While carriers have made it publicly known that they’re unhappy with how much they’re subsidizing the iPhone, don’t expect this practice to change anytime soon. According to All Things D, carriers are concerned that raising the prices consumers pay for iPhones will drive them away to alternative carriers that choose to leave the subsidy as is. Carrier trepidation makes sense when it comes to the iPhone; Apple’s smartphone beat out sales of every single other smartphone combined on the three major networks that carry the iPhone. Further, T-Mobile has recently stated that not carrying the iPhone is one of the primary reasons they’ve seen their customer count shrink over the past few years.
The iPhone 5 (or, iPhone, 6th generation) is also a likely driving force behind carriers maintaining the status quo when it comes to subsidies. The next generation of iPhone is rumored to have a bigger 4″ display, as well as offer support for LTE networks, which all four major carriers are currently building out. The next iPhone, with LTE and a bigger screen, is going to result in a ton of sales for carriers, be it through upgrades or new smartphone owners. Pushing these customers away by reducing the subsidies on the iPhone would be a huge mistake and drive customers towards the competition.
It’s unclear whether or not carriers could actually change the subsidies offered to customers. Apple enters into long-term agreements with carriers who choose to offer the iPhone, agreements which likely mandate the amount of the subsidies offered on Apple’s iPhone devices. Further, the agreements likely contain “most-favored-nation” clauses, meaning that any subsidy reduction offered to one carrier must be offered to them all. Verizon and Sprint have both recently struck long-term deals with the company, suggesting that Apple has almost no motivation to alter their current subsidy structure.
For now, at least, the amount of subsidy paid to Apple by the carriers is unlikely to change. Of course, carriers tend to pass some of that cost along to customers with higher plan and data overage charges in order to recoup some of those operating losses, so we end up paying more in the long run anyway. Don’t expect that to change anytime soon.
[via All Things D]