REVEALED: How YOU PAY extra for iPHONES - even if you DON'T HAVE ONE

Apple's secret deals with mobile operators are squeezing smaller companies out of the market and driving up costs even for those who don't use their products, according to Register sources across the industry. "In my opinion Apple are in a grey area," one legal expert with first hand experience of the contracts told us. The …

[alain williams]

Message to mobile operators

Just don't sign the Apple contracts. Apple need you more than you need them.

When a new iphone comes out put a message on your web site saying: we cannot sell you an iphone as we refuse to agree to Apple's outrageous demands.

If the meme catches on with several mobile carriers, they will not lose out to their competition and Apple will have some incensive to behave properly.

[Anonymous Coward]

Re: Message to mobile operators

Won't work. There are so many who just have to have the new designer label item. If they don't get it from your phone shop, they will hop to another network and get it there.

[Anonymous Coward]

Re: Message to mobile operators

Those days have long gone. There are better designer phones out there, consumers now it.

[Ken Hagan]

Re: Message to mobile operators

" they will hop to another network and get it there."

But if it is costing you and your competitors to offer the Apple product, then losing Apple customers might allow you to keep more of the cash you make out of the rest, who are the majority. It rather depends on the numbers. The good news is that if operators don't think they are better off without Apple then non-Apple customers probably aren't paying too much Apple-tax.

In any case, if the other big name manufacturers are cutting similar deals then Apple aren't as evil as the article makes out.

[apjanes]

Re: Message to mobile operators

"In any case, if the other big name manufacturers are cutting similar deals then Apple aren't as evil as the article makes out."

Um, yes they are. Just because other people are doing it does not make a morally reprehensible act any less reprehensible!

[Diabolic]

Re: Message to mobile operators

Apple's actions *may* be reprehensible, but if everybody else is doing it, singling them out is not okay. Either call out everybody doing this on these actions, or call out nobody. Otherwise, that's just reporting bias.

[Enrico Vanni]

Re: Message to mobile operators

The fact that this news is breaking surely proves that the lure of the new model is waning. 5C is a flop on the market but apple still made their money from it. They won't get away with that twice.

[Anonymous Coward]

Re: Message to mobile operators

The 5C is just the 5 - Apple always keep the previous 1-2 models available. It's actually very clever as it's a 5 for people who would have bought a cheaper (1 model old phone) and it's a colourful phone for people who prefer it. Many people miss the point that not everyone wants (or can afford) the latest and the 5C is basically the 5 (technically) but without the stigma (if it's important to them) of not really just being the older phone.

I know people who could have afforded either but chose the 5C over the 5S purely on it's looks and it's still an extremely capable phone.

[apjanes]

Re: Message to mobile operators

Perhaps just not stocking the iPhone will not work, but alain is suggesting a two pronged approach, not stocking the iPhone AND posting some dirt on their inordinate demands. I think that MIGHT work as it has the chance of decreasing the public opinion of Apple and making the purchase of Apple products a morally and socially less acceptable thing to do. The problem may come in that it seems likely Apple requires the signing of an NDA before event SEEING its terms.

[Drat]

Re: Message to mobile operators

The power of the Apple brand is too strong, any operator who refused to sign the contract and so could not stock the the latest iPhone would surely loose many iPhone loving customers.

[James Micallef]

Re: Message to mobile operators

It's not so much that Apple brand is too strong, more that in any negotiation of 1 party vs multi-party, the single party has the advantage of unity. They only require one operator to break ranks, and can offer the first operator to break ranks preferential terms, including exclusivity.

The operators can only win vs Apple if they are united among themselves, but it is a LOT better for each individual operator to risk some losses to make a stack of dough selling iPhones than to risk being frozen out of the market while a rival operator rakes in all the Apple sales (and the juicy multi-year contracts that go with them).

A bit like the unionised workplace really... no matter how strong a union is, in the long run the employer will always have the upper hand because it's one entity and the employees are only as strong as the weakest members / those willing to work for less.

[Destroy All Monsters]

Marxism strong!

A bit like the unionised workplace really... no matter how strong a union is, in the long run the employer will always have the upper hand because it's one entity and the employees are only as strong as the weakest members / those willing to work for less.

Uh, what? The employer is a monopsonist? More like, the Union is a monopolist. Which can use the threat of violence and property destruction,as well as the beating up of "scabs".

[Anonymous Coward]

Re: Message to mobile operators

The demands are not outrageous those saying they are are simply unaware of how supplier contracts with large multinational companies work. You say "we think we can sell X units of this product if we can get it for Y price" the supplier agrees, then if your projections are wrong you have to either pay them more for each unit sold or take the physical stock from them at the agreed price.

The manufacturing industry has worked on this exact model for the past few decades.

[DanceMan]

Re: Message to mobile operators

The downvoters need to realize that when a retailer buys from a distributor there is a price based on quantity. Buy 1 to 10 the price is x. Buy 100 the price is x minus something. Buy 1000 it's less yet. When you get into really large quantities, you're into negotiations and bargaining.

I don't support Apple and the hardball tactics employed here, but you have to see the industry practices that underlie them. I want a BB Q10, and its sad to see how a small operator in the market gets muscled out.

[Anonymous Coward]

Re: Message to mobile operators

It's the subsidy issue that's at fault here.

Small phone manufacturer has hot new product, but it can't be subsidized by X in an attempt to really get a head of steam up because that's more than the iPhone subsidy. To do it the dealer would have to match that subsidy and give it to Apple. That means mucho, mucho moola.

It's the same sort of "nobody else can EVER have a better deal than us" bollox as the eBook stuff, and it could also be considered as anti-choice, anti-consumer, anti-competitive protectionism.

[Kristian Walsh]

Re: Message to mobile operators

O2 UK have been downplaying iOS devices for a while now. As a launch carrier for iPhone, they got burned more than anyone. Go into their smaller stores now, and you won't even see an iPhone, and on a recent TV campaign, the associated app was available for Android only.

Remember the adage: you're not the phone-maker's customer. Apple sold the iPhone to its customers, the mobile operators. Apple told them that it was so hot that people would switch networks to get it (something that in hindsight did not happen in UK/Ireland - Vodafone ended up making more money from not having to sell iPhone than O2 did by selling it), and reeled them in.

Personally, I want all subsidies gone, and replaced with an interest-free loan to buy the handset you want. This model is used in Finland-- a country that also has the lowest mobile phone bills of any comparable EU economy: there's no such thing as a free phone...

[John Riddoch]

Re: Message to mobile operators

Can't see it working for various reasons. The cult of Apple means that people will move to another provider if it means they get the latest shiny. Secondly, the negotiations with Apple are almost certainly tied up in reams of NDA so the most you'd be allowed to say is that you didn't have a deal with Apple to sell their products.

It would take a majority of carriers to do this for it to have any effect and even then, I'm not convinced. O2 had a monopoly on the original iPhone in the UK and people still bought them. Heck, I considered going back to O2 on that basis at the time, even though I'd found reception to be crap.

[Philippe]

Re: Message to mobile operators

It has been tried before and failed.

O2 Czech republic refused to pay the subsidize and remove the iPhone from their range. Their marketshare suffured dramatically.

All operators in Russia tried it all at once.

That kind of worked as everone played ball, but now Russians customers buy their iPhone unlocked directly from reseller instead meaning the operators lost the iPhone margin and the lock in on the clients.

[JC_]

Re: Message to mobile operators

O2 Czech republic refused to pay the subsidize and remove the iPhone from their range. Their marketshare suffured dramatically.

The old joke that "we lose money on every sale but we make it up in quantity" comes to mind :)

now Russians customers buy their iPhone unlocked directly from reseller instead meaning the operators lost the iPhone margin

Sounds ideal. That way there's no hiding the price of the phone - if punters will pay £500 for an iPhone instead of £140 for a Moto G or £120 for a Lumia 620, then Apple deserves to get the extra. As a consumer, it's nice to have the handset price broken out.

[John Smith 19]

Re: Message to mobile operators

"Sounds ideal. That way there's no hiding the price of the phone - if punters will pay £500 for an iPhone instead of £140 for a Moto G or £120 for a Lumia 620, then Apple deserves to get the extra. As a consumer, it's nice to have the handset price broken out."

Damm right. That's real competition.

You want new shiny? That's the realcost of it (but you won't be paying it every day of your bill).

Still need it that badly?

[Anonymous Coward]

Re: Message to mobile operators

A lot of people DO buy the handset SIM free from Apple so are well aware with the cost of the handset and suspect most others are intelligent enough to realise the cost of their contract includes a charge for the handset that basically divides the cost over the contract term. Quite simple really.

As for operators not making money on iPhone - it's the ones NOT selling iPhone who are not making the money. iPhones drove the market for data contracts and from a consumer point of view we ended up with more generous data allowances. I remember having various sort-of-smart phones before the iPhone and they often came with 25Mb of data or pure pay for usage data (at a horrendous price).

Also again for now making money - many iPhones I know are on SIM only contracts and it's the same SIM only contract whether it's an iPhone or Android - so either they make money from those on both or they lose on both?

[Kristian Walsh]

Re: Message to mobile operators

"now Russians customers buy their iPhone unlocked directly from reseller instead meaning the operators lost the iPhone margin and the lock in on the clients."

Let's be clear about this: there was no margin on iPhones for the networks. None. It's a subsidised sale. The operator loses money every time a customer chooses an iPhone; their only hope of recouping it is to keep that customer on contract for as long as possible. As for lock-in, you're more likely to stay with a service plan for longer if you're not being pushed to change your handset every 18 or 24 months - subsidies work against lock-in benefits, because they actively encourage the customer to either take another phone (whose cost the operator must recoup again) or go to another provider whenever the renewal comes up.

In Russia, the operators are now prohibited from subsidising phones, on the grounds that the practice is against the interest of the consumer (I tend to agree).

So, the Russian operators are actually benefiting: they get the monthly data plan fees, but don't have to spend a penny in subsidies to get it. Customers also pay less for service because they're not repaying handset subsidies (often on other peoples' phones). People who can afford iPhones now have what they always wanted: an exclusive device that poor people just can't buy. I'd call that a win all round. Oh, except for Apple, but maybe they've enough money already to see themselves through this trauma...

[P. Lee]

Re: Message to mobile operators

> Let's be clear about this: there was no margin on iPhones for the networks. None. It's a subsidised sale.

That's true, but I think its probably true for most of the phones being sold, isn't it?

The question is how accurately the networks pick the sales targets for themselves.

The anti-competitive bit is really only when the network over-estimates sales - then the other handsets get squeezed and Apple continues to make margin. That over-estimation may be an genuine error by the networks or it may be a less desirable product failing or it may be an economic downturn.

The issue becomes that Apple maintains it's margins in a downturn and is forcing the smaller companies out. The sales structure is anti-competitive, as all vendors would like. It's time to lump subsidies (Apple and Android) into the predatory-pricing category and ban them.

[Alan Brown]

Re: Message to mobile operators

If you lose money on the deal then lockin doesn't matter.

If you rely on lock in to keep your clients, then you're in the wrong business.

If mobile phone companies realised that, their churn levels would fall _dramatically_

[Anonymous Coward]

Re: Message to mobile operators

No what happens then is the consumes who DO want the phone ask for their PAC code and mode to another operator - done. Operators doing what you suggest is possibly collusion / cartel and they would probably get done for it and why would they - unless they all did it their customers would bleed and move to whoever was selling it.

[Anonymous Coward]

Re: Message to mobile operators

"Operators doing what you suggest is possibly collusion / cartel and they would probably get done for it"

Yes the operators could be sued over that practice but Apple would refute any involvement. Then th carriers could settle out of court with the government and provide assistance in the case against Apple. Sound familiar? eBook price fixing?

[Miek]

Re: Message to mobile operators

The operators should refuse to sign the contract and then publish it on the internet for all to see (as, if they have not signed it they cannot be bound by it)

[paulc]

Re: Message to mobile operators

they have to sign an NDA before they can even see the contract...

[JeffyPoooh]

Re: Message to mobile operators

"The contracts that operators sign with Apple are confidential."

"They have to sign an NDA before they can even see the contract..."

Oooh goodie. A secret contract. Where do I get to sign a contract where the other side CAN NEVER ENFORCE IT IN COURT because it would go against their desire for secrecy?

Yes, I know that the court might be convinced to seal the evidence. Maybe. Perhaps. Maybe not, maybe the testimony would reveal the primary points.

[Anonymous Coward]

I bet

Samsung have a similar clause, only they never say 'sold' only 'shipped'.

[Sander van der Wal]

Re: Message to mobile operators

These being the same operators that would charge you through the nose for roaming?

Back in the days people would love Nokia being able to pull a stunt like that. But Nokia's smartphones were never that in demand, so that did not happen.

[Stratman]

Suppose Apple gave a contract

and nobody came?

The relative unpopularity of the latest iThing will be a very strong bargaining point when Apple are demanding frankly ludicrous terms for iThing+1.

If nothing else, the balance of power has shifted somewhat.

[Anonymous Coward]

Re: Suppose Apple gave a contract

Relative unpopularity - you living on a different planet to me? Thought Apple sold more iPhone 5S than any previous model?

[NumptyScrub]

Re: Suppose Apple gave a contract

quote: "Relative unpopularity - you living on a different planet to me? Thought Apple sold more iPhone 5S than any previous model?"

Yes, but the article quite clearly talks about the 5C, which has had less than stellar reception since it's introduction, and is the model that operators are being burned on because they haven't shifted enough units.

I'm fairly confident claiming that "Moffett estimated that Verizon had committed to $23 billion worth of iPhone purchases, but had fallen short on sales, by around $12bn to $14bn." (taken from the article) is a pretty clear indicator that something made by Apple is not selling the way it was expected to. Unless Verizon is being run by a cabal of damp sponges, one would hope they actually based that $23 million estimation upon reasonable figures rather than just rolling some dice, and thus a sales shortfall of 50% is more an indictment of the state of the market, rather than their utter incompetence at estimating sales.

Although TBH if you're going to fail estimates by 50%, there is obviously an element of incompetence involved on your part, even if it is just not hedging your bets appropriately. Luckily they have a willing army of customers ready to pay increased monthly, call and data charges, so they can make that money back ready to give to Apple, eh? :)

[Anonymous Coward]

Re: Suppose Apple gave a contract

The market is changing but Corporations are loath to admit it, although they certainly they act upon it by cutting staff; both union and non-union.

From an income tax perspective, I earn more money than I ever have; but, my expendable income keeps shrinking. Obviously, I'm not keeping up with inflation, and I would suggest that a very many others getting a very modest annual increase or none at all are feeling the same pinch.

In speaking with a Senior Executive recently I realized that he is living an alternative reality and that corporations everywhere are lining themselves up not to face the realities of "the new economy".

[JeffyPoooh]

Re: Suppose Apple gave a contract

"...my expendable income keeps shrinking..."

We all have "necessary" and significant monthly expences that did not exist 25 years ago.

I can only recommend frequenting the on-site wine making storefronts. One can easily save $500 per month.

[Anonymous Coward]

Re: Suppose Apple gave a contract

What would be interesting would be to compare sales of the 5C to the 4S when the 5 was released as basically that is what it is - i.e. the 5C is basically what the 5 would have been when the flagship 5S was released.

[IAmTheMillipede]

Re: Suppose Apple gave a contract

Selling X% more into a market that grew by X+(a lot)% is strong evidence that your products are losing popularity. Apple sales have failed to grow at the same rate as the smartphone market for several quarters now. Spinning it to say "we sold more than last time" is deceptive.

[Anonymous Coward]

@IAmTheMillipede

The "smartphone market" is irrelevant. The growth rate of that market is falsely inflated because most of its growth is at the low end (replacing feature phones)

The relevant market is the "mobile market", which includes smartphones as well as feature phones. That market is relatively stable, with the growth in the "smartphone" market balanced by the shrinking of the feature phone market as lower and lower priced smartphones are introduced and replace more and more of the feature phone market. In the overall mobile market Apple has never been in the double digits, but has always been and still is slowly growing.

As feature phones will disappear completely in a few years, leaving smartphones as the only kind of phone there is, the graphs for Apple's smartphone market share (showing declines) and Apple's mobile market share (showing growth) will converge at around 10%.

But please, feel free to portray this as "losing popularity" if it makes you feel better. Just realize that if you compare the smartphone market share for Samsung's top end (GS4 and Note3, versus last year's GS3 & Note2) you'd see the same "losing popularity" phenomena, for the same reasons.

[Eddy Ito]

Re: Suppose Apple gave a contract

Is it me or does this sound an awful lot like the contract they did with e-book publishers.

[A Non e-mouse]

Apple have a second money-making string with iPhones & iPads.

If you have an iPhone or iPad specific tariff, the carrier pays Apple a cut of the monthly fee. Those in the know, tell their operator they only have an Android phone and save a few quid every month.

This has nothing to do with hardware purchase subsidies.

[Anonymous Coward]

"Those in the know, tell their operator they only have an Android phone and save a few quid every month."

Of course! The IMEI doesn't uniquely identify the device. Doesn't stop you having a non iToy plan tho.

[Soruk]

Until they look at your IMEI, see that you're using an iToy and bill accordingly.

[frank ly]

Is that why the mobile provider websites ask you to specify if you want a standard or iPhone SIM when you choose tariffs for a SIM only deal? (There is also a Blackberry SIM option). My assumption was that the iPhone (and maybe Blackberry) used a different type of SIM card?

[Anonymous Coward]

Spot on - they use it to determine the SIM you want and in the case of blackberry so they can give you the blackberry email service. There is no difference between a call + SMS + data plan for iPhone and Android. Some iPhone plans (O2?) used to include visual voicemail but pretty sure other (UK) carriers do not provide that feature.

[JeffyPoooh]

"There is no difference between a call + SMS + data plan for iPhone and Android."

So you've never heard the Telco lady on the other end of the line say these exact words?

"I'm sorry, that plan is not available for iPhones."

I have.

Nothing to do with subsidies, iPhone 4S had been bought outright.

"iPhones use data differently."

So, in practice, depending on your local carriers' level of insanity, you're wrong.

[A Non e-mouse]

I can't speak for consumer contracts, but in business contracts, Blackberry tariffs ARE different to all other tariffs. This is because they ensure your data gets routed through a BES or a BIS. You usually found the Blackberry tariff was worse that a normal smartphone tariff. They also went a step further and if you put a non-Blackberry SIM into a Blackberry ('cause it's cheaper), they'd block you.

[Diabolic]

That's not why. They ask you what kind of phone you are using to send settings to your phone so you can browse the Interwebs and do picture messaing etc.

[Anonymous Coward]

What a crock - my contract cost with Vodafone (SIM only) is exactly the same cost for Android or iPhone.

[graeme leggett]

So functionally, there's no difference between an iPhone tariff and an ordinary voice+data tariff?

[Ommerson]

Potentially Visual Voicemail - which you definitely miss once you've had it. And it's not offered by 3 or Vodaphone.

[David Cantrell]

IIRC there's fancy-pants stuff in an iPhone tariff to support push notifications

[Anonymous Coward]

"One is that mobile subscribers ultimately pay for the unsold iPhones - they pay an Apple tax whether or not they own an Apple product."

Not me! I'm not stupid enough to take mobile contracts! I'm also not stupid enough to pay Apple tax.

As always, my decisions are considered and measured. Not many people like me left, the rest have been traded by the marketeers and they don't even know it. Of course I won't be twatting/fakebooking it because I'm also not stupid enough to use social networks. I prefer to love in the real world with real friends, you know the ones you can trust/rely on? Remember those?

Now, back to your twat/fakebook update on your iFolly.

[big_D]

So, you don't have a mobile phone? Or are you using a carrier that doesn't offer the iPhone in its line-up?

[Ken Hagan]

"So, you don't have a mobile phone?"

I'm not the OP, but it sounds like a pay-as-you-go deal, which for limited actual use might easily be ten times cheaper than any contract.

[Anonymous Coward]

""So, you don't have a mobile phone?"

I'm not the OP, but it sounds like a pay-as-you-go deal, which for limited actual use might easily be ten times cheaper than any contract."

No, I don't use PAYG, either!

[Killraven]

I don't. Neither do more than 40% of the world population.

[weenoid]

Very insightful. Thanks for posting.

[Anonymous Coward]

"Very insightful. Thanks for posting."

You're welcome! Hope you work out how its done.

[SkippyBing]

This real world thing, how does posting anonymously on an internet forum fit in with that?

[Anonymous Coward]

"This real world thing, how does posting anonymously on an internet forum fit in with that?"

Very well thanks for asking!

[Greg J Preece]

Man, am I ever glad you came here to tell us all how superior you are! Don't think I could have gone on with my Friday without knowing how much better than me you are because I have a Twitter account.

[Anonymous Coward]

"Man, am I ever glad you came here to tell us all how superior you are! Don't think I could have gone on with my Friday without knowing how much better than me you are because I have a Twitter account."

You're very welcome! I hope you learn from the experience.

[Steve Davies 3]

US or Worldwide?

Most of this only applies to the very skewed and frankly obnosious market in the US.

Does this apply elsewhere? Maybe not but frankly it is beholden on the hack that put this together to actually look at the worldwide markets.

After all, the US is no longer the biggest market for technology....

The outrageous if not obscene rates for data that the likes of AT&T and Verizon charge per month would be more newsworthy not that I have an iDevice or even have data capability on my phone.

[Anonymous Coward]

Monopolistic behaviour

I must admit I always thought it queer how smaller vendors struggle to make sales, but now this explanation makes it clear. The present system very simply fails to benefit the customers at all, with vendor lock-in on enormous scales. Fixing the problem would be a tough call, perhaps by banning contracts of this kind except where sales are relatively small.

[kmac499]

Ryan Air pricing..

Maybe if the Telcos listed the price like Ryan Air 'fares' ex luggage,ex boarding,ex card costs etc

New iThingy £(think of a number) lowest RRP anywhere

+ Apple Tax £(think of another number\percentage) Oh dear same as evrywhere else..

[James Micallef]

Re: Ryan Air pricing..

Mobile phone contract pricing is even more scandalously difficult to "read" and compare than 'cheap' flights. More so now when instead of just call minutes / sms, with multiple options each for 'own network' / other mobile / fixed line / overseas fixed line / overseas mobile / roaming, there's also the same cornucopia of options for data.

I'm pretty sure most people trying to compare tariffs at some point throw their hands up in disgust and point to any tariff that seems reasonable. I'm also pretty sure that most people could get the same service they currently do on a cheaper contract... which is why operators subsidise the phones in the first place.

We subsidise your phone by £100, but only if you sign up to a contract where you're overpaying us by £10 a month for 2 years.

One local operator here was offering a plan where one could pay individually for call minutes, sms and data. I jumped on it, getting a data-only contract, knowing I could use skype/viber/what'sapp etc to replicate call and sms functions without needing to pay unneeded sums for them. Guess what, they must have found a bunch of people doing that because within a few months they stopped offering the option, and now its no longer possible to get ANY contract at all that doesn't include a huge bunch of call minutes and sms that I wouldn't use anyway. Wankers!

[Alan Brown]

Re: Ryan Air pricing..

"Mobile phone contract pricing is even more scandalously difficult to "read" and compare than 'cheap' flights. More so now when instead of just call minutes / sms, with multiple options each for 'own network' / other mobile / fixed line / overseas fixed line / overseas mobile / roaming, there's also the same cornucopia of options for data."

Including a number of "unlimited" data options that aren't. The fine print on some of those makes me wonder why the OFT hasn't stepped in.

[DiViDeD]

Re: Ryan Air pricing..

"a number of "unlimited" data options that aren't"

Come South young man. When I asked the nice lady at Optus why my 'Unlimited Data' plan cut out after 5Gb, she responded:

"You have the Unlimited Plan. That's 5Gb/m. if you need more you can upgrade"

My options?

Unlimited Plus, Unlimited Pro, Unlimited Ultimate, Unlimited Business Plus, Unlimited Business Enterprise....

I have sent Optus a dictionary with the definition of Unlimited highlighted in red

[nematoad]

A case for the competition authorities?

If these reports are true then I have a feeling that Apple may be getting a call from anti-competition authorities around the world.

No company has the God given right to sell X number of products in a given period and if this is what Apple are doing they may well find themselves in a similar situation to Microsoft in US V Microsoft.

Apple are not a monopoly like MS but if they are imposing such T&Cs on the distributors than this may well be seen as anti-competitive behaviour.

Th trouble is the time it will take the courts to prise the contracts out of Apple's hands. Apple are sure to resist as much as possible thus both filling their coffers and at the same time hurting everyone else.

[Anonymous Coward]

Re: A case for the competition authorities?

And in the real world car makers make their dealers commit to a certain volume as they need to commit to their production line etc. etc.

[Tapeador]

Re: A case for the competition authorities?

"And in the real world car makers make their dealers commit to a certain volume as they need to commit to their production line etc. etc."

Indeed, however, unlike in the mobile phone industry, there is no single car manufacturer which has the market power to systematically extract supracompetitive profits from dealers, to the cost of other manufacturers and consumers of other products. Furthermore, unlike in the mobile phone industry, cars are not dominated by a luxury manufacturer whose market power enables it to load high costs onto consumers of non-luxury cars as a matter of course.

[Anonymous Coward]

Re: A case for the competition authorities?

That maybe so - but car dealers tend to be locked to one company. So my local Ford dealer might have to up his prices to cover contract commitments to Ford but that won't affect the Renault dealer who might not have made the same sort of deal with Renault

[Shannon Jacobs]

Borrowing from the Microsoft economic models

I think it is more significant to compare this with Microsoft's business models in terms of distancing Apple from the actual users. It's quite a bit like Microsoft selling directly to the manufacturers and to the devil with the software preferences of the actual users at the bottom of the hole. I think this will be ultimately destructive of Apple just as it has make Microsoft into a brake against innovation. I'm not quite sure how it will work, because I do admit that Apple has been genuinely innovative in many cases in the past, whereas Microsoft has only purchased or stolen the relatively few innovations it has propagated.

[JMiles]

How the tides have turned. 10 years ago it was the operators who got to push around even the largest mobile makers (at the time it was Nokia).

Truth is, operators have tried to be sneaky too - pushing Android devices to consumers who were clearly after Apple ones. Now operators are less likely to do that.

In the end, it is the operator who decides how many iDevices they want from Apple. If they under-estimate they'll lose out to competitors and if they over-estimate they'll be left on the hook for commitment they can't meet. This type of model is not unusual in other industries (e.g. try getting a multi-gig data connection to some remote location without an up-front commitment)

[Anonymous Coward]

The difference is people WANT iPhones specifically whereas the difference between Vodafone and O2 and EE etc. is pretty minor these days - maybe a few pounds here or there per month but you are more likely to choose based on coverage or customer service. Mobile phone service has become very commodity these days with very little to differentiate. So suspect the operators know people want iPhones so have to stock them or lose customers.

[Anonymous Coward]

"The difference is people WANT iPhones"

Don't fool yourself! If "people" want iPhones, why is their market share in decline?

And save yourself the embarrassment of saying because they are too expensive.

You are just so wrong, you're fooling yourself, no one else.

[Anonymous Coward]

The market share is in decline as now almost every phone is a smart phone so the market size has increased dramatically. Apple are still selling record numbers of iPhones so their volume has gone up. If you sell 1000 and the market is 2000 you have 50% of the market but if the market grows to 10000 and your sales increase to 3000 your share has dropped to 30% but you are actually selling 3x more. Don't think Apple are too bothered as they are the only ones building a long term user base and they are the ones making all the profits.

[Victor Ludorum]

I get the feeling Apple don't really want to sell through other outlets. If they can make the terms of the deal so restrictive that few operators will agree to them, then everyone will have to queue to buy their latest iThing from an official Apple Store, thus increasing Apple's margin and the apparent craze for them.

Beer o'clock...

V.

[Paw Bokenfohr]

Seems easy.

Just don't sell the iPhone.

Let Apple sell it through their stores, and you sell the phones you can live with the agreements on, if you're not already making a killing anyway. Which they all are. Evidenced by the fact that companies like Verizon can afford to make $23bn bets.

[Anonymous Coward]

Re: Seems easy.

I bought my iPhone from Apple and have a SIM only contract - works out cheaper and more flexible as it's only a 12 month contract then month to month. Low usage - PAYG may be cheaper still and many PAYG contracts come with data these days.

The networks may buy their iPhones a bit cheaper than paying full retail - but they also have to factor in financing the cost of the phone over the 18-24 month of your contract and also factor in bad debt etc.

Keep your phone longer than the contract minimum term and you are quids in as how many people forget to swap off their £25-35/month contract even if they keep the phone.

[captain veg]

the problem is subsidised handsets

Mobile operators should stick to providing the best possible infrastructure at the lowest possible price, and let the punters find out for themselves how much it costs to actually buy outright a handset. As a bonus, it wouldn't come laden with the operator's crapware, or be locked in to their network.

-A.

[A Non e-mouse]

Re: the problem is subsidised handsets

The problem is people get seduced by "free device" marketing. They can't be bothered to do some basic primary school maths to work out that they're getting shafted.

A fool and his money are easily parted...

[Ken Hagan]

Re: the problem is subsidised handsets

"They can't be bothered to do some basic primary school maths..."

By the time you've considered likely interest rates over the repayment period, I'm fairly sure that quite a few people simply aren't able to do the primary school maths.

On a philosophical point, that's why society invented the notion of consumer protection law. The vendor has staff working full-time to make sure that their products extract as much cash as possible for as little product. The consumer has limited time (for each of their many purchasing decisions) and usually lack some of the information and skillset to make the judgement. Therefore, the law says vendors aren't allowed to offer insanely bad value or risky products.

At least, *sometimes* it says that. I believe financial services products (like investments or insurance) are fairly tightly regulated in the sense that you can take far bigger risks if you leave the high street and go to the stock-market or Lloyds of London. Food, medicines and household chemicals are tightly controlled, too. Utilities and services like TV, phones, gas, electricity, water? Meh ... I haven't noticed it.

[Ommerson]

Re: the problem is subsidised handsets

If you calculate the all-up cost over the length of the - and I did for my last two iPhone purchases - you'll find that the network subsidy is considerably cheaper than buying the phone outright and then finding a SIM only package. Furthermore, the SIM only packages with equivalent data to the iPhone packages aren't terribly cheap either. Seems the networks are far more interested in losing money on subsidies and having locked-in customers than flighty ones on SIM only packages.

[Destroy All Monsters]

Re: the problem is subsidised handsets

"On a philosophical point, that's why society invented the notion of consumer protection law."

And then society invented lawfare to shut up bad press as a counterpoint.

[DiViDeD]

Re: the problem is subsidised handsets

Mobile operators WILL stick to providing the cheapest infrastructure they can get away with at the highest possible profit margin.

There, FTFY

[Andy 115]

People often struggle to sell stuff they not know exists…

"This summer, as operators sought to meet Apple's targets for the iPhone 5C and with a new model anticipated for an autumn release."

[Roo]

Much as I love to kick an aggressive anti-competitive multinational in the nuts...

This isn't really an Apple problem. The telcos are the ones screwing up on their future sales projections, no one is holding a gun to their head when they sign the contract.

[Anonymous Coward]

Re: Much as I love to kick an aggressive anti-competitive multinational in the nuts...

Don't cry too much for the operators - they commit to a certain volume to ensure they have them and probably to get a certain price etc. Apple is not forcing them to take any if they really did not want any.

[Alan Brown]

Re: Much as I love to kick an aggressive anti-competitive multinational in the nuts...

But the results of this industrywide cockup/collusion/cartel is that customers pay higher prices no matter which carrier they choose.

[Anonymous Coward]

Choice?

Not Apple policy. Not even the choice not to buy.

[Simon B]

All the operators should talk and agree NOT to buy any. This way NONE of them will get shafted into making losses, and force Apple to change their ways from I am God, to I am a mere mortal.

[slhilly]

So the answer to a concern about potentially anticompetitive behaviour is ... anticompetitive behaviour between networks. Brilliant!

[dajames]

Yes, but ...

All the operators should talk and agree NOT to buy any. This way NONE of them will get shafted into making losses ...

The problem is that -- as it says in the article:

The contracts that operators sign with Apple are confidential.

They're actually not allowed to talk to each other, so Apple protects itself from any reasonable market forces. This sort of non-openness is pretty widespread throughout the industry, and never works out in the consumer's favour.

[Anonymous Coward]

Re: Yes, but ...

SO... everybody ignores the "confidential" bit as well. What would Apple do about it?

But a united front amongst competing providers is so unlikely, that this is all hot air.

[Destroy All Monsters]

Re: Yes, but ...

Only in a legal framework that is paralyzed by the threat of "antitrust" lawsuits could this be in any way acceptable:

They're actually not allowed to talk to each other.

It's all completely schizophrenic. Springboards for exploitative practices are erected under the name of stopping exploitative practices. It's almost as if there was lobbying by a large pack of wolves, flimlamming the interventionistic do-gooders. Then band-aids like "consumer protection laws" are put onto festering wounds. Which are then made harmless by lawfare.

[Anonymous Coward]

When Motorola are knocking out the brilliant G for peanuts

Apple are seriously taking the piss with their pricing. Oh and by the way Apple those clowns at MS will eventually get their shit together with windows phone and it's you they have in the cross hairs. Yes the iPhone was a great phone and nothing could touch it for a long time but now everyone else has caught up (and for less money) while you have stood still. Better shape up or you're in for a bumpy ride.

[thomas k.]

How much fiber?

Wow, how much fiber roll-out would $12-14 billion have provided for?

[Don Jefe]

While the financials are fairly staggering, the practice of getting signed in blood commitments with punitive clauses from your authorized resellers certainly isn't an Apple exclusive. They're using the same tactics everybody in retail (in the US anyway) deals with.

Generally if you've got territorial exclusivity on a brand name product you commit annually to purchase (x) value of product and if you don't you can buy the difference in POP, you can do the difference in Co-Op marketing, you can have a radically increased interest rate on your float or you can just lose the brand, but you still owe for your commit. Your annual commitment is increased every year until either you can't reach the goals or somebody bigger comes along and agrees to take the brand from you in exchange for taking your commitment shortcomings on themselves. Most small/medium shops jump at that chance.

It's that way with car audio, home theater, outdoor gear, boats, ATV's, equestrian tack & accessories and high end woodworking hand tools anyway. I've been in retail management in each of those industries and currently have interest in two of those categories. The commitments are brutal and if you slip up the penalties are swift. If you're forecasting a shortfall they'll let you run a short term less-than-MAP sale, but only on your current inventory, you can't order more with the intention of having a sale. Some manufacturers won't even let you pay invoices at time of order and force you to take the float so they can maintain control of pricing.

It's all a really big mess. These practices are only coming to light because they're effecting big national brands and they've got the power to get the message out, but this kind of thing is in no way an Apple invention. Small retail shops in many industries have been dealing with these sorts of things for at least 30 years and we as consumers have been paying for it for that long as well.

[Alan Brown]

"Some manufacturers won't even let you pay invoices at time of order and force you to take the float so they can maintain control of pricing."

If that's provable in the EU then criminal charges would be forthcoming. Ditto a number of other countries.

[Don Jefe]

It should be illegal everywhere. Over here it's how manufacturers got around some States that passed legislation restricting MAP pricing. The slimy legal angle being that the reseller doesn't own the product while it's floating therefore can't dictate the price.

The entire MAP scheme artificially increases the price to the consumer and the worst part, in my mind, is manufacturers tell you it's to keep the value of the products higher so all the retailers can make money, but in reality they've been turning the screws on retail margins at the same time.

Computers and related accessories have always had crappy margins (compared to other non-grocery retail) anyway, but between the fixed pricing and ever shrinking margins it simply isn't worthwhile for anyone but a big box entity to deal with. The consumer is screwed on price and they're screwed on getting useful purchase information from an educated salesperson. It's pure crap.

[Ommerson]

MAP - or retail price maintenance - is thoroughly illegal across the EU on most goods (there are a few exceptions such as magazines and newspapers, and books - but definitely not electronics goods), and the penalties are eye-watering.

I suspect the similarity in pricing on electronics goods is mostly down to the wafer-thin margins.

[Anonymous Coward]

The article seems to hinge on 'unsold' iPhones but seems they are selling all they make?

I'm sure other manufacturers seek to get mobile operators to commit to a certain volume of products as well - pretty sure car dealers have to commit to buying x cars from the manufacturer??

[Don Jefe]

You're correct, purchase commitments at retail are near universal, but the article is overweighting the pressure from Apple, or any other manufacturer and is not paying enough attention to the insidious part of sales commitments.

When you're negotiating a big resell deal the manufacturer will have a pretty good idea of what you're capable of pushing and will toss that number out there along with other breakpoint numbers for increased incentives. As an easy numbers example lets say you've got to do $1M annual to be an authorized reseller and you'll get 30 net 0 float but if you commit to $1.5M they'll do 60 day net 0 float. If you commit to $5M they'll do 90 net 0 with 5% price reduction, free shipping and $100,000 of POP. If you commit to $10m you'll get all that and they'll agree to take 1/3 of your 'dissatisfied customer' non-warranty returns. They've already got break points custom designed for you to get you to the next level of commit.

So while the repercussions are harsh, resellers, especially larger ones, often back themselves into a corner by over committing to reach greater levels of incentives. Not excusing the manufacturers, but they manage their supply chains and financials based on those commits. If somebody falls far short it has big implications upstream.

That being said, it's almost the exact same scenario that occurred in the mortgage mess. Manufacturers are willing to let resellers hang themselves with insane commitments and resellers are far too willing to take on excessive commitments to get that better deal. As long as the ball keeps rolling it's fine, but sooner or later it's guaranteed to snowball and somebody is left holding a shitload of useless contracts.

The manufacturer (Apple) can book the committed sales and count them towards revenue and the reseller (Verizon) uses those commitments in sales forecasts that affect stock prices. Just like with the mortgage mess though sooner or later the music stops and a whole bunch of people are left out.

It's all a huge mess and personally I don't think there's enough disclosure in public company reporting and too many people have their retirements riding on things nobody outside the industry understands. Traditionally these sorts of things have had minimal risk for the average person. The retail market, while enormous, has always been so fragmented that implosions in one corner didn't impact anyone else. But the sheer scale of a largely unified retail element is a big, ultra nasty, problem that's brewing. About 2/3 of the US economy is in retail sales and the financials as a sector make housing look like an incidental line item. But it's being run the exact same way as housing was...

[ShaolinMonkfish]

Easy to not pay!

I bought my Nexus 5 phone SIM free direct from Google Play. So happily, I'm NOT subsidising Apple....

[Anonymous Coward]

Re: Easy to not pay!

So it's better to subsidise Google?

[Anonymous Coward]

Re: Easy to not pay!

You mis-understand... they chose to "subsidise" google by buying from them. The argument in the article is that people signing up with carriers with contracts for non-apple phones are paying more than they should so that the losses made on the carriers contracts with apple can be recovered.

[I ain't Spartacus]

Re: Easy to not pay!

I think El Reg's point about that was that every customer of the operators will be paying extra on their contracts - in order for them to claw back some of the cash they're handing over to Apple. So by using a mobile, your price is being affected by Apple because they're driving the costs of all the operators up. Whether that's true or not, who knows.

[danny_0x98]

Re: Easy to not pay!

Let's see Verizon sells its $20 billion allotment from Apple. Cost to Verizon: $20 billion.

Verizon sells $10 billion of the $20 billion allotment from Apple. Cost to Verizon $20 billion.

It's on the revenue side where the difference occurs. So, yeah, maybe Verizon bumps the monthly charge to cover the shortfall, though I haven't really seen prices change, except for the early term fees and the gradual phase-out of unlimited data (though there was a limit which led to throttling when exceeded.)

(And let me whisper, other phones do not sell out and there's a restocking charge for returns, so it isn't exactly only an Apple-carrier's problem of missed revenues. Shoot, with the restocking charge, it truly does make a difference whether a carrier sells or doesn't sell one of those other phones.)

As to the contract terms: Apple makes a convincing case and the carriers in the US who were left out via the exclusivity agreement with AT&T and Apple's unconcern with odd networks wanted to start selling the iPhone as soon as possible. One company even said in its Annual Report that they were at a disadvantage because they could not carry the iPhone.

Look at it from this point of view. If someone loves Android or Windows Phone (and there's no reason why not to), there are quite a few manufacturers who will offer those phones. There is only one iOS phone, so drop the iPhone and say good-bye to those fans. And before you say "Well, those folks are hipster fashionista no-tech money-wasters." I'll remind you that the money is just as green as that of the super-capable, wise people who choose [your mobile os device].

[2Fat2Bald]

You don't have to buy one..

The logic here is simple. If you don't think the price of your contract is reasonable, don't bother with it. Nobody is forcing you to go with X operator. Find one cheaper, if you're not happy with the price you're paying.

To be honest. I've just been issued with an iPhone at work. I can't say I like it all that much. My previous blackberry was better at some stuff, my Android is better at almost everything. I think the reasons why Apple are suddenly having their day in the sun have more to do with fashion than it does to do with actual benefits of the devices. And fashions change.

Apple could lose popularity overnight if something really unfortunate happened. It's not especially likely, though. But imagine if - for example - there was a huge bruhaha over some activity they were involved in. Or someone influencial just decided something else was cooler now and all the hipsters were saying "Apple is SO 2013.. I've got an XYZ now. Once you've had that - you won't go back".

[Anonymous Coward]

Re: You don't have to buy one..

""Apple is SO 2013.. I've got an XYZ now. Once you've had that - you won't go back"."

Apple IS so 2007! The hype is over, but the general public usually take a few years to catch on.

Proof?

Fakebook was launch in the early part of the 00's wasn't till later 00's that it really took off.

The "plebs", as the some toffs like to say, are always years behind what is actually happening.

[DavCrav]

Re: You don't have to buy one..

"The "plebs", as the some toffs like to say"

As Wikipedia says, "verifiability, not truth".

[Richard 1]

Apple shoots self in foot?

As you've all pointed out, if a mobile carrier doesn't carry Apple products then customers will take their custom elsewhere to a carrier that does... except there will be a break over point whereby the loss of having to pay for phones that never get sold costs more than the lost customers through not carrying Apple products. If you alienate your market then you're going to find yourself in a terminal decline as other carriers decide not to carry your product through either excessive price gouging or lack of interest due to the declining availability of the iDevices.

[Silver]

Nothing new here!

I work in the mobile industry and used to work for a network operator dealing directly with handset manufacturers. These deals are nothing special and very common. We call them MOQs (or Minimum Order Quantities) and the OEM offers a certain price and/or marketing funding in return for the operator paying a "fine" if they don't need the minimum number.

The advantage of the iPhone is that you have a pretty good chance of hitting the MOQ - whereas launching one of the myriad of Samsung variants can be significantly more risky.

So the real story here is that everyone is probably paying a small amount of money for the disaster that was the Android phone with a built in tea maker - rather than the iPhone.

[Roland6]

Re: Nothing new here!

Are you sure?

Whilst this might be the case with respect to the purchasing deals, the limitations on subsidises:

"If you subsidised a Samsung Galaxy for €100 then you were obliged to subsidise Apple for at least €100 per iPhone. You would be penalised for breaching that - either by paying Apple or paying in the equivalent marketing."

Does seem out-of-order, particularly as Amazon won when Apple tried that trick on books... Does seem that there are grounds for an EU competition investigation...

[Steve Todd]

Re: Nothing new here!

The book thing was a different issue. Apple aren't stopping the cellco's selling Android devices for less money or on cheaper contracts, which would be the equivalent restriction.

[Anonymous Coward]

Apple Telecom

Apple should create their own Telecom company and be done with all the others.

Then they will have full control over their iFans.

[Anonymous Coward]

It seems reminiscent of the approach they took with eBooks, maybe its time for an investigation of "possibly monopolistic behavior"

[Don Jefe]

Re: I just don't understand this "sApple" craze.

And who are you to determine how much money a company can make? The reverse of what you're suggesting is also true. I suspect you are overpaid and the losses related to your mediocre performance are being passed onto the consumer. At what point will management get a whiff they're royally screwed?

[Don Jefe]

Re: I just don't understand this "sApple" craze.

I was simply trying to point out that what you see as Apple customers getting screwed is no more valid than someone's (mine) unfounded assessment about your employer and their customers being screwed by your performance. I have no idea if you are a good employee or not, just like you have no idea if a consumer feels screwed because of their purchase.

I understand the size of margins very well. That's why when I got the chance I got out of OTS box shifting and went into a field that actually has large margins. That couple hundred dollars a unit stuff is great for starting a career, but unless you're an Apple who gets lucky for a while it's just too much work.

Apple is having their moment in the sun and people are lining up to lining up to throw their money at them. It's hard for me to begrudge a company for hitting on something and getting their few minutes of glory. That's what nearly every business out there hopes for. They've captured only a small portion of the addressable market and still they're bringing in as much money as their all their competitors combined.

I just don't see a problem with that, it's not like Apple is forcing people to buy their products. It's the consumer that's voluntarily throwing their money at Apple and only the consumer can determine it Apple are charging too much. Right now the consumer appears to be content with the pricing.

[jai]

Who is to blame here?

Could it possibly be all the "expert" analysts and industry journalists who spent the last year going on and on ad infinitum about how Apple *HAD* to produce a lower cost iPhone to satisfy the demand they were sure was there.

So now Apple have, and you're paying for it, literally.

If you hadn't insisted that a 5C type of iPhone was so critical to Apple's continued existance, then they might have just produces a 5S, which would have sold as it has, and so wouldn't be costing non-Apple purchasers.

[Richard 1]

Re: Who is to blame here?

Erm... except that the iPhone 5c wasn't actually all that cheap? It looked cheap but was expensive. That needs to be the other way round, really - looks expensive, is cheap.

[Anonymous Coward]

Explains why they seem to be pushing them so hard.

[MrT]

Nice try...

"The Register contacted Apple multiple times via multiple channels for comment on this story, but none was forthcoming."

You have this on a permanent cut'n'paste for Apple articles, don't you?

One day, they might crack and start talking to El Reg again... ;-)

[codeusirae]

Confidential mobile operator agreements.

Can we see the secret agreements the other handset makers have with the mobile operators.

[g7rpo]

Seems a shame

That samsung, the main rival to apple are starting to adopt the same tactics.

[tom dial]

"If you subsidised a Samsung Galaxy for €100 then you were obliged to subsidise Apple for at least €100 per iPhone. You would be penalised for breaching that - either by paying Apple or paying in the equivalent marketing."

This sounds quit a lot like what Apple and the publishers were found guilty for trying in the eBook market.

[Whiznot]

The apples are going rotten but people are being forced to eat them. Bad Apple.

[Anonymous Coward]

So, does this explain how Apple "sell" all those iPhones? They "sell" them to the operators and count them all as retail sales regardless of how many actually go through the doors?

[Number6]

Sounds a bit like the old Microsoft tax where the customers didn't want to refuse because they were afraid that would cost them more than agreeing. At least Apple aren't demanding a fee per phone sold regardless of whether it's running iOS or not, but they seem to have found a way of squeezing the smaller competition to their advantage.

[John Tserkezis]

Wait: "Apple tax"?

Didn't microsoft have prior use of this? Or did Apple just not think to patent the idea yet?

[Anonymous Coward]

"The contracts that operators sign with Apple are confidential. But we spoke to several sources who have seen the terms first hand, across multiple markets. Apple's terms include rigid and non-negotiable purchase commitments which commit an operator to making a given number of sales of a forthcoming Apple handset, typically without even seeing the handset first, say our sources."

All correct to my knowledge. From a person I've discussed this with, the purchase commitment is given at a projected price. The price for the 5c went up $100 just before launch, after the commitments were entered into. The mobile networks are not happy!

[Anonymous Coward]

Does this suggest that Apple recognise that they are starting a downward spiral or that they think they have so much clout that they can screw their customers and expect them to come begging to them again?

I ask because that's the kind of action that will keep a customer from coming back and the only reason to think you can get away with it is that you recognise that you're at the end of a particular produce cycle, or you're done with that business model, or are just too big for your britches, so to speak.

[Joerg]

"The deals for the Galaxy S4 were almost as restrictive as Apple's,"

"The deals for the Galaxy S4 were almost as restrictive as Apple's," one source said. "But Samsung has a range of phones, and operators had choices."---THIS TELLS EVERYTHING. It doesn't matter how many crap phones Samsung and other Android manfuacturers release. They are no sweet angels. And Apple is not the bad guy in town.

[Anonymous Coward]

Financial blackmail

Financial blackmail. All operators should just say no.

[Anonymous Coward]

So as Apple's market share continues to dwindle these terms which effectively amount to subsidies for Apple will become even more unbalanced. The recent figures showed that in the smartphone market Android devices sat at around 82% (maybe more by now) while Apple devices were around 12% (maybe less by now). Indeed sales of Windows phones have already exceeded those for Apple in some regions

so we are heading to a situation where Android and Windows smartphone users might be paying for all

those iphones to be produced whether or not they are actually purchased!

[Simon Rockman]

It's not new

Celnet/O2 had similar commitments to Compaq and Blackberry, but when the devices failed to sell in 15 years ago the suppliers took them back so as to have an on-going relationship.

[JDX]

"tax"

I wish people would stop calling things a "tax" when they are not. Call it a fee or a charge whatever, but "tax" is a word with a meaning, and this is not it, no matter how cool you feel using it when talking about 'M$' or 'Crapple'

[diodesign]

Re: "tax"

"I wish people would stop calling things a tax"

My reaction. Tax is a fun word.

C.

[Anonymous Coward]

Re: "tax"

hahahaha, that's too funny. Love that show, and as I approach 50, I'm not sure what that says about me. Not that it matters, 'cause that show's fun.

[John Savard]

Re: "tax"

The word is appropriate, because it isn't a fee for a service I choose to avail myself, or a charge for something I choose to purchase. Instead, it is added to the cost of something else I wish to purchase, despite not being relevant to the production of that thing.

So it is similar to a tax in being imposed involuntarily on a voluntary transaction.

This same argument was used about a government-imposed copyright levy on blank tapes in Canada; we shouldn't call it a tax, because the money didn't go into general revenues, it went to copyright clearance agencies. But that only made it worse than a tax, not better.

[Anonymous Coward]

LOL. So all the Fandroids are subsidising both Microsoft and Apple? Man, you guys must really hate yourselves right now :-)

[John Munyard]

Apple may have thier swagger & bully tactics in full effect, but when you see how sales of Android phones are now going against iPhones it cannot possibly go on like this. We cannot be far from a time when the operators will just tell Apple to get stuffed.

[John Savard]

And then Apple complains

when its products get sold on the grey market.

Quantity discounts are quite standard in manufacturing, but this sort of tactic goes beyond that, and it is anticompetitive. Individual carriers can't refuse the contracts, because of the popularity of the iPhone, but the government can act, and that is the only cure.

Although the company I get my cell phone from doesn't offer the iPhone. So a few companies can survive without Apple - but they're in a particular niche of the market.

[Glostermeteor]

Dont buy your phone from an operator

The simple message is here, don't buy your phone from an operator. I bought my phone direct from Amazon and then got a sim only deal from an operator. It means that I not only saved a huge amount of money but it means I am on a 30 day rolling contract and not a 24 month one. The contracts from operators are now so expensive especially when they give you a 'free' phone that its often cheaper to go DIY

[JeffyPoooh]

Re: Dont buy your phone from an operator

"...I am on a 30 day rolling contract..."

With 6GB of data per month included?

Yeah, didn't think so.

The guys at work with Android phones are constantly borrowing my iPhone's wifi hotspot. They pay about 75% of what I pay per month, and get between 1.7% and 6.7% of the data allowance my plan provides (voice and SMS about equal). Seriously.

Informed conclusion: there are many locally optimized solutions to the puzzle. The cheaper solutions are likely to provide significantly less value. If one can afford to pay a bit more, then one may arrive in a place where mobile data is essentially unlimited. Sometimes the one paying a bit more is actually the clever one.

[DavCrav]

Re: Dont buy your phone from an operator

"The guys at work with Android phones are constantly borrowing my iPhone's wifi hotspot. They pay about 75% of what I pay per month, and get between 1.7% and 6.7% of the data allowance my plan provides (voice and SMS about equal). Seriously."

Sounds like they get the best deal: 75% of your contract, and use your data.

[JeffyPoooh]

Re: Dont buy your phone from an operator

"...use your data."

Thanks for the Joke Alert icon - noted.

They get to use a dribble a data once in a while, while I can stream Sky.FM's Bossa Nova music channel all day for many days a month.

A long time ago I noticed that Y=mX+b, where the intercept for next-to-no-services crosses the Y-axis at about 50% of the full-on generously-provisioned price. Satellite TV is the same, $60 gets you all the garbage channels, while $100 gets you all the channels (including the high brow ones).

[john devoy]

Phone sellers deserve what they get for agreeing to such contracts; if they all boycotted the iphone6 Apple would soon change the deals.

[Matt Bryant]

But Apple's sales are down....?

If Apple can just force the dealers and carriers to take x amount of phones regardless, how come their sales are down? Surely their sales would remain level as the contracts would tie the carriers to taking exactly the same numebr of handsets regardless? So either Apple's offers are being refused and units returned unsold, or Apple is actually taking a pasting in the retail segment.

[nicercat]

Oh please. These phones will just take longer to sell. Assuming 4% funding cost for the operator, and 3 months delay in selling these 4Cs, that'll be 1.33% of the cost price of each phone passed on to other customers. That's negligable. Stop trying to court controversy where there is none.

[sisk]

Aren't these exactly the sort of contracts that just got Apple in trouble in the ebook market? I don't see much difference between "You can't give anyone else a better price than you give us" and "You can't subsidize anyone else more than you subsidize us".

[Stevie]

Bah!

Just: Bah!

[JohnG]

Regulators?

Bullying resellers with restrictive contracts got Microsoft into a lot of trouble with EU regulators and courts. If Apple is as arrogant with EU officialdom as Microsoft were, I guess they could expect an even bigger fine. Of course, the EC could use the cash.