Originally Posted by winterspan
Apple has ALWAYS been about maximizing profits... Anyways, I don't buy the "complexity" argument. It doesn't make sense from a profit perspective, and regardless Apple could make the next iPhone with a dual-radio baseband that supports both standards...
So Apple is getting more from AT&T then they could make selling another 5-10 million iPhones on Verizon/Sprint? I HIGHLY doubt that... I don't remember the exact figure, but I believe the new deal is that Apple is getting around $500 from AT&T for each iPhone sold and in exchange not receiving any monthly commission.
So lets go with a theoretical 7 million CDMA iPhones sold over the next 24 months, which I think is quite conservative even especially with the new model and firmware 3.0.
7 Million iPhones sold @ $300/phone= $2.1 Billion. You'd have to be nuts to think AT&T is going to be paying Apple anywhere NEAR that amount for an exclusivity agreement.. I can't imagine more than $100 million or more..
I think you are thinking of short term gains, not long term. Apple thinks very long term, well beyond any other CE company I know of.
You are absolutely right, they could have not sided with a carrier and come out with a GSM/UMTS and A CDMA/CDMA2000 iPhone right out of the gate. They could have sold it with every major carrier.
They would also have issues with battery life to radios as it was their first device. They wouldn't have been able to get $20 unlimited data like they did with AT&T. They wouldn't have gotten the unlimited data to drop over the next year for the rest of the US to $30. They wouldn't have been able to include Visual Voicemail as a free feature. They probably would have had to remove YouTube and Gogole Maps from at least Verizon's version of the device when subsidized. They would have had higher development cost which have come through in the initial pricing. They would have had a great start and then it would have been like every other device on the market.
They wouldn't have been able to get song downloads over the carrier's network or start a vendor controlled App Store that allowed downloads over the carrier's network. They would have been put in the same poor position that every other handset manufacturer is in and what they thought would happen to Apple after they got here. Nothing innovate or unique in any way, just a fancy GUI and decent web browser.
Apple is doing what Apple does best, they are starting with something single minded, focused and expanding from there. They have a GSM-based device which is the developed world's standard, and they have slowly improved the HW and SW from there.
If the goal was a short sided increase in profit then there would have no reason to update the original iPhones to v2.0 or to v3.0. The original iPhone will be going into its third year and it's getting the same OS and pretty much all the SW features of the new device coming out this summer. What other phone has done that? It doesn't make sense to do that if short term profits are so important.
I'm quite sure AT&T is paying Apple more than $100M. For Apple and AT&T that number is so ridiculously low. The subsidy off the retail price is usually $200-300. That is retail price, not wholesale price, but AT&T also has to pay for this exclusivity and each iPhone contract has a required unlimited at a charge of $30/month, which in itself is unique to phones prior to the iPhone. We can look at the non-GAAP iPhone and AppleTV sales data to get a pretty good idea about much Apple is getting per unit worldwide.
The bottom line is, Apple couldn't have made a game changer without a carrier that would give them free reign. The best choice was AT&T. The best choice for China is China Unicom with their GSM-based network. These are the biggest networks in their respective countries so Apple can court the largest and then get a better deal from the smaller companies. It's a great strategy and benefits Apple in the long run a lot more than throwing multiple unlocked devices into the market to see where they land.