There was a poster who felt Verizon and CDMA were superiour techs. He would use AT&T's disclousure of a short term hit after the drop of profit sharing to prove some point about how AT&T and the iPhone were ultimately doomed. Who was that poster and what point was he trying to make? My memory is failing me.
Now that you mention it, I think you may be right. I'd be a bit surprised that would still be one of the contract terms tho. Pricing has changed a lot in the past couple of years, coupled with two other telcos offering what used to be an ATT exclusive.
They dropped that contract term when iPhones went subsidized.
Anyhow, why would this be an issue for AT&T now? GIven that this is not the first year they are offering the iPhone, data plan revenues should be catching up to subsidies paid to Apple. If it has not caught up, there is a problem in the carriers' business plan.
While the iPhone is clearly profitable to AT&T remember that with each new iPhone release we're seeing a huge jump in demand. This time around it appears to be more than double YoY. That's a lot of extra dough AT&T has to pay to Apple for the month/quarter, or however they negotiated the payments.
AT&T really wanted the profit sharing to stay because they don't have to pay such huge lump sums. At the time this wasn't an issue for the other carriers but they were short sighted and Apple lost this position would would have helped everyone involved, especially Android users where the longer the device is used the more money the vendor gets from that device from a monthly percentage of carrier revenue. You bet your ass they would be offering longterm OS updates to their devices instead of just letting them fester right after they were sold.
Isn't VZ making back the money throughout the life of the iPhone. It is not like what RIM took when they wrote off more than $450m for the playbook.
And these guys are also good at nickel and dime their customers.
Are these analysts missing the forest for the trees.
I don't think the analysts are missing it - it's the people quoting the analysts (Read: Appleinsider) who miss the point.
This is quite common in the cell phone industry. Apple gets the entire wholesale price from the carrier up front (i.e, $650). The carrier keeps the $199 that they sell the phone for - and then collect the remainder of their money (plus a profit if they are doing their jobs properly) over the life of the contract.
It is pretty much standard practice that a carrier will not be 'in the black' for a given customer until well into the contract. So, it is true that the more expensive phones the carrier sells, the more cash they will have tied up until sometime later. In the end, though, the more expensive phones you sell, the more money you make in the long run.
So it's simply a cash flow issue - carrier spends cash now but will recover it (plus a profit) later. No big deal unless you don't have the cash or borrowing ability to handle it.
This is true. I went to my Verizon store to buy an iPhone 4S. All I could do is order it.
I ordered it on December 19. It didn't ship until the 23rd... and I got it on the December 27th.
I'm curious why you didn't go to an Apple store? Everyone I go into one, at least a few people are leaving with iPhone 4Ses. In fact, just before Xmas, many (all?) Apple stores have a special area set up for rapid purchasing, with a stack of iPhones, iPads, iPods and MacBooks all ready to go. All to say, you could have walked out with a device.
While the iPhone is clearly profitable to AT&T remember that with each new iPhone release we're seeing a huge jump in demand. This time around it appears to be more than double YoY. That's a lot of extra dough AT&T has to pay to Apple for the month/quarter, or however they negotiated the payments.
AT&T really wanted the profit sharing to stay because they don't have to pay such huge lump sums. At the time this wasn't an issue for the other carriers but they were short sighted and Apple lost this position would would have helped everyone involved, especially Android users where the longer the device is used the more money the vendor gets from that device from a monthly percentage of carrier revenue. You bet your ass they would be offering longterm OS updates to their devices instead of just letting them fester right after they were sold.
What you are saying makes sense. But here's my thinking - regardless of YoY increase in iPhone sales, the installed base for AT&T > new iPhone customers. What each pre-existing customer pays in a year should be sufficient to offset the subsidy AT&T owes Apple on each new iPhone sold. So, from year to this year, why would AT&T have to issue a warning on reduction in GM? (I don't know for a fact they did, but someone above stated so.)
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According to VZW customer care, the iPhone has been on backorder almost since the 4s came out.
This is true. I went to my Verizon store to buy an iPhone 4S. All I could do is order it.
I ordered it on December 19. It didn't ship until the 23rd... and I got it on the December 27th.
Now that you mention it, I think you may be right. I'd be a bit surprised that would still be one of the contract terms tho. Pricing has changed a lot in the past couple of years, coupled with two other telcos offering what used to be an ATT exclusive.
They dropped that contract term when iPhones went subsidized.
Anyhow, why would this be an issue for AT&T now? GIven that this is not the first year they are offering the iPhone, data plan revenues should be catching up to subsidies paid to Apple. If it has not caught up, there is a problem in the carriers' business plan.
While the iPhone is clearly profitable to AT&T remember that with each new iPhone release we're seeing a huge jump in demand. This time around it appears to be more than double YoY. That's a lot of extra dough AT&T has to pay to Apple for the month/quarter, or however they negotiated the payments.
AT&T really wanted the profit sharing to stay because they don't have to pay such huge lump sums. At the time this wasn't an issue for the other carriers but they were short sighted and Apple lost this position would would have helped everyone involved, especially Android users where the longer the device is used the more money the vendor gets from that device from a monthly percentage of carrier revenue. You bet your ass they would be offering longterm OS updates to their devices instead of just letting them fester right after they were sold.
Colour me clueless.
Isn't VZ making back the money throughout the life of the iPhone. It is not like what RIM took when they wrote off more than $450m for the playbook.
And these guys are also good at nickel and dime their customers.
Are these analysts missing the forest for the trees.
I don't think the analysts are missing it - it's the people quoting the analysts (Read: Appleinsider) who miss the point.
This is quite common in the cell phone industry. Apple gets the entire wholesale price from the carrier up front (i.e, $650). The carrier keeps the $199 that they sell the phone for - and then collect the remainder of their money (plus a profit if they are doing their jobs properly) over the life of the contract.
It is pretty much standard practice that a carrier will not be 'in the black' for a given customer until well into the contract. So, it is true that the more expensive phones the carrier sells, the more cash they will have tied up until sometime later. In the end, though, the more expensive phones you sell, the more money you make in the long run.
So it's simply a cash flow issue - carrier spends cash now but will recover it (plus a profit) later. No big deal unless you don't have the cash or borrowing ability to handle it.
This is true. I went to my Verizon store to buy an iPhone 4S. All I could do is order it.
I ordered it on December 19. It didn't ship until the 23rd... and I got it on the December 27th.
I'm curious why you didn't go to an Apple store? Everyone I go into one, at least a few people are leaving with iPhone 4Ses. In fact, just before Xmas, many (all?) Apple stores have a special area set up for rapid purchasing, with a stack of iPhones, iPads, iPods and MacBooks all ready to go. All to say, you could have walked out with a device.
While the iPhone is clearly profitable to AT&T remember that with each new iPhone release we're seeing a huge jump in demand. This time around it appears to be more than double YoY. That's a lot of extra dough AT&T has to pay to Apple for the month/quarter, or however they negotiated the payments.
AT&T really wanted the profit sharing to stay because they don't have to pay such huge lump sums. At the time this wasn't an issue for the other carriers but they were short sighted and Apple lost this position would would have helped everyone involved, especially Android users where the longer the device is used the more money the vendor gets from that device from a monthly percentage of carrier revenue. You bet your ass they would be offering longterm OS updates to their devices instead of just letting them fester right after they were sold.
What you are saying makes sense. But here's my thinking - regardless of YoY increase in iPhone sales, the installed base for AT&T > new iPhone customers. What each pre-existing customer pays in a year should be sufficient to offset the subsidy AT&T owes Apple on each new iPhone sold. So, from year to this year, why would AT&T have to issue a warning on reduction in GM? (I don't know for a fact they did, but someone above stated so.)