The iPhone may be losing momentum as carrier subsidies fade

April 22, 2014
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With T-Mobile’s fresh take on how a mobile carrier should operate, it’s you and I that benefit. One of their most enduring changes has been an end to blind subsidies, wherein we can clearly identify what we’re paying monthly for our total device cost. That’s had a ripple effect with other carriers who have offered the same thing, but there is collateral damage afoot — and it’s the iPhone.


The iPhone is routinely one of the more expensive devices on offer with carriers, costing roughly $100-200 more per unit. With the old “blind subsidy” model, most consumers had no concept of what the full retail price of the device was, instead concentrating on our out-of-pocket amount. For a similar down payment to other handsets, we had our iPhones.

For carriers, the device likely meant expensive, long-term agreements with Apple to carry the device, and an agreement to not burden it with bloatware. Sprint, who was last to jump on the iPhone bandwagon, reportedly signed a deal that could take them well into 2016 before they actually see a profit from the iPhone. Like consumers, carriers pay a premium to have the device.

iPhone-Moto-X-AC-600x337

Now that consumers are seeing what devices cost, they are reconsidering their options, one of which includes not upgrading at all. When faced with a $650 hook, many consumers are looking to lower-end devices, or just hanging on to their current model. When the iPhone price tag of $750 or more is staring you in the eye when you once only considered it as a $200 investment, wheels start turning. The monthly cost, which is now often laid out to you plainly, may make you wonder if that extra $10-15 is really worth it.

While the full price of a device was never actually hidden, it was also never explained adequately at the time of purchase. It was a lot like buying a car when you had no idea what the price would be — you just made payments. Now that transparency is starting to rule the day, pricey phones will likely lose their appeal for consumers. Apple, unfortunately, has failed to capture the mid-range segment, instead focussing on a revenue model that is quickly becoming passé.

Source: The Wall Street Journal


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  • krym73

    Very true, most ppl still upgrading from iPhone to iPhone are on 2yr contracts.. and not to mention how Apple eventually made the 4s a 8gb and now the 5c also a 8gb…not worth still paying full price.

  • dontsh00tmesanta

    Agreed

  • Techngro

    I agree as well. But most carriers over here still do contracts so, at least for a while, Apple has nothing to worry about.

  • http://www.geek-news.net/ GeekNewsNet

    You mean to say the ‘consumerist market’ is finally slowing down? Wow shocking! This has always been the struggle tech companies face. Consumers need something to drive the market. For PCs it was always the Mhz race and new updated software and games. For cameras, MPs and zoom. Phones are just the next thing to fall victim to the plateau effect.

  • d-roid

    Sprint wasn’t last to ink Apple deal…unless you don’t consider Tmobile a carrier.

  • OnlyApple

    Keep on dreaming, you can’t compete with quality and amazing finish with those crashing plastic you call

  • winter_hat

    On the day before Apple releases record sales data and record revenue….

  • James Burkett

    Don’t worry, the iPhone could go to 1500 with 2 year old specs and iSheep will still buy it full price sight unseen.