Wonder if AT$T and Verizon will collude together to raise subsidized iPhone pricing?

[aneftp]

We all know Apple charges each of the major cell phone carriers in the USA close to $600 for each iPhone 4S 16GB. In return the cell phone carriers subsidized the iPhone by approximately $400 to lock consumers into a 2 year contract.

Yeah I know the MSRP retail price for iPhone is $650 but we're pretty sure Apple gives companies somewhere about a 5% discount in bulk.

Sprint's CEO has already gone on record saying Sprint's subsidy of the iPhone is already 40% higher than any of their other phones (including the S2). That means Samsung really is only charging Sprint around $400 for their high end phones.

So I believe it will take both major carriers to collude together and try to raise subsidized iPhone pricing by $50-100.

What do you think? It will take the 2 major carriers in the USA to tango together. I really think they want Sprint out of the equation all together and divide up the customers themselves.

Verizon's been trying to up the pricing of their high end LTE phones by $100 (ie Droid Razr, Galaxy Nexus etc $299 on contract at Corp Verizon stores and online Verizon.com). Yeah I know you can get those phones cheaper on Amazon Wireless etc. But those are Android Phones with much more flexible pricing strategies than the iPhone.

 

[lordofthereef]

That's basic price fixing. If it can be proven, that comes with huge fines. So, I don't expect they will.

 

[jsm4182]

Apple has tight control over the pricing of their products, the companies selling Apple products don't really get a say, they charge the price Apple tells them to charge or they won't be able to carry the products anymore.

 

[aneftp]

Apple has tight control over the pricing of their products, the companies selling Apple products don't really get a say, they charge the price Apple tells them to charge or they won't be able to carry the products anymore.

Even in European and Asian markets?

I see "free iPhones" in European phone plans with certain voice/data/text plans.
And the "free subsidized iPhones" are the newer 4S phones. Not the very old 3GS ATT tries to sell for 1 penny on contract.

 

[DeusInvictus7]

Even in European and Asian markets?

I see "free iPhones" in European phone plans with certain voice/data/text plans.
And the "free subsidized iPhones" are the newer 4S phones. Not the very old 3GS ATT tries to sell for 1 penny on contract.

That's because regulations for carriers are much different (read: better) in Europe than it is in North America.

 

[kalex]

Give it time and they will figure out how to do it. Look at all the current "promotions" u get. Instead of competition promoting lowering of prices we get the opposite. One carrier comes up with idiotic idea (raised etfs) and every jumps on it.

 

[lordofthereef]

Even in European and Asian markets?

I see "free iPhones" in European phone plans with certain voice/data/text plans.
And the "free subsidized iPhones" are the newer 4S phones. Not the very old 3GS ATT tries to sell for 1 penny on contract.

US carriers could do this as well if they wanted to. It's not Apple stopping them, it's the carrier's greed. They figure "why should we miss out on $200 if we don't have to?"

 

[rjohnstone]

US carriers could do this as well if they wanted to. It's not Apple stopping them, it's the carrier's greed. They figure "why should we miss out on $200 if we don't have to?"

The $199 price has nothing to do with greed, it's about recouping the high subsidy costs Apple charges to the carriers.
US carriers are lucky to break even on the hardware.
They try to make up for it in contract.

Here's a good read on how the iPhone impacts a carriers bottom line.

http://money.cnn.com/2012/02/08/technology/iphone_carrier_subsidy/index.htm

The price of Apple's iconic smartphone is heavily discounted by carriers. Those subsidies almost single-handedly devastate profit margins for Verizon, AT&T and Sprint.

 

[scaredpoet]

Even in European and Asian markets?

AT&T and Verizon don't serve Asia. They couldn't collude there if they wanted to.

 

[lordofthereef]

The $199 price has nothing to do with greed, it's about recouping the high subsidy costs Apple charges to the carriers.
US carriers are lucky to break even on the hardware.
They try to make up for it in contract.

Here's a good read on how the iPhone impacts a carriers bottom line.

So are we saying that the European carriers are sold the iPhone for less than the US carriers are?

The average phone's bottom line certainly must get recouped very fast. Who actually uses all those minutes that they are paying for? What about all the people on a $15 $200mb plan? That's $360 on a data plan that is BARELY using ATT's data network in the life of the contract. I would say they are making their cash back plenty well on the vast majority of their users, and a truckload alongside that.

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AT&T and Verizon don't serve Asia. They couldn't collude there if they wanted to.

You took that response out of context. It was a response asking about Apple's tight control of the market. Nobody is saying ATT and VZW will collude in Asia.

 

[rjohnstone]

So are we saying that the European carriers are sold the iPhone for less than the US carriers are?

The average phone's bottom line certainly must get recouped very fast. Who actually uses all those minutes that they are paying for? What about all the people on a $15 $200mb plan? That's $360 on a data plan that is BARELY using ATT's data network in the life of the contract. I would say they are making their cash back plenty well on the vast majority of their users, and a truckload alongside that.

Hey... I'm just quoting the article.

I have friends that work for two of the big 4 carriers (not lowlife CSR's either) and they tell me subsidy costs are a killer.
Sure they make money, but very little if any off the iPhone itself.

This comment in the article is pretty much spot on from what I've been told.

All smartphones weigh on carriers' margins, since wireless carriers pay a hefty subsidy up front to buy the phones from the handset manufacturers. They make up the difference over the life of a two-year contract.
But the subsidies on the iPhone -- roughly $450 per device -- are the highest in the industry. AT&T's subsidies are even more exacerbated because it gives away the iPhone 3GS for free.

Remember... they not only have to recoup the subsidy, they also have to provide the service which has a very real cost behind it (equipment, employees salaries, network maint/upgrades, etc).
When it's all said and done, there really isn't that much actual "profit".
Sure, they make boatloads of cash, but all of the carriers are seeing their margins fall year after year. Hell, Sprint went from a 16% margin down to 9% after they got the iPhone.

 

[xxBURT0Nxx]

it's not about making $100 off of a phone, it's about making money on your contract. Charging $20 for text messaging, $30 for data plans, etc.

carriers aren't making money off of phones they sell, but the service those phones are tied to.

If the carriers weren't making money from the iPhone, why did they turn a profit last year, and why is TMO upset that they don't get the iPhone. They may not make money on the phone itself, but they are going to make more money having people on contract for their service. You think TMO would rather be losing customers because they don't offer the iPhone, or maintaining customers by essentially braking even on a phones price?

 

[lordofthereef]

Hey... I'm just quoting the article.

I have friends that work for two of the big 4 carriers (not lowlife CSR's either) and they tell me subsidy costs are a killer.

I don;t doubt this. The argument above, which I find to be valid, is that the EU companies do sell new models of the iPhone for free with contract, and often times their monthly costs are still even lower than what a base user would be paying on ATT's network. I know, ATT has all of America to deal with, etc. but the fact still remains that they are asking something like $20-$30 a month, offering the iPhone for free, or damn near it. The cheapest iPhone plan is twice that, plus we pay $200 for the handset itself. There is likely more to this situation than you or I know.

 

[xxBURT0Nxx]

I don;t doubt this. The argument above, which I find to be valid, is that the EU companies do sell new models of the iPhone for free with contract, and often times their monthly costs are still even lower than what a base user would be paying on ATT's network. I know, ATT has all of America to deal with, etc. but the fact still remains that they are asking something like $20-$30 a month, offering the iPhone for free, or damn near it. The cheapest iPhone plan is twice that, plus we pay $200 for the handset itself. There is likely more to this situation than you are I know.

yes, there likely is a lot to it, but I think it boils down to the expansiveness of the US.

Much more expensive to create the infrastructure for mobile and broadband here because we have people spanning the entire country. It's expensive to pipe broadband and 3G/4G coverage to tiny cities in places like Montana, North Dakota, Wyoming, etc. Places in other countries are much more developed and much smaller. Some countries are the size of our states, so it's a lot easier for the telco to pipe in high speed broadband and 3G coverage for everyone. That's why they get cheaper service, and probably why they can afford to really subsidize the iPhone to free. They would rather give out the iPhone for free to get customers on their plans, than let a customer go to a competitor because they offer the phone for cheaper.

 

[lordofthereef]

yes, there likely is a lot to it, but I think it boils down to the expansiveness of the US.

Much more expensive to create the infrastructure for mobile and broadband here because we have people spanning the entire country. It's expensive to pipe broadband and 3G/4G coverage to tiny cities in places like Montana, North Dakota, Wyoming, etc. Places in other countries are much more developed and much smaller. Some countries are the size of our states, so it's a lot easier for the telco to pipe in high speed broadband and 3G coverage for everyone. That's why they get cheaper service, and probably why they can afford to really subsidize the iPhone to free. They would rather give out the iPhone for free to get customers on their plans, than let a customer go to a competitor because they offer the phone for cheaper.

Here's a question for everyone then. How come I cannot buy an iPhone completely off contract and have my monthly fees reduced? If all they are doing is recouping costs, surely I shouldn't have to pay the same for minutes, texts, and data as the person who just subsidized his/her phone, right?

 

[kevink2]

Here's a question for everyone then. How come I cannot buy an iPhone completely off contract and have my monthly fees reduced? If all they are doing is recouping costs, surely I shouldn't have to pay the same for minutes, texts, and data as the person who just subsidized his/her phone, right?

I think that TMobile might offer a plan like that. And years ago ATT Wireless offered me a discount to extend my contract without upgrading the phone.

But people in the US like the "free" phones. And many people end up replacing phones anyway because of new features, the old one wears out, or breaks.

 

[lordofthereef]

I think that TMobile might offer a plan like that. And years ago ATT Wireless offered me a discount to extend my contract without upgrading the phone.

Both statements are accurate. Unfortunately, ATT doesn't do this with smartphone plans. I remember way back when, before ATT bought cingular, they offered the same thing to me (I actually opted out because ATT had terrible, horrible coverage at the time).

 

[koigirl]

The $199 price has nothing to do with greed, it's about recouping the high subsidy costs Apple charges to the carriers.
US carriers are lucky to break even on the hardware.
They try to make up for it in contract.

I feel so "lucky" to be a customer

 

[Agent-P]

That's because regulations for carriers are much different (read: better) in Europe than it is in North America.

I feel like part of it is the regulations, and the other part is that there are more carriers to choose from and thus more competition driving them to provide good deals. And since the land area to population ratio is smaller in Europe compared to the US, it's easier for them to cover more people and more areas.

Here's a question for everyone then. How come I cannot buy an iPhone completely off contract and have my monthly fees reduced? If all they are doing is recouping costs, surely I shouldn't have to pay the same for minutes, texts, and data as the person who just subsidized his/her phone, right?

You pretty much nailed it on the head. The plans are where they make their real money. They just use popular phones to get people locked into contracts. As kevink2 guessed at earlier, T-Mobile US does have a lower rate plan if you bring your own compatible phone to them, but they do not advertise it. You can find them on the website by finding the value plans option. From quickly scanning, they appear to be more than $20 in savings over the regular individual plans with the same features (the only difference being the subsidized phone being bought from T-Mobile).