Why Wireless Providers Love and Hate iPhone

The iPhone has absolutely revolutionized the cell phone market and has been a serious game changer for wireless providers.  the popularity of the iPhone has given Apple a lot of power and has put wireless carriers in a tough spot. On one hand, they pay more for the iPhone than any other phone which cuts into their margins. On the other hand, if they don’t sell iPhones,  it could be seriously detrimental to their new contract signups. T-mobile trails all of the other major carriers, largely due to the absence of iPhone.  The other major networks such as Verizon, AT&T, and Sprint could just opt to stop carrying the iPhone but with iPhone sales being over half of all smartphone sales it doesn’t look like a risk they will be willing to take.

Wireless networks have a love hate relationship with the iPhone due to it’s wild popularity and cost. The iPhone does not come without it’s price. iPhone receives upwards of $500 from most carriers which is much more than they pay for any of the android or windows devices. The effect is even more compounded by the fact that google currently pays subsidies to providers to load devices with android.

So what does this mean for iPhone Users? Investors typically don’t look lightly on dropping margins so something has to give. With iPhone sales continuously smashing previous quarter sales, Apple has no reason to reduce their asking price. Since Apple won’t budge, providers are going to have to do something. This lies the dilemma for cell phone users. If Apple won’t lower their price, the networks will have to do something to make up the margin. This fact will most likely hit the users in the pocket once again. The only way wireless providers can overcome Apple’s demands is by joining together and collectively refusing to pay. Since this is not likely to happen they will probably make up the margins in raising the rates for their users.

Verizon released that they will start charging $30 dollars for upgrade fees in the near future on all phones. Recently AT&T jacked their data rates up to $20 a month instead of $15 a month for the lowest plan with the added perk of an extra 100mb a month. This sounds all fine and dandy but it doesn’t hide the fact that cell phone providers are raising their rates while marginally trying to make us feel like we are getting something for it. Remember when unlimited data plans used to be the standard? Cell phone companies have all but eliminated unlimited data seeing the potential profit that can be made from it. Currently the mid level 3GB seems to be completely reasonable since it takes a fair amount of dedication to reach that point, but as technology advances so will the data used by it . I don’t think anyone believed that they would ever need more than a 100 megabytes when they were using windows 3.1.  Now many people have issues filling up their terabyte drives.

the iPhone has paved the way for data use addiction. data addiction has put the networks in a position where they can continue to raise rates without much push back. Wireless users will stop paying for smartphones the day they stop paying for cable TV. Unfortunately users have painted themselves into a corner where wireless usage has now become a need and not a luxury. As apps become more robust and feature rich, and network speeds continue to increase, average data usage will inevitably go up.

The real question here is whether we will continue our thirst for data without the iPhone. True iPhone users are diehard. They love their iPhones and continue to support Apple as long as the products are good. Those diehard iPhone users would just shrug their shoulders and say, “hey, at least I  have an iPhone”.  I don’t think there is any way android could keep up with this kind of loyalty. This means the iPhone is here to stay and we will continue to pay increasing premiums for service.  iPhone users should not be surprised if they pay an additional $50 for this years iPhone release and possibly $100 extra for the iPhone 6.

Sources:

Duncan, Geoff. How the iPhone is raising your phone bill. retrieved May 6, 2012, from http://www.digitaltrends.com/mobile/how-the-iphone-is-raising-your-phone-bill/

Frommer, Dan. The Real Reason Wireless Carriers Love Android: Google Is Paying Them To. retrieved May 6, 2012, from http://articles.businessinsider.com/2010-03-25/tech/30041935_1_nexus-one-google-s-android-google-apps

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