Feeds

Apple takes the operator's shilling

You are no longer the customer

Combat fraud and increase customer satisfaction

Apple's new iPhone is faster, better and cheaper than its predecessor, but the low cost is achieved by taking a subsidy from the network operator: a business model that Apple rejected last time, and one that will drive the unlockers quickly out of business.

Most mobile phones are sold to operators and retailers - Nokia's biggest UK customer is Carphone Warehouse - who then sell those devices on to customers as a loss-leader, to get them signed up to long contracts. With the iPhone Apple rejected this model, believing the device was so pretty it could be sold direct to customers, at the full price.

The company has had some success, but not as much as it would have liked. After all, you have to be a lot better than the competition when it has a price label marked "free".

This time around the iPhone is going to be heavily subsidised, up to 100 per cent in the UK - customers will be able to get hold of the shiny handset for free if they are prepared to sign up to a big enough contract. But the change also reflects a shift in the balance of power between the operator, the customer, and the manufacturer.

Apple will have to start selling the iPhone to O2, rather than to the end customers, just as all the other manufacturers do. No end customer ever asked for a phone with a camera or Bluetooth. Operators wanted those features to push MMS and headset sales respectively, and as operators are paying for the handsets they get to dictate the features.

Most operators will have a list of features, each of which is worth a specific amount of subsidy based on the revenue that feature will generate. One-button MMS, for example, cuts the price significantly, while a music player isn't really of interest unless it's linked to the operator's download service.

That subsidy will be clawed back over the length of the contract, just like any other mobile phone handset, so there'll be no buying of handsets just for unlocking – the contract will be signed in-store. In the US AT&T allows customers to buy out of their contracts for $211. This puts the cost of the phone back up to $411, which those not interested in the AT&T network might be willing to pay.

Exclusivity is worth a considerable amount, and the iPhone brand will ensure that for the moment O2 will be willing to pay over the odds to have the handset on its network alone. But in a year or two, when customers start looking to replace their handsets or switch networks Apple is going to need a product that will appeal to their new customer: the network operators, rather than the man on the street. ®

Top three mobile application threats

More from The Register

next story
Virgin Media so, so SORRY for turning spam fire-hose on its punters
Hundreds of emails flood inboxes thanks to gaffe
A black box for your SUITCASE: Now your lost luggage can phone home – quite literally
Breakfast in London, lunch in NYC, and your clothes in Peru
AT&T dangles gigabit broadband plans over 100 US cities
So soon after a mulled Google Fiber expansion, fancy that
AT&T threatens to pull out of FCC wireless auctions over purchase limits
Company wants ability to buy more spectrum space in auction
EE & Vodafone will let you BONK on the TUBE – with Boris' blessing
Transport for London: You can pay, but don't touch
Turnbull gave NBN Co NO RULES to plan blackspot upgrades
NBN Co faces huge future Telstra bills and reduces fibre footprint
NBN Co plans fibre-to-the-basement blitz to beat cherry-pickers
Heading off at the pass operation given same priority as blackspot fixing
NBN Co in 'broadband kit we tested worked' STUNNER
Announcement of VDSL trial is not proof of concept for fibre-to-the-node
prev story

Whitepapers

Mobile application security study
Download this report to see the alarming realities regarding the sheer number of applications vulnerable to attack, as well as the most common and easily addressable vulnerability errors.
3 Big data security analytics techniques
Applying these Big Data security analytics techniques can help you make your business safer by detecting attacks early, before significant damage is done.
The benefits of software based PBX
Why you should break free from your proprietary PBX and how to leverage your existing server hardware.
Securing web applications made simple and scalable
In this whitepaper learn how automated security testing can provide a simple and scalable way to protect your web applications.
Combat fraud and increase customer satisfaction
Based on their experience using HP ArcSight Enterprise Security Manager for IT security operations, Finansbank moved to HP ArcSight ESM for fraud management.