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« Previous Entry | Main | Next Entry » Why Is the iPhone on a Single Network?
Robert Frank: Why has Apple restricted its popular iPhone to just a single wireless network in both the United States and the United Kingdom? Apple was shrewd to take this step. When it first hit the market in the United States several years ago, the iPhone offered capabilities that no other smart phone could match. Its technological edge is somewhat smaller now, but remains significant. The upshot is that if a wireless service provider had an exclusive contract to provide iPhone service, it could trumpet that fact to attract new subscribers. That's a huge advantage, because most of the costs of providing wireless service are independent of the number of customers served. Additional revenue from new subscriptions thus boosts company profits almost dollar for dollar. But why should Apple provide that advantage to an Internet service provider free of charge? After all, it's the iPhone, not anything the service provider does, that's pulling in new subscribers. Apple has considerable bargaining power here. By signing an exclusive service contract with one service provider, it can insist on a sizable quid-pro-quo. The terms of such contracts are not public information, but I'm guessing that Apple claims a substantial share of the monthly service fees paid by all new iPhone subscribers. If Apple had instead made the iPhone available to every wireless service provider, no company would have had a uniquely attractive offering with which to attract new customers away from rival providers, and Apple wouldn't have been able to claim any share of the iPhone subscription fees. That may help explain why Apple has been signing exclusive contracts. Robert Frank's latest book, The Economic Naturalist's Field Guide: Common Sense Principles for Troubled Times, was published last month. -- Posted July 7, 2009 | Comments (5) | Permalink
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I heard that two years ago (Laura got her iPhone), Apple was getting something like a penny per minute of use from AT&T, without having to provide anything beyond the phone.
The observation that "When it first hit the market in the United States several years ago, the iPhone offered capabilities that no other smart phone could match." is not entirely accurate.
The only difference between the iPhone and its smartphone predecessors* is that Apple had vertically integrated: from the software, to the hardware, to the sales - especially sales via cellphone (read: the App and iTunes "Stores").
All of the functions that are present on the iPhone are available on its predecessors (given a little effort from the user's side). But the latter point - the commercial aspect - is what distinguished the iPhone from its predecessors.
The real reason Apple agreed to the six year contract with AT&T is because AT&T allowed them to build the kind of smart phone they wanted without interference or pre-knowledge of its design. Apple would have preferred to partner with Verizon who has a superior network. However, Verizon wanted to micromanage the design of the phone and Steve Jobs and Apple would not permit that, thank goodness. Due to masssive contributions from the phone companies to lawmakers in this country, we, the customers are locked into these exclusive, long-term contracts. It is high time this abuse is remedied by the FCC so that American cell phone users can freely choose the phone and the network provider they want, when they want. Not only would this reform offer more freedom of choice, it should go a long way to reducing the unnecessarily high cost of smart phone cell service. Write your senators and congressmen and the FCC and ask them to reform the cell phone industry. Use that smart phone for something really smart: political action for reform. Paul from Albany, CA
I'm surprised that there was no mention about telecommunications carriers locking their phones, presented in this blog report.
Check out:
http://freeyourphone.org/
I find this all rather amusing. In Australia we have 5 different 3G networks supplying Apple 3GS iPhones with all sorts of different plans. We can even buy an iPhone outright (network unlocked) and then connect to whichever network we prefer. Plenty of choice.
Obviously, Apple and AT&T have only one mantra for their business plan - GREED, GREED, GREED. Or am I just being cynical? Maybe you should check out what we have Down-Under.