iPhone is no worse than an Android phone.

So its probably not the "iPhone", but just the general trend to expensive smartphones compared with lower subsidy needed feature phones.

Apples Warranty (3, Informative)

Pirow (777891) | more than 2 years ago | (#38969761)

I work for one of the UK network operators which had made me develop a new level of hatred for iPhones.

One of the way the iPhone is hurting carriers is that Apple only offer a 12 month warranty as standard, sure you can extend it with Apple Care, but no one bothers even if they take out the iPhone as part of a 24 month contract.

A customer will phone up over 12 months into an 18 or 24 month contract to say their iPhone is faulty, all we can offer is a chargeable repair as the phone's out of warranty, naturally they're not very happy ("I got it from you, not from apple!") and they'll either want to cancel their contract without any sort of termination fee or get a working phone, 99% of the time if they complain enough they'll get a free of charge replacement iPhone just to keep them happy in the hopes that they'll upgrade at the end of their term (and it works out cheaper than having the call escalate further). This is happening hundreds if not thousands of times a day where I work, sure it happens with other brands too, but to a lesser extent and normally with lower price handsets.

I'm shocked that so many people are willing to accept a 12 month warranty on a product that markets its self as the best in the market.

Re:Apples Warranty (1)

Beardo the Bearded (321478) | more than 2 years ago | (#38969917)

Here's what you have to do:

"Listen, I can't make that judgement for you, but if you call [Mr. Boss] at local [local] he'll probably give you a new phone if you complain enough. You didn't hear that from me, all right?"

Don't worry about things you can't change and can't control. If it's not in your authority range, IT IS NOT YOUR RESPONSIBILITY.

They could stop carrying it... (1)

alispguru (72689) | more than 2 years ago | (#38969795)

And Apple could start selling phones that weren't locked to a carrier, only for real (GSM/CDMA).

The early adopters and heavy users would still buy them even at $650+, and they'd be able to switch carriers faster than every two years, on the basis of performance and customer service rather than contract expiration.

Be careful what you whine for... you just might get it, good and hard.

The carriers are not your friend. (0)

Anonymous Coward | more than 2 years ago | (#38969813)

You mean the iphone tips the balance of power away from the carriers and towards that of the phone maker and the customer? Commoditizing once ridiculously priced premium services so that they're available to the general public?

Strongest argument I've ever heard for buying an iphone. Remember when the telcos would bleed you dry for a 56kbit frame relay line or a 128kbit BRI? I just signed up for 100mbit cable internet that costs less than my old ISDN line.

It's time for wireless carriers to get some sense beat in to them and actually compete for our dollars. I am so fucking sick of these massive carriers bitching and moaning about data usage when they make money hand over fist. I'm talking 39.99/mo for truly unlimited data, text, and voice. Anything less (well, more cost) than that and it's time for some anti-trust action. Forcing users in to plans that are designed to create overage fees is the sort of thing that demands congressional action.

Oops, typo in the article... (4, Insightful)

It doesn't come easy (695416) | more than 2 years ago | (#38969841)

...the subsidies they have to pay Apple in order to carry the iPhone are drastically reducing their [insanely high, customer gouging] profits.

There, fixed that for you.

If carriers are so worried about this... (1)

thatbloke83 (1529851) | more than 2 years ago | (#38969921)

...then why don't they stop insisting on restricting it, and having custom firmwares/hardwares/whatever for THEIR version of the phone, and instead simply use unlocked, stock, "off the shelf" models. Costs might go down then...

(caveat: I'm from the UK, but i hear it's generally pretty crap across the pond with mobiles)

Carriers brought this on themselves (4, Insightful)

Karmashock (2415832) | more than 2 years ago | (#38969955)

Carriers shouldn't have any control over which phones work on their network. They should stop selling cell phones altogether.

Sell sim cards. Period. Offer some cheapo phones you don't really care about in your store. But make it obvious that users should really get the actual phone somewhere else especially if it's a smart phone.

AT&T used to sell or even rent land line phones in the early days. If you wanted a phone you had to buy one from the phone company. Today, if you want a landline phone you pick one up at practically anywhere for between 10 dollars for the cheap ones to 200 for the really fancy ones. That's what the wireless carriers need to do.

When they do that apple can't charge a fee anymore. It's just selling a phone. A bit of hardware. And the carriers aren't selling a phone. They're selling a data plan. Because I imagine that "minutes" are going to be a thing of the past at some point. At what point does it become more practical to just skype everything? Does skype cost the carriers more money then a regular phone connection? I wonder. They're obviously turning it all into data anyway. In any case, once all phones have internet the typical phone/voice connection becomes redundant. Just give everyone a data plan. People will stick to email and text most of the time to save on connection charges and that has to use much less bandwidth then a voice conversation.

Just sever the relationship entirely between phone and carrier. Sell sim cards. Then the carriers can anti trust apple or something if apple gets snippy about letting some carrier's sim cards work and others not.

Well, no one forced Verizon... (1)

lord_mike (567148) | more than 2 years ago | (#38969963)

...to jump on the iPhone giving apple everything they wanted and then some, but some stupid exec felt they just HAD to have it at any price, even though they were doing exceptionally well with Android phones and making way more money to boot. So, they got a few more iPhone subscribers, but now are losing money. Boo hoo. Apple needed Verizon more than Verizon needed Apple, and yet Verizon acted like the guy desperate for the girl. So, they lost. Any normal person could have predicted that action, but some overpaid executive could not. Amazing.

Ah Corporate Capitalism.... (0)

Anonymous Coward | more than 2 years ago | (#38969979)

The problem here is that corporate capitalism has an ideological mandate to CONSTANTLY grow the business and the profits or you are "failing". This is why capitalism inevitably ends up with monopolies or pseudo monopolistic cartels.

What ever happened to making a fair profit and a decent living and calling it a day?

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