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Why do carriers bother subsidizing the iPhone so much?


pyroscott
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I was reading this seeking alpha article about carriers raising fees to discourage customers from upgrading their phones. The article claims that the carrier subsidy on an iPhone is $400. With Sprint offering an upgrade every 22 months, $18 per month goes to the subsidy of the iPhone. On a family plan, that wipes out the add-a-phone charges and all sprint is left with is the $10 per month smartphone charge and the plan on the main line.

 

Other phones are not subsidized nearly as much, but are still subject to the activation charge that is sneakily inserted to partially cover the subsidy.

 

My thoughts are it is either the contract that the carrier signed with Apple to carry the iPhone stipulated the amount the carrier would subsidize the iPhone, or the carriers are like the gas stations right across the street from each other, where one station raising the price of their gas, even a little, will drive potential customers across the street.

 

What do you think is the underlying reason for this?

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Don't think its the contract stating the carrier has to subsidize X amount. The contracts with apple have more to do with exclusivity and # of units guaranteed to sell(buy from apple). So if say sprint finds itself in a hole and can't fulfill the # u could see them do some crazy special on them for cheap if the $ worked out right.

 

They might stipulate a floor for iPhone prices in the contract though I doubt it, but they likely don't state you have to sell it for X amount. Apple gets paid the same amount no matter what the carrier charges as they are buying them from apple anyway...

 

Sent from my PG86100 using Tapatalk

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Don't think its the contract stating the carrier has to subsidize X amount. The contracts with apple have more to do with exclusivity and # of units guaranteed to sell(buy from apple). So if say sprint finds itself in a hole and can't fulfill the # u could see them do some crazy special on them for cheap if the $ worked out right.

 

They might stipulate a floor for iPhone prices in the contract though I doubt it, but they likely don't state you have to sell it for X amount. Apple gets paid the same amount no matter what the carrier charges as they are buying them from apple anyway...

 

Sent from my PG86100 using Tapatalk

 

True, but Apple would see a drop in the amount sold if they weren't priced in the ballpark of Android models. If the carrier cut the subsidy in half and you were faced with a $400 16GB iPhone 4S or a $200 16GB Epic 4G Touch, then $36 activation fee, screen protector, case, charger, etc. The extra $200 could come into play.

 

Maybe you are on to something with the amount Sprint needs to sell. Nobody knows how many iPhones AT&T and Verizon have agreed to sell, maybe all 3 are subsidizing to keep the iPhone moving so they can fulfill their contracts.

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True, but Apple would see a drop in the amount sold if they weren't priced in the ballpark of Android models. If the carrier cut the subsidy in half and you were faced with a $400 16GB iPhone 4S or a $200 16GB Epic 4G Touch, then $36 activation fee, screen protector, case, charger, etc. The extra $200 could come into play.

 

Maybe you are on to something with the amount Sprint needs to sell. Nobody knows how many iPhones AT&T and Verizon have agreed to sell, maybe all 3 are subsidizing to keep the iPhone moving so they can fulfill their contracts.

 

Yeah I think the main point of the contract is on the # required to sell, like sprints was. then its up to the carrier to decide how to price it more so. We all know the $250ish sweet spot thats out there for phones and recently seeing carriers starting creeping higher from that. in a sense it doesn't matter b/c the carrier agrees to buy X devices at X price, then its up to them to sell the device. dunno how it works within the actual apple stores though....now they could very well control it indirectly through other terms in a sense....

 

Apple is the most controlling of them all out there so anything is possible. I just know I wont ever own that phone. No way.

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Apple is the most controlling of them all out there so anything is possible. I just know I wont ever own that phone. No way.

 

Maybe it's my inner rebellious teenager coming out, but I feel the same way. Apple comes across to me like they are saying "this is what you shall think, you stupid consumer. Keep filling our pockets with cash!"

 

Sent from my SPH-D710 using Tapatalk

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I don't know, If I won an iPhone I might just flip it for the cash of maybe keep it for a bit to see what the mystique is all about or maybe hope some magic fairy dust falls on me and I become a convert. But seriously, what the iPhone does it does well. Its just I would see myself getting board with it too quickly. The iPhone was designed with simplicity in mind, at least the way Steve Jobs thought simplicity should be,and that doesn't challenge or satisfy me.

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I gave away two Apple products this year that were given to me. I refuse to own anything Apple LOL.

 

The Android Strikes Back 4G

 

Please put me on your list of giving Apple products too. I'm always looking for something new to add to my collection.

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