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AT&T CEO: Carriers Can't Afford Big Subsidies for Devices Any Longer
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The bill of materials is irrelevant to how much a product actually costs to make. Apple pays all their engineers - whether they be in design, hardware, software, what-have-you - $100k+ per year.
R&D is by-and-large a major factor in pricing schemes. Then there's also advertising, legal things, shipping, etc. It's not very black and white, is all I'm saying.
Even if they make $100 million in revenue on iPhones in a year, they're only looking at probably $30 million in profits (i.e. a 30% markup from manufacturing costs). Assuming at least 300 people at Apple are making $100k per year, that's only breaking even.
Apple doesn't do as well in countries where phones aren't subsidized. Someone posted a chart a few days ago here showing the breakdown. Android owns the market in the non subsidized countries.
Apple's net profits are in the 30% range, and they were even higher before the iPad mini was released.
Am I catching the most uninformed thread in the history of MR? Did anybody do their homework and learn that AT&T is dropping plan prices by $15/month for people out of contract?
That's a much more flexible model in numerous ways. First, I'm looking forward to being able to purchase unlocked phones at Target with my 5 percent discount off $650 or more instead of $200 or so. AT&T was charging you that extra $450 through more expensive service, so you weren't saving that 5 percent.
The obvious downside is the $15 savings over two years is just $360. But if you keep your phone for another four months, you've saved another $90 and are even. Plus you can keep saving by using your phone longer instead of feeling cheated if you didn't upgrade.
Also, if the darn phones will get their hardware to align again like they did with the iPhone 4S, INSANE PORTABILITY. You buy a full price phone and go to AT&T. You don't like AT&T after a couple of months, you jump to Verizon. You don't like Verizon, you go to Sprint. You don't like them, go to T-Mobile or one of a million discount/prepaid carriers.
Yeah, it is a little whiny from a guy with "AT&T CEO" attached to his name. Boo hoo, hope he can stay warm under his silk sheets. But I think this will be good for most of us if everybody else jumps aboard -- with T-Mobile and AT&T now on, expect it -- and the hardware gets more portable.
That's a much more flexible model in numerous ways. First, I'm looking forward to being able to purchase unlocked phones at Target with my 5 percent discount off $650 or more instead of $200 or so. AT&T was charging you that extra $450 through more expensive service, so you weren't saving that 5 percent.
The obvious downside is the $15 savings over two years is just $360. But if you keep your phone for another four months, you've saved another $90 and are even. Plus you can keep saving by using your phone longer instead of feeling cheated if you didn't upgrade.
Also, if the darn phones will get their hardware to align again like they did with the iPhone 4S, INSANE PORTABILITY. You buy a full price phone and go to AT&T. You don't like AT&T after a couple of months, you jump to Verizon. You don't like Verizon, you go to Sprint. You don't like them, go to T-Mobile or one of a million discount/prepaid carriers.
Yeah, it is a little whiny from a guy with "AT&T CEO" attached to his name. Boo hoo, hope he can stay warm under his silk sheets. But I think this will be good for most of us if everybody else jumps aboard -- with T-Mobile and AT&T now on, expect it -- and the hardware gets more portable.
And how much is Apple currently worth? Surely there is plenty of stock options to pay every employee.
No subsidy
I don't see a problem with no subsidy as long as they reduce the cost of data plans. Here in Thailand I pay about $20 USD for unlimited data and 300 mins voice which I hardly even use. Albeit we only have 3G here (just recently) and 4G on trial in some parts of Bangkok.
Of course as a result of low cost data plans carriers will not subsidize phones.
I don't see a problem with no subsidy as long as they reduce the cost of data plans. Here in Thailand I pay about $20 USD for unlimited data and 300 mins voice which I hardly even use. Albeit we only have 3G here (just recently) and 4G on trial in some parts of Bangkok.
Of course as a result of low cost data plans carriers will not subsidize phones.
I am with O2 in the uk and I am on a sim only contract that costs me £15 per month. I get unlimited calls and texts and half a gig of data per month.
The £30 a month that I save by not having a subsidized phone contact means that I can buy a new iphone outright every year if I sell it on after 12 months.
Simple really
The £30 a month that I save by not having a subsidized phone contact means that I can buy a new iphone outright every year if I sell it on after 12 months.
Simple really
Ugh.
I used to work for an at&t corporate store and they definitely do not have any interest in making customers happy. All they want is $$$ and to suck off their investors so they keep getting their $$$. WORST COMPANY EVER. They do not want to subsidize phones because they want pure profits.
I used to work for an at&t corporate store and they definitely do not have any interest in making customers happy. All they want is $$$ and to suck off their investors so they keep getting their $$$. WORST COMPANY EVER. They do not want to subsidize phones because they want pure profits.
IMHO Apple owes most of it's success to 2 year subsidy programs. Apple is the winner, not cell companies, not component manufacturers, not the companies that assemble the devices. Apple rakes it all in (which is fine by me, so long as they keep making great products).
The housing market bubble of 2007ish was due to low interest rates and easy financing.
Auto manufacturers would not be nearly as successful if it weren't for financing. Everyone would be driving jalopies.
The rising cost of a college education is due in large part to student loan programs.
High healthcare costs are due in large part to health insurance, a type of financing.
The end of the world will probably have something to do with financing.
The housing market bubble of 2007ish was due to low interest rates and easy financing.
Auto manufacturers would not be nearly as successful if it weren't for financing. Everyone would be driving jalopies.
The rising cost of a college education is due in large part to student loan programs.
High healthcare costs are due in large part to health insurance, a type of financing.
The end of the world will probably have something to do with financing.
The "subsidy" is coming out of the extra money you are paying on your two year contract. Try going contract-free with a phone you own and compare your before and after bills. (T-Mobile, in my case, turns out to be cheaper by far with this approach than buying phones on contract with the other carriers.)
Tesco Mobile offers a SIM only for £7.50 a month for calls, text and data.
Next time I upgrade my iPhone I'm going to buy it outright and then take one of these deals. When I next want to upgrade, I can sell the old phone for a decent price to put towards the next one.
That has to save money.
Next time I upgrade my iPhone I'm going to buy it outright and then take one of these deals. When I next want to upgrade, I can sell the old phone for a decent price to put towards the next one.
That has to save money.
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stop these nonsensical phone subsidies and put pressure on the manufacturers to release products at realistic prices.
these subsidies do nothing but fool the casual user of how expensive the phones are, how far beyond their means they really are, the huge financial commitment they are entering and it masks the exorbitant markup some companies place on their products.
osaga makes some good points
these subsidies do nothing but fool the casual user of how expensive the phones are, how far beyond their means they really are, the huge financial commitment they are entering and it masks the exorbitant markup some companies place on their products.
osaga makes some good points
Except they can't. AT&T, and indeed all 4 of the majors, have notably uncompetitive prepaid plans compared to their own MVNOs. If they tried to compete on price with them they dilute their brand.
The primary value they offer over their MVNOs is better coverage in most cases (few MVNOs have the clout to negotiate roaming agreements), priority in the towers (they get throttled last during heavy congestion), and less throttling. Also, MVNOs usually aren't allowed to offer tethering and in some cases (like Sprint MVNOs) can't offer the latest and greatest handsets for sale.
They do.
Most of the world's cellular markets do not have subsidized handsets, so the devices are sold at retail.
It is interesting to note that apart from Apple and Samsung, the other major smartphone handset manufacturers are losing money, regardless of what they are charging for their devices.
This also brings to light something else of note: the fact that Apple has allowed US carriers to offer subsidies has not negatively impacted Apple's bottom line.
I would be very interested to see Apple become a carrier and offer their own services as well as the hardware. They would need to get an FCC license, but this is an intriguing prospect nonetheless. I hope it happens!
As an AAPL shareholder, I would be furious if they tried to become a mobile operator. The mobile network operator business model doesn't encourage innovation.
Steve Jobs looked at cellular companies as dumb pipes, which is why to this day Apple refuses to let carriers pre-install junk ware on their handsets.
Part of Apple's success was to avoid getting mired in activities that don't highlight the company's core competencies.
Note that investing in a cellular network (particularly a US network) doesn't benefit most of their customers (more than half of Apple's revenues comes from international sources and China is the fastest growing market).
Without a doubt, I would heavily short AAPL if they trying to get into the cellular carrier business.
But Tim Cook isn't that stupid. Neither was Steve Jobs.
Steve Jobs looked at cellular companies as dumb pipes, which is why to this day Apple refuses to let carriers pre-install junk ware on their handsets.
Part of Apple's success was to avoid getting mired in activities that don't highlight the company's core competencies.
Note that investing in a cellular network (particularly a US network) doesn't benefit most of their customers (more than half of Apple's revenues comes from international sources and China is the fastest growing market).
Without a doubt, I would heavily short AAPL if they trying to get into the cellular carrier business.
But Tim Cook isn't that stupid. Neither was Steve Jobs.
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that Ceo is a liar. AT&T and Verizon have record profits. What I wish they did was scrape the mvnos and offer cheaper plans themselves and/more options. Theres no reason why you should be forced into a data plan if you have a smart phone, things like that need to go...
Dear carriers,
What are you doing with the $2,400 that I pay you over 2 years?
After you pay the subsidy of $450... you still have $1,950
And that's not enough?!?
It seems like things are going badly for AT&T. They used to enjoy a monopoly. Then they started losing long distance customers. Then they started to lose land line customers. Then they started to use Uverse customers.
Do they really want to screw around with the subsidized phone pricing structure too much?
In the home, all you need is internet connectivity.
It seems inevitable, prices have to go down for mobile connectivity.
Just a thought!
Do they really want to screw around with the subsidized phone pricing structure too much?
In the home, all you need is internet connectivity.
It seems inevitable, prices have to go down for mobile connectivity.
Just a thought!