Comments on: AT&T’s Value to iPhone Users: Negative $400/phone?!

By: Radler

Radler — Thu, 21 May 2009 14:44:45 +0000

I hear you. AT&T is the only people that are surprised by the call volume to customer service.

By: Jen

Jen — Thu, 21 May 2009 14:37:10 +0000

Amen Brother! 11/19/09 will end my relationship with At&t and the iphone because it is unacceptable to me to spend a minimum of one hour with customer support to get 1/2 of any problem I bring to them resolved. Thus, it is 2 hours of my time to get a nominal problem resolved.

By: Radler

Radler — Tue, 12 May 2009 16:53:44 +0000

Joe: No doubt about it. Churn is very expensive – especially given the subsidies and customer acquisition cost. It flies under the radar because the numbers are not generally avaialble. We had a client calculate the cost of churn relating to poor voice quality. It was in the billions.

Wireless Engineer, Great point about the warranties. Right now, for the popular phones, the balance of the negotiating power is with the handset manaufacturers. It might be different for the cheap phones, but it would mean a price increase to cover the warranty costs. Given price sensitivty, that probably is a deal breaker.

By: WirelessEngineer

WirelessEngineer — Tue, 12 May 2009 16:11:53 +0000

There is another side to this the cost of iPhone that both at&t and Apple may be missing in their assessment, handset churn.

The iPhone is simply not a very durable device. The iPhone gets repaired/replaced under warranty one to two times a year for many users, let the extended warranty lapse and the iPhone is likely replaced by a non-iPhone at the earliest opportunity. How many customers churn away from the iPhone to another at&t phone? How many simply churn away from at&t because of the iPhone experience. The cost of churning a customer to another carrier is high, in many cases they will not return because of their perceived problems wiht the handset and carrier support.

When will carriers make handset manufacturers bring their warranties in line with the typical lenght of contract? 20 years ago the business model was to sell minutes, today the business model is to sell accessories bind the customers into contracts that last longer than their equipment.

-WE

By: Joe Shade

Joe Shade — Tue, 12 May 2009 14:26:51 +0000

I doubt if there is anything ATT can do to retain these customers. For many iPhone users it may be time to upgrade to a newer version (or perhaps to a phone not so scratched and dented). The competing CDMA carriers will probably do a better job at providing real 3G speeds; but in the end Apple is playing the carriers for what they are: bloated, dumb bureaucracies that do a better job at network “plumbing” than creating a compelling environment for savvy wireless users. In the end wireless services will become a commodity service with the lowest price point winning the day. The carriers are simply huge collectives of project managers with a billing system tacked on the side. Technology, business smarts and innovation? That’s Apple’s domain.

By: Radler

Radler — Tue, 12 May 2009 02:53:55 +0000

Pablo,

Thanks for the comments. I was referring to the business model of subsidizing the purchase price and making money charging for service.

The various access technologies pose a different challenge for Apple to redesign the phone to work on CDMA or T-Mobile’s spectrum. That is a barrier to Apple breaking ATT’s exclusivity. It would not surprise me if Apple waited until adoption of 4G before including VZW, Sprint or T – especially if they can get AT&T to pay dearly to maintain exclusivity.

By: Pablo

Pablo — Mon, 11 May 2009 21:55:16 +0000

“Moreover, the other three 3G service providers are likely to follow a similar short-term business model when they sell the iPhone.”

Who are these “other 3G service providers”? Verizon and Sprint uses CDMA technology, as opposed to AT&T which uses UMTS. T-Mobile uses UMTS technology for 3G, but not on the same spectrum as the iPhone is designed. Also, T-Mobile has their thing going on with the Google phone (G1). Please fill me in…

By: This is the iPhone’s Business Model on Crack |

This is the iPhone’s Business Model on Crack | — Tue, 05 May 2009 16:25:52 +0000

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