[First: No (new) iPad report, yet. In the meantime you can feast your eyes, or nurse your dyspepsia, by googling “iPad 3” or “new iPad”. This will tell you almost everything (minus the Fingerspitzengefhül, the all-important gut-feel) about the product, and definitely everything about the kommentariat. If we thought we’d plumbed the nadir with the iPhone 4S…]
Dictionary.com unfolds the historical and linguistic links to We Wuz Robbed, and translates: We were cheated out of a victory; we were tricked or outsmarted.
The gist of the carriers’ lament is this: We do the hard work and someone else is making all the money. And by someone else they mean a certain interloping personal computer company that has, without the slightest experience in the technical (and deal-making) intricacies of the mobile phone industry, inexplicably lucked into the smartphone business and pocketed an unfair share of the cash.
The PR flacks go to work and give us this “rich” WSJ article, “How the iPhone Zapped Carriers”, from which I extract a few of its many gems:
Americans are glued to their mobile devices, obsessively calling, texting, emailing and downloading applications. So why is the U.S. wireless industry in such straits, as shown by AT&T Inc.’s crucial but failed plan to buy T-Mobile USA?
A big reason is that carriers are losing power to the device and software makers riding the smartphone boom.
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For the most part, it’s really been a wealth transfer from AT&T shareholders to Apple shareholders…
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Device makers and app developers are having the fun, while the carriers are doing the grunt work.
Nowhere does the churnalist entertain anything other than the carrier party line. Not a word from users, from Google, from the device makers and software freeloaders who are “riding” the boom and having all the fun.
The article’s bias is clear, in its language and innumeracy. First, AT&T’s “crucial but failed” attempt to buy T-Mobile was a bid to restrict competition and raise prices. Had the merger gone through, customers would be the ones crying “We wuz robbed.”
Second, the article mentions a decrease in the sacrosanct monthly ARPU (Average Revenue Per User) to $46.09, down $2 from the previous year. Behold once more the lack of respect for the reader exhibited by the fake four-digit precision. But beyond the attempted intimidation, what is the meaning of the $46.09 average, what ingredients does it mix together?
Curious, I ask the oracle a simple question: ATT ARPU. The first hit is a happy — triumphant almost — AT&T press release for Q4, 2010:
AT&T Reports Record 2.8 Million Wireless Net Adds, Strong U-verse Sales, Continued Revenue Gains in the Fourth Quarter
…This marked the eighth consecutive quarter AT&T has posted a year-over-year increase in postpaid ARPU.
And the news gets better. The Q4 2011 investor presentation (download it here) yields these morsels:
…and…
The average ARPU for smartphones on AT&T’s network is 1.9 times that of the company’s non-smartphone devices.
The $64 ARPU is for all wireless devices, smart (with their 1.9x revenue premium) and dumb. Two years ago, AT&T CEO Randall Stephenson pronounced himself happy with the “over $100” ARPU from iPhone subscribers. So how much does AT&T get for its iPhones today?
From Apple’s latest earnings release, we know the iPhone ASP (Average Selling Price) is about $660. AT&T subscribers pay $200, plus $20 or more in accessories, directly to Apple. This leaves $440 to be fronted by AT&T. Subtract that $440 number from $2880 (the customary 24 month x $120 agreement), and there’s $2440 left — or about $100 per month of “real” iPhone ARPU.
But there’s a problem with my back-of-the-envelope calculations. Data consumption makes up 40% of AT&T’s service revenue; I can’t prove it, but I suspect that iPhone subscribers are more ‘‘generous”, they consume more data, than AT&T’s other customers. In Q4 2011, that probably worked out to a nice ARPU of about $120 per iPhone.– and users will pay even more now that the “unlimited’’ plans are no longer offered.
What about Verizon? Are they being “zapped,” too? The oracle obligingly responds to “Verizon ARPU” with a few good links, such as this one, trumpeting Verizon’s robust health:
US carrier landscape in Q3: Verizon records biggest ARPU
Jumping to Verizon’s Q4 2011 numbers and to the January 24th earnings call transcript (courtesy of Seeking Alpha), we needn’t shed tears. The company’s smartphone business is doing well:
Ever since the iPhone barged in, we’ve heard carriers cry extortion; they complain that Apple’s prices — to them — are too high. But they took the iPhone and its prices for two simple reasons: higher ARPUs and fear of losing subscribers to a competitor, the cost of watching your most “productive” subscribers — the ones who contribute to the 1.9x ARPU factor — go elsewhere. It’s better to bet the company on the iPhone than on not having it.
Sprint agrees. According to our WSJ story, Sprint has committed $15B to the purchase of iPhones for a period ending in 2014. (Another WSJ story says $20B, but what’s $5B these days?) As obverse evidence, we have T-Mobile’s simple explanation for its subscriber losses: No iPhone.
Carriers subsidize smartphones because it’s what their customers want, and they put up with the iPhone’s higher price because it’s what their customers want most. Just last week, a T-Mobile exec called for an end to smartphone subsidies — but refused to go first. When/if the iPhone becomes less desired, the carrier subsidies will subside.
I introduce this thought by way of providing context for another statement in the WSJ article:
‘’… subsidizing a customer buying an iPhone would cost 40%, or about $200, more than another kind of phone, on average.”
(Let’s see: $200 divided by 24 months, that’s about $8 a month. Will an iPhone customer yield the extra $8 in monthly ARPU? The carriers’ accountants seem to think so.)
Still on subsidies, try this thought experiment: You walk into an AT&T or Verizon store with a fully-paid unlocked phone. Will you get a lower monthly deal? I asked and, in both cases, the answer is a polite no. See this on-line chat with a Verizon person:
No deal on an unsubsidized phone. The logic is impeccable: We complain about subsidies while using them to tie customers up.
Carriers want to imagine a world in which the ‘‘excess’’ $200-per-iPhone subsidy moves back to its rightful home: the carriers’ coffers. With 180 million iPhones sold so far, that’s $36B of pure carrier profit…and Apple would still enjoy an ASP of more than $400 for its iPhone. Cosmic order would be restored.
Back in this reality, carriers complain about excessive subsidies and threats of disintermediation, of attempts to make them ‘‘dumb pipes’’. But nowhere do we see a discussion of the ratio between the cost of an additional cell tower and the new revenue it generates. We can be sure carriers know this number, but they’re not sharing. It must be a good one: We now see carriers eager to offer their new LTE infrastructure as data pipes for the (unsubsidized) new iPad.
As a final offering, regard this handy chart from Fierce Wireless:
Some observations and a little math, in no particular order.
- The first four carriers, Verizon, AR&T, Sprint, and T-Mobile, have 295M subscribers, 90% of the total US market.
- If we multiply each carrier’s ARPU by its number of subs, sum the results, and divide by the 295M, the overall ARPU works out to about $50 (our journalist would write $49.69).
- For the two leading carriers, the churn rate (people leaving) is quite low, about 1%. Compare this to the iPhone-less competitors: Before Sprint got the iPhone 4S, Sprint’s churn was about twice AT&T’s; T-Mobile’s is close to three times that of Verizon’s.
- AT&T continues to benefit from its early bet on the iPhone and, in Q3, added more subs than Verizon.
- Both Verizon and AT&T get about 40% of their service revenue from data.
Related columns:
- Google Voice: Did Carriers Miss An Opportunity? TweetLet’s start with what Google Voice is: Grand Unified Telephony, as in physics Grand Unified Theory. Imagine all your phones (home, mobile, work…) linked together to one number, and all data (calls, voicemail and SMS) also “webbed” together. Add a few wrinkles such as transcribing your voicemail into text, personalized greetings for your mother or [...]...
- Google and Apple are robbing us! TweetThat’s the cry of anguish heard in the executive suites of cellular carriers, poor things. Why the sorrow? Nuances removed, it boils down to this: . ISP (Internet Service Providers) don’t sell content, they bill at a flat rate regardless of what you download, music, e-mail, video. ISP don’t decide which computer you can and [...]...
- Smartphone: Huge market – but where are the business models? TweetThis was an important week for carriers: first the $19 billion spectrum auction announcement and then Verizon opening its network. Great, the trillion dollar market is in sight! But do we see any good advertising business models in there? Today, I’m optimistically embarrassed to admit, I don’t. The market: John Sculley was right, after all. [...]...
- Raw Data: Comparing ARPUs TweetThis week, back to basics. Forget about complex financial ratios, Ebitda, KPI, even costs. Let’s consider one simple element: for our news businesses, how much are they actually making in revenues, and how do they compare? Let’s go the way of the cell carrier, let’s use one credible metric, the ARPU (Average Revenue per User): [...]...
- Fiction: How Steve Jobs Cuckolds AT&T TweetSteve shimmers into a bar, materializes next to Dan Hesse, Sprint’s CEO, crying in his mojito and whispers: I can fulfill your fondest dream. You’re the Devil, go away! No, I’m merely Steve Jobs and I want nothing to do with your soul or your chiseled body. Relax, it’s just about money. A little bit [...]...
45 Comments
It’s hard to shed a tear for US cellular carriers. One one end, AT&T and Verizon get rid of their unlimited plans. I think that’s fair: I pay for what I use. But on the other hand, they charge me $30 a month for the privilege of tethering (in other words: the privilege to consume more data, only on a different device). I’ve used my unlocked iPhone 4S in Israel and Mexico with reasonably priced prepaid data plans and of course tethering is included. What US carriers get away with is robbery.
Then again, remember how much they used to charge for SMS? Robbery.
Carriers get away with robbery is because
government gives them everything they want.
In the 70s people started suing AT&T for wiretapping without
warrant then Congress passed FISA. and after 911 government
gave them immunity for sending all their customer info and data
to NSA.
Also government gave these companies $300 million to get internet
to everywhere instead they pocketed that money and are gauging
people like Time Warner making 3000% profit margin on internet.
In the future they will even steal HDTV frequencies from TV companies.
As usual, very very interesting! Thank you!
Seems like the carrier “landscape” is quite different here in France. And having read that, I’m happy we have FreeMobile!
I’ll translate this article in french if I can find some time: would be interesting for french people to learn about that
Btw, I found a small typo: “The first four carriers, Verizon, AR&T, “=> AT&T
Well, what a delight!
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Now that it’s exposed how much the iPhone has help the carriers that offer it cry all the way to the bank, the next question is how this’ll evolve over time.
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Will Apple offer to subsidize certain data costs, such as fr’instance ads, by buying the data wholesale? … Siri for free? Apple has intro’d iMessage for OSX desktops; I presume it won’t be too long before some entrepreneur reverse-engineers it so Androids can also run it for anybody with an iTunes account, thereby destroying SMS and it’s profitability (which is ridiculously high only due to the lock-in).
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Smartphones have gone from kinda crappy toys to pretty damn capable devices. Without an as much incentive for customers to upgrade, the lockin/subsidy game gets ugly. Which carrier will be the first to tell “Theresa” to say, “yes, you can get a 1-year data-only deal for $15/month less than the subsidized iPhone plans” ?
“Inquiring Minds Want to Know!” ®
Great post, Jean-Louis. As @Nicolas points out, there’s an interesting comparison to make with what recently happened in the French market with the arrival of Free Mobile, launched by Xavier Niel, one of the few disruptive entrepreneurs in France.
While Free is being secretive about its subscriber numbers, it’s probably recruited at least 2.5M since its launch in January without spending a penny on marketing. Taking a page out of Apple’s playbook, they’ve made their offer very simple and easy to understand : a single, clear, inexpensive offer (19.95€ all you can eat plan) and no lock in/subsidy since they don’t provide the phone.
Free’s arrival has definitely created a deflationary market with the incumbents launching new low-cost offers and massive cost-cutting efforts. Sounds like the US market could use a little competition too…
Great insight as always!
Two comments-
1. Re: your chat with the Verizon rep, I had a related experience with AT&T. I moved from US to UK recently and had two iPhone contracts with AT&T. I understand they’re partially paying for the phone so was willing to pay the early termination fee. However, in theory, since I am paying it, the phone should be allowed to be unlocked so that I “own” it. You can see where this is going – they refused to entertain any talk about unlocking and had absolutely no reason for it. Absolutely enraging!
2. Part of the same move to the UK – I’ve looked at all carriers here and they are much more reasonable and up-front about their pricing and terms and conditions. Between O2, 3, T-Mobile, Vodafone and Orange, you pretty much know what you’re walking into as long as you know some basics. Also O2′s social experiment GiffGaff is very interesting (similar to FreeMobile in France it seems). If the industry could truly separate into two, dumb pipes (connection) and smart services (phone, sms, iMessage etc), I think all consumers would benefit. Think of how you consider water and electricity to be just there, same for data. Hopefully soon!
“Subtract that $440 number from $2880 (the customary 24 month x $120 agreement), and there’s $2440 left — or about $100 per month of “real” iPhone ARPU.”
While not doubting the veracity of your numbers (I keep seeing similar for US market), I wonder how they get away with this. Is it because there is an effective duopoly?
For comparison, having bought my own iphone, I pay £10-15/month for “unlimited” data etc in the UK. (The variation is monthly PAYG/12 month contract). I only need to double this number (and contract length) to get an iPhone subsidy, which is less than half the amount reported for USA.
Jean-Louis, it is “Fingerspitzengefühl” or “Fingerspitzengefuehl” (more compatible with ASCII). Cheers
You should come back to France!
Here you do have a lower rate if you bring your own device. For instance -6€ per month at Bouygues telecom… Or specific low cost plans with no subsidized phones (“sosh” for Orange, FreeMobile, …)
The mother and model of iPhone architecture is NTT DoCoMo’s iMode which started in 2000. The grand-mother being the French Minitel;
Who calls the shots? The carrier, the device manufacturer, the content/service provider?
In the case of iMode and Minitel, it is the carrier who operates the ensemble.
In Japan, the brand (NEC, Toshiba, Panasonic etc) had been removed from the phone and replaced by DoCoMo’s.
Who would have thought that a device manufacturer (Apple) with no history nor experience in Telecom would set up the entire ecosystem (iPhone+iTunes+AppStore) and mystify the entire scene,
Yes, the guy was a genius.
But the carriers can only blame themselves. They’ve been passive and slow for a decade, enjoying revenues from SMS.
Serves them right. Yes, they’ve lost it to Apple, and next to Google and Facebook etc
When I got my latest (AT&T) iPhone, I unboxed it on the street and went to a Starbucks and logged into AT&T Wi-Fi and activated the phone with Apple and did a bunch of iMessage texts and FaceTime calls before I realized I had not activated the device with AT&T. I had to open a Web page link that was in the printed instructions and fill in a form to activate and get traditional cell phone calls and SMS and 3G/4G data.
Thing is, all I want is 3G/4G data, so I’m looking forward to when I only have to activate my iPhone with Apple, and the 3G/4G would just show an Apple logo there and whatever data I use is charged to my iTunes account and how it gets to my phone is a detail that’s worked out by Apple and all of the carriers in my country. That’s a detail I don’t want to be bothered with any more and am willing to pay to make it go away. Plus, all my calls and SMS money is on the table every month for whomever to take, because AT&T is not giving me any value for that.
@Hamranhansenhansen sounds like you need an iPod touch.
Others have mentioned this, but I’ll try clarify. Your article is misleading, but the confusion is understandable.
You confused ‘out of contract’ (“fully paid for”) with “unlocked”.
In the US market an AT&T or Verizon iPhone is never “unlocked” and cannot legally be unlocked. It can be resold, but only for use with the original carrier. This, of course, reduces the resale price of the phone. I wonder if there’s some way to sue AT&T for the relative value loss; in legal terms it seems a form of theft.
Furthermore, even though an iPhone is “paid for”, it cannot be used on AT&T without a data plan. Of course this is a very profitable data plan — as best we know none of the money goes to Apple. (see [1] for how this turned out with our children).
I don’t know what Sprint’s policy is, but I believe they follow AT&T’s lead.
Remarkably, the total cost of iPhone ownership was lower with the unsubsidized original iPhone!
[1] http://notes.kateva.org/2011/11/gordon-vs-at-iphone-war-conclusion.html. Also, see the interesting economics of iMessage and SMS – http://notes.kateva.org/2011/11/iphone-micro-how-sms-pricing-is.html
Well, you’ll be doing this post again in a year, so you better keep track of all these numbers. As you’ll realize with the new iPad (3), things could change on websites as they upgrade photos, videos, and graphics to deliver sharp, non-blurry images to that Retina Display. Here are a few consequences that Retina Display can lead to:
http://mikecanex.wordpress.com/2012/03/20/i-cannot-stop-thinking-about-the-new-ipad-3/
Who is ready for posts that are multiple megabytes in size?
Actually, latest numbers are showing Android users are using more bandwidth than iPhone users.
That’s gotta be a big issue for the future for Google. Not as good user experience, not nearly as many apps, not anywhere close to the same amount of profit, and your users are going to alienate the carriers more than Apple’s customers!
Carrier don’t “subsidise” anything. They pay part of the up-front cost, and the user pays them back each month during their contract.
water, electricity, internet … utilities.
The day the iPhone is no longer profitable for the carriers is the day that they will stop offering it.
The day it is no longer possible for the carriers to make their own decision to stop offering the iPhone is the day that it becomes reasonable for them to complain.
@Walt French – “Which carrier will be the first to tell “Theresa” to say, “yes, you can get a 1-year data-only deal for $15/month less than the subsidized iPhone plans” ?”
T-Mobile. Maybe not $15 less, but less. I’m on a (family) plan now where I supply the phones, they supply the bandwidth, and I’m saving money compared to the old (family) plan, and I added one smart phone, and the (per-phone) bandwidth caps only cost me speed, not money. I was getting a little sad about their lack of i-Device support, but I understand that is now coming soon-ish.
Carriers don’t get to complain as long as I am stuck spending $40 a month for what is usually 70 minutes of talk time.
As already underlined by Nicolas and Ethan, in France, a new carrier, Free Mobile, grabbed 3% of the french market in just two months, without subsidizing phones, simply by taking contract prices way down. It looks as if consumers, making the same calculation as yours, start to realize that carrier subsidies are in fact very costly.
Should this new trend be confirmed and spread to other markets, it could in my point of view become a serious threat to the expansion of the iPhone that, up to now, seems unstoppable. The iPhone is beautiful indeed, but also pricey, and may fare differently in a « naked price competition » market.
In an era where personal responsibility is a favorite phrase of conservatives, I find AT&Ts statements continually lack all sense of responsibility. It’s Apples fault we aren’t making more money. It the users fault that our network doesn’t work well or have enough capacity to handle the number of customers to whom we’ve sold service. It the customers wiring, router computers fault that they don’t get the advertised speed on DSL. Its the governments fault that our merger with T-Mobile fell through. It’s T-Mobiles fault that we had to pay $4B to them, which cut our dividends in half.
Man-Up Stephenson start taking responsibility, start thinking like Jobs, and start offering insanely great services.
@dr2chase, T-Mo was a perfectly fine carrier for me, too.
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Until my RAZR gave up the ghost & I went with an iPhone. When my wife retired her Gen1 iPhone, our son was OK with it on T-Mo. He didn’t need lots of mobile data. But last year, when she upped again to the 4S, he joined up with AT&T.
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Almost certainly, T-Mo has to try harder to attract higher-value users because their spectrum is incompatible with the rest of the nation, requiring specific devices. It’s really quite the pity that the FCC has managed to carve up / allocate out spectrum in such a way that carriers can’t compete on equal footing.
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Per JLG’s comments, I rather imagine that if the carriers hadn’t wanted it that way, they’d be moaning about it, too, demanding inter-operability and transparent, at-cost roaming, domestically and internationally.
@CVBruce, the whole thrust of this piece is that the carriers will say anything they think we’ll swallow to try to justify higher fees, whether in regulated businesses or in setting expectations about pricing.
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If we didn’t have an oligopoly (duopoly), they’d go about their business by trying to attract business by better service, or by lower costs. But we don’t, and they don’t.
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The comments are useful as a measure of what they think they can encourage the regulators to swallow, based on political and commercial pressure. That’s useful information. No need to think, however, that somebody there’ll read your post and decide, “gosh, CVBruce is right! Why didn’t we realize we just had to get off our butts and offer great services?”
I see Doctorossi has already said what I was going to say, but it bears repeating: “The day the iPhone is no longer profitable for the carriers is the day that they will stop offering it.”
Period.
@ itchy and all: Yes, carriers will drop the iPhone 1 nanosecond after it stopa making them money. See Sprint’s CEO saying iPhone customers are “more profitable” than others http://j.mp/GI9gTg
What is every computer user setup a Wi-Fi network in their home or business that was freely available to the public. There would be very little incentive for people to purchase expensive data plans. That would put the crunch on the carriers.
The carriers are complaining that Apple is making MORE money than they are … at LOT MORE, but it was Apple (not Google, or Facebook or even Microsoft or Nokia) that showed the way. Apple was lucky in one way – AT&T needed the customers and Apple gave AT&T a phone that was going to give them the customer increase and price increase they wanted… at the cost – Apple has (and had) much more control over what went on the phone and how it looked and what it could do.
Apple did cater to some of the carrier’s demands (like they can charge extra for tethering, SMS after the iPhone 3G launch, etc…) but for the most part Apple has had near total control of ITS phones.
The ironic thing here is the carriers almost always offered a poor experience, even if their network was “good”. I left Verizon because they phone they had that were good were locked down and Verizon would charge for extra things like software to backup you phone to your computer – if you could do this type of thing at all … Anyone remember Verizon’s “V-cast”? I do and it was no good… esp on a 1.9″ KRAZOR phone that cost $300 and sucks for multi media and just about everything else – it did have damn fine audio (for calls) and signal quality, and I still like the flip phones, but other than that – and being on Verizon – it sucked.
So really – Apple has done to the phone carriers what it has done to the record labels – brought them – kicking and screaming into the 21st century – where a number of things are fairly easy to do (tech wise) but for some reason they could not figure out how to do this (Napers/Apple lead the way)… and Apple still leads the way.
So again, the carriers are complaining that Apple IS better and smarter than THEY are and the carriers are complaining that Apple is making too much of ‘their’ money.
I call bullsh!t!
Off topic: you have a typo in “Fingerspitzengefühl” (at the end) – plus I think you are using it wrong since it means something more along the line of using the right moment to have your say in a conversation, e.g. knowing when to talk to someone to get what you want, wording it right. The page you linked to used Hitler and Napoleon as an example for leaders who knew when to talk and what to say.
For instance not publishing a story about the working conditions in China the day after Steve Jobs died would have been considered Fingerspitzengefühl.
Publishing it would could be regarded putting one’s foot in one’s mouth. Or in German: “ins Fettnäpfchen treten”.
@ Sebastian: Fingerspitzengefühl is the right spelling, used only once at the beginning.There might be trouble rendering the umlaut on some machines (character set choices).
As for the meaning:
Fingerspitzengefühl [ˈfɪŋɐˌʃpɪtsənɡəˌfyːl] is a German term, literally meaning “finger tips feeling” and meaning intuitive flair or instinct, which has been appropriated by the English language as a loanword. In German, it describes a great situational awareness, and the ability to respond most appropriately and tactfully. It can be applied well to diplomats, bearers of bad news, or to describe a superior ability respond to an escalated situation.
Thanks for the reply Jean-Louis
But I have to insist – “Fingerspitzengefhül” is the wrong spelling (even checked the sourcecode of the page, it’s between two em tags).
It’s a composite word of “Fingerspitzen” (which in itself is a composite of “Finger (fingers) and “Spitzen” (tips, points) and “Gefühl” (feeling) and you definitely put the U-Umlaut *ü” after the h. The H is a “Dehnungs-H” making the speaker lengthen the ü so it should come afterwards.
Sorry for nitpicking, I kinda grew up speaking German being born here and all
Apple seeks to expand it’s business and retain customers by ‘delighting customers.’ They do this time and time again by creating great products and excellent customer service.
The carriers seek to expand their business and retain customers by locking their devices and tying them up with lengthy contracts.
It is easy to see why customers love Apple and hate the carriers.
Let’s hope that French entrepreneur who started ‘Free Mobile’ expands his business into America sooner rather than later. We need him.
I’ve never understood why carriers don’t want to be dumb pipes. Be the best dumb pipe in the industry. You’ll make money, and people won’t hate you. If you want to be something more than that, make a great phone.
You didn’t investigate deep enough. T-Mobile USA DOES give you a lower-monthly (previously known as the contract-less Even More Plus) if you bought/brought your own phone. $10 less per month. It now survives as a 2-year contract Value Plan. Data costs at least $10 less / month too.
The smart shoppers sucked up to Android and moved to T-Mobile, but not in enough numbers. The Market had spoken — it wanted to be a sheep and wasn’t interested in NOT getting ripped off by AT&T nor Verizon because of the iPhone ‘candy’.
@Hamranhansenhansen That is exactly my same feeling as well. I’m fed up dealing with crappy service from carriers. I so want Apple to be in charge of my monthly bill for both data and phone. Since they can now put all of the radio receivers into an iPhone to make it truly a world phone, I want to pay Apple via my iTunes account or another way, and let Apple divvy up my monthly money to whichever carrier provided me with the strongest service throughout the month — no matter WHERE I travel throughout the world. This is the ONLY way carriers will start doing what they do best (or should do best) — building their networks. I don’t want to have to choose between carriers any more. I want to buy my device from whatever manufacturer I want, and then I want to get my monthly money’s worth of actual calls and data from the strongest provider at the moment of need. This is my idea of the IDEAL cellular world which I’ve written about since January 2010 (http://technolusters.wordpress.com/2010/01/23/cell-phone-service-solution/). Apple and Google have enough clout behind them to pull this off. Every customer would support their efforts one hundred percent.
@PaulDWaite, dumb pipes get interest-rate level returns, while value-adders get equity-level premiums for taking chances.
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No harm in simply getting low, steady returns, except that investors expect more, and pay execs to get more. If you’re just going to get 2.X% return, you don’t need any infrastructure other than a courier to go to the teller window.
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Not all the risk-takers end up successful. Eventually they become either obsolete technology (buggy whips), or flame out from not keeping up with new trends (Moto), or… well, maybe one in a thousand, like IBM, lasts at least a hundred years. They’re quite the exception.
I could cry less for the operators in the US. They _are_ stealing from the US consumers.
ARPU for carriers in Finland is about $21 and AT&T is over $60?!!?
To me the most telling point about subsidies is the Cellco’s unwillingness to offer a no-subsidy rate plan. If they want to end subsidies, make it plain to consumers how much the subsidy actually costs them. And give me an incentive not to buy a new subsidized phone exactly 2 years after the the last one. I would be more content with my old iPhone if I weren’t paying $10-15 a month for the new one whether or not I buy it.
Thank you, Mr. Gassee,
I always enjoy your commentary. Record companies are singing the same song. The television industry should be studying the sheet music. Apple, it seems, is upsetting the cart for several industries where the vendor was in charge and the customer had to select from what was offered.
When the consumer is in charge, the whole dynamic will shift. I’ll bet the quality of shows improves when programming dies.
A great discussion topic.
Here in Japan we have the iPhone with partner SoftBank mobile. Over time this carrier has many new customers due to the iPhone. The problem is it is turning into a dumb pipe but is deluded in thinking they offer great value added services. The other two large carriers Docomo and Au kddi are in the same boat with holes in it and buzzards flying over it. Quick call Gill Amelio!
In the short run they may think things are great but don’t they realize that the OTT app ecosystem are going to eat them? Am I the only Apple post pc average Joe that sees this?
Hi! I could have sworn I’ve been to this blog before but after browsing through a few of the articles I realized it’s new to me. Anyhow, I’m definitely happy I came across it and I’ll be book-marking it and checking back frequently!
Don’t pay your next cell phone bill until you read this! All the big cell phone companies like at&t, sprint & version no longer has unlimited data plans which means you are going to pay more for what you already have or your smart phone will be useless, if you are looking for a good deal on a cell phone plan then you should take a look at Lightyear, because there is no contract, no credit check and no deposit and further more if you don’t have the money for the next month then just leave it off and when you have the money turn it back on again, prepaid plan is the best plan and most popular plan, you also get Unlimited Data, no cap! And this company actually allows you to earn free cell phone service, Read more: http://lcp.trwv.net/lcp/ervin3000/lightyearcustomer/29703
Jean-Louis,
This was an eye opener and I agree with Doctorossi.
I can’t see the manin carriers ceasing to offer the Iphone anytime soon…it will remain profitable in my opinion for quite some time!
I really cannot see why they have any justification for complaining and still cannot believe that the average price for one of these gizmos is over $600!
Apple works with carriers hand in hand, the evidence is “tethering”, absolutely unnecessary feature which allows carriers demand additional money. Neither Android nor Windows require it. There is no reason why not use your data limit you paid on your computer.
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[...] Gassée brings an applause-worthy smackdown to U.S. wireless carriers via an exhaustive rebuttal of a blatantly biased *Wall Street Journal [...]
[...] Monday Note has a great by-the-numbers breakdown of the carriers’ profit off phones subsidies. But if you want impassioned arguments over weasel words and doublespeak, you can just stay right [...]
[...] Matter of fact Jean-Louis Gass?e covered this subject in excruciating detail in a great piece from more than a year ago. [...]
[...] for the iPhone, some say as much as $200 more than carriers pay other handset makers. (See “Carriers Whine: We Wuz Robbed!” of March 11, 2012.) Carriers rattle their sabers, they let everyone know they’re looking [...]
[...] for the iPhone, some say as much as $200 more than carriers pay other handset makers. (See “Carriers Whine: We Wuz Robbed!” of March 11, 2012.) Carriers rattle their sabres, they let everyone know they’re [...]
[...] for the iPhone, some say as much as $200 more than carriers pay other handset makers. (See “Carriers Whine: We Wuz Robbed!” of March 11, 2012.) Carriers rattle their sabres, they let everyone know they’re [...]
[...] for the iPhone, some say as much as $200 more than carriers pay other handset makers. (See “Carriers Whine: We Wuz Robbed!” of March 11, 2012.) Carriers rattle their sabres, they let everyone know they’re [...]
[...] for the iPhone, some say as much as $200 more than carriers pay other handset makers. (See “Carriers Whine: We Wuz Robbed!” of March 11, 2012.) Carriers rattle their sabres, they let everyone know they’re [...]
[...] Last year, a group of concerned professionals called for an end to the confusing and wasteful smartphone subsidies. The group? The carriers themselves (see Carriers Whine: We Wuz Robbed!). [...]
[...] Last year, a group of concerned professionals called for an end to the confusing and wasteful smartphone subsidies. The group? The carriers themselves (see Carriers Whine: We Wuz Robbed!). [...]
[...] Last year, a group of concerned professionals called for an end to the confusing and wasteful smartphone subsidies. The group? The carriers themselves (see Carriers Whine: We Wuz Robbed!). [...]
[...] Last year, a group of concerned professionals called for an end to the confusing and wasteful smartphone subsidies. The group? The carriers themselves (see Carriers Whine: We Wuz Robbed!). [...]
[...] Last year, a group of concerned professionals called for an end to the confusing and wasteful smartphone subsidies. The group? The carriers themselves (see Carriers Whine: We Wuz Robbed!). [...]