Apple iPhone Subsidies To Drop In June?

  • Posted: 22 November 2009 06:03 PM

    Check out PED’s column on iPhone contracts. It’s worth the read.  grin

         
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    Posted: 22 November 2009 07:11 PM #1

    The drop from $450 to $300 is conditional on the exclusive arraignment with T ending. The question then becomes does AAPL make up the lost $150 and the CDMA phone development costs on volume (access to VZ customers and to a much less extent T-Mobile and Sprint)? I would think with the high margins the iPhone supposedly enjoys, the answer is yes.

    edit: Plus more people are going to be shopping at iTunes and the Apps store.

    [ Edited: 22 November 2009 07:14 PM by stkstalker ]

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  • Posted: 23 November 2009 04:40 AM #2

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    Gene Munster ? Piper Jaffray

    We?re looking at the iPhone, it?s pretty clear we?re still in a greenfield opportunity here, but if you start to go to multiple carriers can you talk a little bit about the pricing of the phone when you go from exclusivity to multiple carriers? And obviously, not specific but any sort of color we can have in terms of pricing dynamics change on the phone from you to the carrier?

    Timothy D. Cook

    Our pricing is confidential, Gene, so it?s not something I could comment on in detail but generally speaking from markets where we?re already selling I would not expect to see a wholesale price difference as we bring on other carriers. However, the end user price is really set by the carriers themselves so you may or may not see a street price difference.

    IMO, it doesn’t matter if the subsidy with T decreases or not, all we care about is ASP.  Even if the subsidy decreased to $300, if Apple still charges $600, the decreased subsidy will just be passed to consumers in the form of higher prices.  Given that Verizon has a better network, it is possible they sell the iPhone for more than AT&T is and just rely on their better network and pent up demand to sell iPhones.

         
  • Posted: 23 November 2009 06:58 AM #3

    No, there won’t be a drop in subsidy in step with the end of exclusivity. But if Apple sticks with the existing business model for iPhone, the competition can eventually catch up. Therefore Apple will step off this model, tapering subsidies down to zero, starving competitors of the margins needed to finance a viable challenger out of device sales. Apple, or Apple’s partner(s) will offer a global mobile broadband service, and voice service will simply be a VOIP App. How long does that take? Let’s say 10 more years to the ending of separate voice service.

         
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    Posted: 23 November 2009 09:31 AM #4

    sleepygeek - 23 November 2009 10:58 AM

    No, there won’t be a drop in subsidy in step with the end of exclusivity. But if Apple sticks with the existing business model for iPhone, the competition can eventually catch up. Therefore Apple will step off this model, tapering subsidies down to zero, starving competitors of the margins needed to finance a viable challenger out of device sales. Apple, or Apple’s partner(s) will offer a global mobile broadband service, and voice service will simply be a VOIP App. How long does that take? Let’s say 10 more years to the ending of separate voice service.

    As far as the subsidy,  I’m sure Apple anticipated that above market subsidies would not last for ever.  The Iphone margins reflect that fact.  Apple’s BOM on the Iphone allows for a reduction which will squeeze the other players.  If Verizon can get an Iphone for $300 subsidy with no advertising cost and another $50 to the retailer vs a $300 subsidy for a Droid or other top end Android phone with $50 for the retailer which would they chose?  The Iphone has proven it can attract customers to ATT so I think it justifies a premium.  As far as the future.  I still think Apple is building out their Data Center to go the MVNO route with the transition to LTE.  LTE does not have circuit switch technology so all the traffic voice/data/SMS is basically IP traffic.  I think Apple wants to control the whole telephone experience.

         
  • Posted: 23 November 2009 09:48 AM #5

    I listened to the interview a second time. I believe the analyst said he was modeling $300 in subsidies per unit. That doesn’t mean Apple is dropping the subsidies to that amount. I don’t think the end of exclusivity means a big drop in subsidies.

         
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    Posted: 23 November 2009 11:41 AM #6

    pats - 23 November 2009 01:31 PM

    ... As far as the future.  I still think Apple is building out their Data Center to go the MVNO route with the transition to LTE.  LTE does not have circuit switch technology so all the traffic voice/data/SMS is basically IP traffic.  I think Apple wants to control the whole telephone experience.

    How long would there be?  What happen to those wireless telephony providers?  By then, won’t cable and telephony providers look similar, and all look like MVNO?  So, should Apple buy one of these providers or set up their own?

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    Posted: 23 November 2009 12:25 PM #7

    Mace - 23 November 2009 03:41 PM
    pats - 23 November 2009 01:31 PM

    ... As far as the future.  I still think Apple is building out their Data Center to go the MVNO route with the transition to LTE.  LTE does not have circuit switch technology so all the traffic voice/data/SMS is basically IP traffic.  I think Apple wants to control the whole telephone experience.

    How long would there be?  What happen to those wireless telephony providers?  By then, won’t cable and telephony providers look similar, and all look like MVNO?  So, should Apple buy one of these providers or set up their own?

    I think Apple is more focused on the customer end of the equation and would only wholesale the network for the gain of their users.  For folks willing to buy in, they would use their buying power to negotiate best value for the end user.  I don’t think Apple wants to control the pipe so much as the customer relationship.  As network bandwidth both fixed and mobile expand new service opportunities will emerge where Apple can leverage their existing customer relationships.  Apple MVNO patent

         
  • Posted: 24 November 2009 05:22 AM #8

    Governments financed the build out of mobile infrastructure by licensing a limited cartel of investors lured by large future service revenues. To provide some restraints, limited competition was set up. But its infrastucture is a natural monopoly in a given area; we don’t have multiple water, electricity and gas mains serving each property.

    It’s inevitable that we will eventually receive service from a unified infrastructure. It’s beginning to look as if Apple will be releasing an all-networks capable iPhone next year. MVNO is the next stage in the transition to a fully shared infrastructure. A couple of years later when the bulk of deployed iPhones are all-network, that patent would come into its own.

    [ Edited: 24 November 2009 05:24 AM by sleepygeek ]