Do you think apple is gouging the carriers?

[CrAkD]

When apple first started releasing phones I thought apple would change the way the mobile industry did business. The whole subsidy for a signed contract crap. I feel like they started out planning to do that but when they saw the money that could be made and it wouldn't really come out of the customers pocket (at least initially) but the carriers. Apple can price their phones at whatever they want and the carriers will cover it to get people on their service.

If you look at the 8gb iPhone 4. It's off contract price is what $549? Now look at the iPod touch 8gb and it's what $199? Now I know some of the hardware in the 4 is upgraded over the iPod touch but is it $349 better? Just curious it seems like apple has fallen into playing the same us carrier game that I thought they would change when they entered the phone market. I love the iPhone and I don't mind saving money on it by signing a contract just makes me wonder.

 

[BlizzardBolt]

Apple has always been ripping off the carriers.

The carriers want more subscribers which is why they take on the cost.
Sprint's 20 billion move for iPhone4S...very risky

iPhone4S BOM should be around 200$, maybe up to 270$ for 64GB.

Yet it sells for over 800$ on the market......

 

[IcyStorm]

Why did you think they would change it? Apple never led us to believe that. What they've changed is carrier control over the software itself.

Apple's still a business, and the iPhone nearly makes half of their profit every quarter.

 

[Stealthipad]

I do not think that Apple or the carriers are ripping anyone off. They both are pricing according to what the market will tollerate! They did sell out in less than 12 hours!

Both of these companies are in this for profit and no one is being forced to buy!

 

[deeddawg]

iPhone4S BOM should be around 200$, maybe up to 270$ for 64GB. [...] Yet it sells for over 800$ on the market......

BOM (if accurate, no idea) is only one small part of the overall cost of anything. Don't forget to factor in: OS development, warranty/support cost allocations, manufacturing capacity/tooling costs, direct and indirect labor & benefits costs, R&D costs, supply chain management/shipping costs, other overhead costs, etc. Furthermore, pricing of a non-commodity item is typically much more focused on what the market will pay and less so on the cost to produce. Typically you only see small cost/price differentials in commoditized products where the business strategy is low-cost producer. That's not Apple's market or strategy.

That's not to say Apple and the carriers aren't making a profit on the devices, but to focus only on the BOM shows a lack of understanding of the cost structure or pricing strategy of any business.

 

[CrAkD]

I do not think that Apple or the carriers are ripping anyone off. They both are pricing according to what the market will tollerate! They did sell out in less than 12 hours!

Both of these companies are in this for profit and no one is being forced to buy!

I'm not saying their ripping customers off. $199 entry is normal for top of the line smart phones in the market today I just feel like their overpricing them to carriers based on the iPod touch price. However I guess every manufacturer is doing the same thing because every phone has that crazy high off contract price. Btw I preordered a 64gb iPhone so I have no problem with iPhone and buy one every year.

 

[scaredpoet]

When apple first started releasing phones I thought apple would change the way the mobile industry did business.

The only way that could've possibly happened would be for Apple to buy some spectrum of its own, build out its own network, and become its own wireless carrier. Not even becoming an MVNO would've been sufficient because they'd still have to hand over revenue to the carriers.

But, since that would've taken years, and lots of red tape (and probably opposition from the carriers), the path of least resistance had to be taken.

Besides, I'm not convinced we would've like Apple as a wireless carrier.

The whole subsidy for a signed contract crap.

Again, that's what carriers in the US do. And they do it because they know that Americans don't like shelling out lots of cash for their cell phones. $500+ phones existed well before the iPhone, but carriers discovered - much to our misfortune - that if they offer to eat some of that cost in exchange for locking you in for a while, then people are more likely to buy them.

The devil in that agreement is that technology progresses faster than the contracts expire, AND carriers have realized that they can do some pretty nasty things to people who are motivated by termination fees to stick around for a while.

Just curious it seems like apple has fallen into playing the same us carrier game that I thought they would change when they entered the phone market.

I had no illusions of that at all.

I am pleased that Apple has managed to wrest away control of what software is installed, something no other platform (not even Android) has managed to do. There's no ugly red V or Blue Death Star or Yellow whatever-the-heck-that-thing-is-from-Sprint emblazoned on our handsets. Nor are they free to hack up the interface to something unusable simply because they want all their devices to conform to a single, dysfunctional interface.

THAT is pretty significant. But it will require lots more money, effort and time to undo the other evils that the carriers practice and impose on everyone. It will also require a different state of mind from US consumers, that no, there is no such thing as a free cell phone.

 

[CrAkD]

The only way that could've possibly happened would be for Apple to buy some spectrum of its own, build out its own network, and become its own wireless carrier. Not even becoming an MVNO would've been sufficient because they'd still have to hand over revenue to the carriers.

But, since that would've taken years, and lots of red tape (and probably opposition from the carriers), the path of least resistance had to be taken.

Besides, I'm not convinced we would've like Apple as a wireless carrier.



Again, that's what carriers in the US do. And they do it because they know that Americans don't like shelling out lots of cash for their cell phones. $500+ phones existed well before the iPhone, but carriers discovered - much to our misfortune - that if they offer to eat some of that cost in exchange for locking you in for a while, then people are more likely to buy them.

The devil in that agreement is that technology progresses faster than the contracts expire, AND carriers have realized that they can do some pretty nasty things to people who are motivated by termination fees to stick around for a while.



I had no illusions of that at all.

I am pleased that Apple has managed to wrest away control of what software is installed, something no other platform (not even Android) has managed to do. There's no ugly red V or Blue Death Star or Yellow whatever-the-heck-that-thing-is-from-Sprint emblazoned on our handsets. Nor are they free to hack up the interface to something unusable simply because they want all their devices to conform to a single, dysfunctional interface.

THAT is pretty significant. But it will require lots more money, effort and time to undo the other evils that the carriers practice and impose on everyone. It will also require a different state of mind from US consumers, that no, there is no such thing as a free cell phone.

I agree the preloaded software and ease of use of the iPhone has changed a lot. I remember the proprietary crap I had to deal with just to change a ringtone in phones before the iPhone.

I just though they would sell them off contract and unlocked to give control back to consumers instead of carriers but I guess I should have known that apple isn't exactly known for their affordable prices haha.

 

[BlizzardBolt]

BOM (if accurate, no idea) is only one small part of the overall cost of anything. Don't forget to factor in: OS development, warranty/support cost allocations, manufacturing capacity/tooling costs, direct and indirect labor & benefits costs, R&D costs, supply chain management/shipping costs, other overhead costs, etc. Furthermore, pricing of a non-commodity item is typically much more focused on what the market will pay and less so on the cost to produce. Typically you only see small cost/price differentials in commoditized products where the business strategy is low-cost producer. That's not Apple's market or strategy.

That's not to say Apple and the carriers aren't making a profit on the devices, but to focus only on the BOM shows a lack of understanding of the cost structure or pricing strategy of any business.

Don't exaggerate other factors, Apple knows how to keep R&D, testing,etc cost low.

After thousands of these products other factors are reduced to a few dollars, it wouldn't be necessary to note it. Apple employee salary and advertising are a different story.