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iPhone makes eyes at T-Mobile and Orange

Darling, I think we should see other telcos

Internet Security Threat Report 2014

The days of O2's exclusive hold on the iPhone are probably numbered - T-Mobile has told us it's in talks with Apple about ranging the iPhone 3G in the next few months.

The deals being discussed only include the iPhone 3G, and O2's exclusive on the 3GS seems to be secure. But even this represents a major shift in how Apple markets the iPhone, which currently relies on network exclusives to get a decent subsidy; giving that up shows either greater confidence or reflected disappointment in how O2 has priced up the latest offering.

T-Mobile has been telling callers that the company is in talks with Apple about ranging the iPhone 3G, and Orange is also rumoured to have plans regarding Apple's last-version handset. That would leave O2 to explain to users why the 3GS is better; doing Apple's marketing for it.

O2's exclusive on the iPhone will have cost it dearly in terms of subsidy - manufacturers know what an exclusive is worth and use them to extract a big subsidy. Several years ago your correspondent wrote a piece claiming the iPhone would fail, largely because of Apple's reluctance to accept the operator shilling in the form of handset subsidy. Apple may have been naive about the mobile industry, but it learnt quickly (more quickly than your author expected) how important the subsidy was, and how the company paying that subsidy is the real customer - which is why we suddenly see MMS enabled, and tethering disabled.

The other way to increase subsidy is to link to lots of operator services - a menu item for "Get more games" is worth a few quid, while a pre-installed music application linked to the operator can make an expensive handset cheap. But those options aren't available to Apple, which wants all the services revenue for itself.

In the USA AT&T had hoped that its exclusive on the iPhone would make the company "cool", but in reality it's become the whipping boy for everything that goes wrong with the handset - blamed for poor reception, limiting tethering and failing to support MMS. Customer loyalty is to Apple, not AT&T, and much the same thing has happened in the UK, where iPhone users love Apple but have little time for O2.

So Apple have little to lose by allowing the iPhone 3G on to other carriers in the UK, even if the 3GS remains exclusive to O2 for the moment. Customers don't consider themselves to be using Orange, T-Mobile or O2 any more, they're Apple's customers regardless of who happens to be carrying the signal... which is just how Cupertino would like it. ®

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