Is this Apple's long-term model for selling the iPhone?

[kdarling]

What makes you think the handset isn't subsidized? Just because Apple doesn't post a phony MSRP that hardly anyone will ever pay?

The iPhone IS subsidized, but the subsidy works in reverse. All customers get the phone at a discount and then Apple capitalizes the difference through their share of the monthly recurring service fees.

We've been over this before. Calling extra profit a reverse subsidy, is faulty.

1) Apple already makes a tidy profit on the device sale. If they did not, they would require activation before taking it out of the store. and their stores would not allow people to come in and buy 50 at a time to send overseas.

Just because someone says that Apple could've sold it for more money, doesn't make it worth it, or even okay. This has already been proven by the rebate debacle.

2) Apple themselves have stated that the monthly royalties are to be used for creating more software. Fine and good (altho so far, we haven't seen evidence of millions of dollars being used for that), but that's not a subsidy, that's selling software over time.