AT&T not planning to subsidize iPhone? - Page 3

Thanks for noticing me, I appreciate the compliment.

Nope. The monthly plan price is the monthly plan price pretty much, regardless of whether you supplied your own phone or paid full retail for it or whatever. And, in fact, if you do supply your own phone and go 'sans contract', you'll lose your 'promotions'... stuff like free nights, free weekends, free m2m. It's really quite insidious.

Overseas apparently its different, but in the US I haven't heard of any large carriers offering monthly plan discounts for folks supplying their own phone/buying one at full retail. If someone does hear about somethin' like that, let me know, 'cuz I might be interested in takin' them up on it.


Nope. It's whatever the market will bear. The plans won't be reduced price for the same reason the phone likely won't be subsidized... because they'll sell tons of 'em regardless.

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Sorry, but it does matter as the question is whether the $500-$600 is a subsidized price, or not. At least that's what I'm talking about.

Since this thread is about this AI report then based on this quote from the report


Apple will receive money from the CUSTOMER in two ways.

1) Some percentage of the sale price of the hardware

2) Some percentage of the AT&T contract revenue.

To me this is no different in total, than any other subsidized phone, just a higher price that other subsidized phones, and no non-subsidized purchase price being offered.

It may be different in that other carrier-phone maker contract call for a payment for the hardware up front from the carrier instead of over the life of the contract but I simply don't know.

You may argue that the AI report is wrong but it say that Apple will receive monthly payments from AT&T they're just arguing over how much.

subsidize
verb [ trans. ]
pay part of the cost of producing (something) to reduce prices for the buyer.

It's lexical semantics, but there is a distinct difference between AT&T paying Apple directly for the retail cost of the iPhone and the AT&T paying Apple a portion of the subscribed dues.

This is very different than the current manufacturer/carrier model, but this not automatically make the iPhone a higher priced solution because it fails to offer some BS subsidized option. That is a similar argument that PC users make about the Mac which can seem more expensive than a PC at first glance, but where the long term usability of the machine is actually quite a bit cheaper.

I know well the meaning of subsidize.

I don't believe there is any difference between this and the current model, other than accounting rules. This is merely time-payments instead of one payment. The 'source' of the funds for the payment is the same in both cases - the customers service contract. The only thing that would make it different, which may be the case, is if Apple is the only support source for the phone. This has real value and offloads additional cost from AT&T.

I hope this is the case because then I'm getting a lot of additional value (compared to the current model) for this money. WIth Apple I might get some real support. With phones I think we've all been on our own out there after purchase.

While it's true that Apple is getting paid smewhere, somehow; 'how' Apple is getting paid is completly different that the current manufacturer/carrier relationship. This makes all the difference as manufacturer is, for once, committed to making the best possible phone and isn't interested in coming out with new models at break-neck speeds to increase its profit margin.



But Apple is not getting paid installments for the cost of selling an iPhone. It's getting a payment for a portion of the subscription fees. This is not a subsidization of the iPhone as Apple is not getting paid a direct one-time fee for the sale of the hardware like with all other carrier/manufacturer relationships.



Of course it is, since the subscription fees is their bread and butter. But the reason for the payment is different. Apple is selling the hardware for little or no profit but will get it on the back end instead of up front.

Scenario 1: Customer purchases RZAR for $100 with 2 year contract. AT&T pays Motorola $300 for the sale. 3 months later the customer decides he doesn't like the phone and purchases a Nokia. Motorola already got it's money.

Scenario 2: Customer purchases iPHone for $500 with 2 year contract. AT&T pays Apple $500 for the sale. 3 months later the customer decides he doesn't like the phone and purchases a Nokia. Apple only gets 3 months of subscription based fees.

I don't see how not being able to go into an AT&T Mobility store to get service would benefit the consumer.

True.


I don't see how this is any different. Customers will still get a byte at the apple (pun intended) every two years, just as now. If the iPhone is an $900 phone which is subsidized to $600 then they get to make the same choice again in 2 years.




I don't think we know this. This depends entirely on the wording and intent of the contract between Apple and AT&t




Huh? How do you know that? 1) It's still a two year contract with the customer so the may be termination fees, which could go to Apple in compensation for the termination. Without the contracts this is all PURE speculation. We don't know if the model is the way you are proposing or not.




Only because, in my experience, going to AT&T Mobility has no value. Being able to go to Apple will.

In my scenerio there was no termination of the contract. The customer is still with the same carrier and still required to subscribe for the agreed length. The fact is, we don't know how Apple will be paid if a customer does switch to a non-Apple phone or does terminate a contract prematurely. These unknowns strengthens my argument as the manufacture is now dependent on the subscription service, not just the initial hardware sale. This helps the customer as Apple has no choice but to deliver a higher quality product.

I don't know what the AT&T/Apple contracts are. I will probably never now. My scenarios were merely to show how this new paradigm of the manufacturer intimately involved with the carrier is not the subsidize hardware model we are used to.

Here are some of the major way I feel this will benefit the consumer:

• Apple will probably have access to cell network infrastructure that other manufacturers do not
• Apple will be able to create more carrier related services for the iPhone
• Apple will benefit financially from releasing free software for the iPhone
• Apple will benefit from allowing 3rd-partys to develop for the iPhone
• Apple will be more committed to a more durable, longer lasting phone
• Apple will have no need to up-sell a new communication device every few month
• Other networks and manufactures will start working more closely together, which should end the US stagnation of the current subsidized hardware model

Sorry but you are probably looking at the plan for computers using a phone modem card. It is more expensive because it is not a phone so they are not selling you minutes, just data.

The current data phone plan from Sprint is 15 dollars only. Because they are selling you a phone, selling you minutes for the phone, you get a very low cost, all you can eat data service.

Anyone has a cingular smart phone with phone minutes and a data plan?

Take a look at your bill and let us know what you pay for the data plan section of your bill, please.

Thanks

I don't see how you can reach these conclusion based on the information at hand. Its certainly a nice model and I agree with your conclusions, given the input assumptions, but I don't see much to support these specific assumptions. They could be consistent with the information out there but its hardly a slam-dunk.

If the customer just exchanges the phone within the 15 or 30 days then there is no sale period, to Apple, to Motorola, to Nokia, or whomever was the manufacturer of the initial phone. Apple's position is no different than anyone else's. The carriers are not likely to pay whatever their going to pay to the manufacturer until the end of such a trial period as you describe. This return is as if the 'sale' never happened so it has no effect on the model.

I hope you are right but I see nothing currently available that leads to this conclusion.

You're right. Sorry about that.

The Cingular data plans are here. Note they already have different plans and prices for different hardware.

Based on the cingular plans, for most phones unlimited data appears to start at 20 bucks and goes all the way to 40 mainly depending on texting if I read it correctly.

Not sure, but the iphone may fall in this same area unless they try to rip off people.

melgross had some excellent points.

others seem to think that apple's gonna be happy with people holding onto the same iPhone for 5 years with free software updates. come on. apple is cool and all, but they're a corporation.

do you see apple offering hard drive upgrades on 3 year old [or ANY] iPod? color screen upgrades? NO. they want you to pay full price for an entire new iPod. more $$$ in their pocket. the same will be true with the iPhone. sure some software will be free to update... that required to run the device. but do we get a free update to iLife or ANY of it's components? hell, we have to pay to USE the .n wifi already installed in our laptops "for accounting purposes".

as for the subsidy, YES the iPhone will be subsidized. as soon as sales slow down and affect production/stock on unsubsidized units. until then [and i think it's gonna be a while] full price is what you're paying.

What's yer point?

Haven't mastered google yet eh? I'll help you out.
http://en.wikipedia.org/wiki/Power_Mac_G4_Cube

BTW, I don't they will subsidize the phone. If you can get it, get it if you like it. If not, Cingular has 100s of other phone to choose from. But the elitist comment was just silly.

Thanks for the reply. Still, one can hope the pricing models will some day change.

Yep... just like the iPod...

D

Unless Apple is willing to totally eviserate the iPhone's feature set the way they did with the Shuffle, I don't see the price dropping to those levels.

Actually, it really depends on how the system is set up.

If Apple simply makes money on the iPhone hardware and that's it, sure, they'll want you to upgrade that iPhone, and they won't have an incentive to make the iPhone particularly durable either. But if the system was set up so that Apple simply breaks even on the initial sale of the iPhone hardware, but makes its profit by getting a cut of the monthly wireless service fees, then Apple has an incentive to make the iPhone very durable and reliable hardware-wise, and to provide a steady steam of updates on the software side.

That kind of system would seem to be a win-win-win... the customer wins because they get a great phone with great reliability in both hardware and software, and they don't have to buy another phone every year or two because their old one crapped out on them.

ATT wins because said happy customer is not going to churn on over to another carrier once their contract is up, and customer churn is a MAJOR problem and major cost to wireless carriers (ATT loses about 20% of its customers per year due to churn, and its expensive to attract enough customers to replace them).

And Apple wins because the iPhone's reputation/brand will be built in an awesome way, and they'd be making mad profit off of their cut of the monthly wireless service fees.

It's not my model though.... Solipism pointed out the idea first. I'm just commenting on the possibilities.

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No problem. And I share your hope... there should be good alternatives, at least, to the current model. But in the US, currently, you're kind of stuck. \

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I think what we might see is Apple getting royalties from third party programs that sell to the iPhone, just as they do now with the much cheaper games for the iPod.

While Apple will, so far as I understand from their statement, update, and upgrade current programs on the phones, and perhaps give new functionality through some others for free, they will probably also sell us programs for the phones as well, thus making sales and profits there as well.

Perhaps a phone version of iWork, or iLife, or as much of it as would make sense on this platform.

Being that it has 3 processors, the phone should have some punch.

Good point Mel, though I do not know that that revenue stream would be particularly huge. But I'm sure Apple would not turn their noses up at it.

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It's another reoccurring revenue stream, if they can get upgrade income as well.

If there are 50 million phones out there, then millions of programs could be sold each year. As programs for smartphones and PDA's average $20 apiece, a lot of them get sold.

For the purpose of this discussion, you don't need to read the entire article, because it's not really about Apple, though they are the one the article is positioning the other companies against, but I'll quote this, which is. It will give a good idea of just how big the smartphone market will get shortly, and how many phones Apple could sell, if they play their cards right.


http://www.forbes.com/2007/05/08/iph...partner=alerts

i HOPE you're right about the durability/lifespan of the iPhone, but then what's to stop people from jumping ship to another provider when the next big thing cell-phone wise comes out [a Nokia N96 or whatever]

apple/at&t are going to have to keep refreshing the iPhone line to keep us happy, keep attracting new customers, etc. unless secret upgrades are built in [like the wifi in the MBP]], i'm going to want a new model when it's got GPS, 3G, a better digicam/camcorder, more storage - so that not only do i not have to carry both an iPod and my cell, i also never have to carry my digicam around.

and of course smart phone sales are going to increase - i would hope that by 2010 EVERY phone is a smart phone [by today's definition]

I don't know if I'm right about the durability/business model of the iPhone... like Solipism, I'm guessing (and hoping).

As to your other point, I think its going to be really hard for anything to come along and supersede the iPhone. It really does seem to be several years ahead of the pack.

Now, there's a few journalists out there who are trying to be on the leading edge of the 'iPhone backlash' wave by writing stuff like "the Nokia N95 is better and its already here!", but they seem to either not realize or are actively ignoring some very obvious things, such as the N95 doesn't have anything like the iPhone's multitouch interface (in fact, its not touch-screen at all), it isn't running a real web browser, it isn't running OS X, and has about half the battery life of the iPhone.

But hey, its sure fun to write about 'iPhone killers'. Look at all the stories about 'iPod killers' over the past couple of years. But.... who got their clocks cleaned, the iPod or the 'iPod killers'? \

Apple's planned this out very well. Nokia may eventually wed an N series phone to a decent touch interface- but it'll still be second rate compared to Apple's Multitouch. LG is throwing the Prada out there, and I'm sure Samsung, Motorola, and Sony-Ericsson will release iPhone-wannabees in the next year or so. But the iPhone likely won't be trumped by anyone anytime soon, simply because, as a friend of mine who works at Motorola put it:

"Cell phone makers are not software companies."

But Apple is. And one of the best.

One final factor: Apple patented the heck out of the iPhone's interface, so any copies of it are likely going to be awkward workarounds. But hey 'awkward workaround' spelled sideways equals 'ZunePhone', right?

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"Once you go Mac, you never go back" is a pretty fair assessment from most people's standpoint. PCs users that shun the "Mac experience" usually have never used a Mac. We can get the same Intel processors and the same memory and harddrives with other systems. If we build the machine ourselves we can certainly get a lower price than Apple sells. But then we are missing the most important reason that we love our Macs so much: OS X. After seeing the 2007 MacWorld keynote I am certain this will hold true for the iPhone.



Cell technology isn't changing that fast. I don't think most people would upgrade their iPhone because it sports a slightly faster CPU. Things like HSDPA (3G), GPS and capacity do warrant an upgrade for many, despite my feeling most people who are drying for 3G probably don't currently utilize them in their current phones and often ignore the current lack of 3G capabilities within AT&T. I'm under the impression that AT&T is working on this, but who knows at what rate of progress.

I don't consider the 802.11n capable cards in the MB[P]s were "secret upgrades". Apple historically only advertises capabilities it currently supports. If not for some savvy fans dissecting their notebooks we may have not have known about that capability until the Airport Extreme was released. If the iPhone has the hardware capabilities it will be known within hours of it's launch. You just can't hide it.





Thanks for the nod.


IMO, that is the fundamental problem with these comparisons from pundits and consumers alike. They often only compare certain featuresusually hardwarewithout looking at the whole enchilada.

All the "iPod killers" try to compete by adding features that the iPod doesn't have. I think this same scenario will play out even more so with iPhone. Technical specifications will only take you so far. It's mind boggling that they don't, instead, focus on the user experience.

Yep, absolutely. And this is exactly why the pundits are usually wrong, and why the iPod's competitors always fail. And they still don't get it, after all this time.

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First of all, no one said software upgrades would be free. I'm sure ringtones and games will be big revenue streams - but how much will go to Apple and how much to ATT&T?

Second, the average free phone is on a two year cycle as normal people re-up service contracts, but is that the same in the Smartphone market? Are you saying people throw away their Treo's after 2 years? Maybe if their company is paying for it or if they are of the executive class. Apple will be targeting high-enders first, but if companies don't start buying them in a few years, Apple isn't going to change the market until the average person could afford a new phone every 2-3 years and that isn't going to be a $400 phone. So the price drops dramatically when the first group gets ready for an upgrade and others are getting off their service contracts OR Apple sells alot to corporations. Hopefully both happen.

Third, I don't see harddrive upgrades driving new sales. Audiophiles will still have their music on 80 gig iPods, not on their 4 gig iPhone and bumping them up to 10 gigs won't be that big of a change. The software demands may drive new sales however if pApps (iPhone apps) take off in any big way and processors get overtaxed, especially downloading services and stuff off wifi points!!

Fourth, Apple will be bringing out a smaller, cheaper phone in a year or two anyway, so this first phone will be more of a flagship that does last 3-5 years.

Fifth, in 3-5 years Apple will be able to have any number of service providers competing to get the phone and by then subsidies may take care of these issues.

As you say, Apple is still a corporation, but it is one that is trying to invent a new business model within the AT&T framework for now. It won't follow the path of the RAZR. It will be somewhere between a Treo and a mini-laptop (that will hopefully also be out in 2 years!)!

Yep! The art to having good design, no matter what the product, is to strip out the features few use, and to hide the ones that are needed, by having the device carry out their functions "inside" so that the user doesn't have to interact with them.

The problem in the PC world is that it's far too techie. Look at CD and DVD recording programs, for example.

The truth is that while you can get a 5% or possibly even a 10% improvement in recording speed and such by going to a PC program such as Nero, the setup is so much more complex, that it is rarely worth it.

Apple understands this.

Many other companies products are like old cars or airplanes, where you had to hit the manual oil pumps, turn the engine around with a crank, or spin up the prop.

Modern machines don't require that. Neither do Apple's products.

Customers appreciate that, which is why now that more people see the Apple brand, and what their products do, they are moving over.

I believe that the same thing will be true of the phone.

Except for the fact that Jobs did say that upgrades to the software would be free, I agree with everything you said.

There will, in addition, no doubt be software from Apple to buy, as well as from third parties as well.

With Mac sales on the upswing, and AppleTV and the iPhone all running OS X, Apple may quadruple the number of number machines using OS X in just the next year alone. This reduces the cost to develop OS X tremendously and allows for Apple to set itself apart from other phones by offering not only offering stability upgrades with iTunes sync, but offering completely new feature sets for free.

If Apple's main source of iPhone revenue turns out to be from monthly subscriptions then it may be financially advantageous for Apple to offer free these feature sets. Outside of bug fixes, no other manufacturer has reason to offer new features in current models. Their interest in the phone's functionality stopped the moment you purchased it. They are only interested in adding new features to new phones to generate new sales.

Of course, Apple isn't known for adding new feature sets for free, but you see where I'm going here. I can't wait until MacWorld '09. I'm not wondering if Apple will sell 10M iPhones, I'm wondering by what margin it will outsell it's own prediction.

Yes, I was thinking more about apps as opposed to the os upgrades.

I am so looking forward to how the entire experience supporting the iPhone evolves. I mean with what other phone would you ask a friend, "Did you get that last up-grade with the NFL widget?" The fact that Apple can send updates and enhancements each time you synch in iTunes, will make the iPhone more of a companion rather than just a device. Maybe I'm overstating it, but I a fullscreen of "touching your music" will give people even more kinds of interactions with an iPhone than with a current iPod. My girlfriend already jokes about how I take care of my TiBook.

This may be one of the biggest reasons Apple wants to control third party apps for the first few years at least. iTunes is going to start getting pretty stuffed with things though the tabs separate devices well. Now we need to request .mac enhancements like perhaps group pushed emails and even easier shared iDisk folders!

Can't wait until I can afford one.

I've been thinking about this for a while and perhaps I'll repeat what others have already been saying (didn't read the entire thread) but...

Cell Phone Market

Prior to iPhone
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Carriers to entice new signups (and sometimes retain existing ones) have offered that latest 'hot/new' phones at a discount over what they would normally cost. They do this by assigning a 'dollar value' to someone signing up under a two year 'locked in' contract. For simplicity sake lets say it's $200 bucks.

So when Joe signs up and asks for a 'totally free' phone model - it isn't free at all - the carrier in fact pays motorola / nokia / etc the price of the phone (heavy discounted no doubt). If the phone is cost (to the carrier) is less than $200 I guess they (the carrier) simply gets to keep the rest. (i dunno)

When dealing with higher end phones (valued at more than $200 bucks... The carrier simply gives you the phone at (retail_price less $200 bucks). So a 500 phone would run you only $300. The carrier still makes out to some degree since when dealing with the public they aren't selling the phone to you at their heavy discounted cost but instead 'retail' or 'retail with 10% off'.

So in either case here's how (I think) things play out once the customer signs the contract and gets the phone.

1 - Cell mfg gets paid for the phone (usually at a fair discount over retail)
2 - Customer gets a free or discounted phone
3 - Carrier gets a customer who as of day one cost them apx $200 bucks *BUT* they own the customer for the next two years so they know they will recoup the money.

In other words that carrier has to wait for x number of months to 'make back' the money it laid out to gain that new sign-up and this is the reason for the contract. Now the carrier isn't out 'all' of the $200 bucks since they marked the phone price up (over the discounted price they pay) but you get the idea...

New iPhone Model

1 - Cell mfg gets paid for the phone (giving a much smaller discount to the carrier)
2 - Customer has to pay 'full price' for the phone
3 - Carrier gets a customer who at the end of day one cost them $0 **AND** they still own said customer for the next two years.

This really sounds like a screw-job for the purchaser... Not only do they pay full price for the phone but they also sign a 2 year contract that stipulates that if they break the contract they will **PAY THE CARRIER** an additional $200 bucks (FOR NO REASON WHAT SO EVER!)

Lets take worst case...

Jan - $499 for the iPhone
Aug - You have to transfer to a region of the country where Cingular coverage is REALLY REALLY lacking (yes those place DO exist).
Sept - You get fed up and cancel your service!

Total cost $499 for the phone (+) 8 months * $39 for the phone service $312 (+) $200 early termination fee (again I ask... ETF is being imposed why?).

Heh 8 month of service just cost you north of ONE THOUSAND DOLLARS and for all your trouble you've got a phone you might as well throw away cause you can't use it on any other network.

Got to admit this is a SUPER DEAL for MOST of the concerned parties it's just the consumer that gets totally hosed.

It sure looks like the the 'carrier subsidy' has been replace with a 'customer hidden payment'

If the **TRUE** cost of the iPhone is $699 and $799 just come out and say it! Don't try and hide the true price in the form of a ETF that must be paid by the customer.

Dave

Ummm.. that's what the iPhone is... A Nano with Video Capabilitiles... 8 MB of Storage is Horrible! I'm waiting for 2nd Generation Open App phone. I'm a teacher and I need to be able to use my gradebook program for my handheld. I got it on my Treo so I'll be upgrading that before I get the iPhone. No matter how cool it is.. it just won't meet my needs right now.

Ummm.. Having the same capacity doesn't make the devices the same. What Ireland is talking about is a smaller iPhone with less features.