Here’s some news you probably didn’t hear today underlying the iPhone 3G announcement: in its bid to change the way mobile companies work, Apple lost.
The new agreement between Apple and AT&T eliminates the revenue-sharing model under which AT&T shared a portion of monthly service revenue with Apple. Under the revised agreement, which is consistent with traditional equipment manufacturer-carrier arrangements, there is no revenue sharing and both
iPhone 3G models will be offered at attractive prices to broaden the market potential and accelerate subscriber volumes. The phones will be offered with a two-year contract and attractive data plans that are similar to those offered for other smartphones and PDAs. AT&T anticipates that these offers will drive increased sales volumes and revenues among high-quality, data-centric customers. Currently, less than 20 percent of AT&T’s postpaid subscribers have integrated devices capable of voice, Web and data applications. Based on the company’s experience, average monthly revenues per iPhone subscriber are nearly double the average of the company’s overall subscriber base.With a two-year contract, the price of an 8GB iPhone 3G will be $199; the 16GB model will be priced at $299.
Unlimited iPhone 3G data plans for consumers will be available for $30 a month, in addition to voice plans starting at $39.99 a month.
Unlimited 3G data plans for business users will be available for $45 a month, in addition to a voice plan.
When the iPhone was launched, Apple and AT&T entered into an unusual agreement. The iPhone was sold at normal price, unlike every other device (in the US, at least). Apple then took a cut of every service plan AT&T sold. But it seems that the old way of doing business proved the winner: iPhones will now be sold like any other device — subsidized by the carrier, which then recoups the money by locking users into a 2-year contract. Apple no longer gets a cut of the service fees. Even with the subsidy, AT&T stands to make more money from this deal, since they aren’t giving Apple a cut and they’ve raised the service charges.
This actually seems to work out better for users than the previous deal, where we still had to sign a 2-year contract but didn’t get a discount on equipment. The only way that other deal would have worked out for the customer is if they sold us an unlocked device.
Apple’s learned the lesson that other handset manufacturers learned long ago: first, you can’t easily trump the service providers; second, sell the device cheap and make up for it in volume and market share. Apple seems to be content being a premium computer manufacturer, but when it comes to the iPhone, they’re going to go for the market share however they can.
