Kingmakers do not take kindly to becoming mere courtiers, so insurrection is only a matter of time. For years mobile phone operators played a delicate game, balancing the power of phone manufacturers’ brands against their own control of customer relationships and a willingness to subsidise handsets. While the carriers risked becoming a dumb pipe, the highly competitive handset market left them room to make decent returns.
Then Apple strolled in and grabbed the industry’s profits. As shown by queues snaking round the block for the latest iPhone, the devices attract customers. Returns for the operators, however, are less clear cut. Some estimates suggest that AT&T, the US carrier, does not break even on an iPhone customer until the 17th month of a 24-month contract. In private, European mobile executives will admit that they only just break even on iPhone customer contracts. The hope is that users spend freely on data services and stick around once their terms are up.
Apple, meanwhile, has kept the average selling price of an iPhone above $600 since the third quarter of 2008. That’s for a device that contains less than $200 worth of parts (not including manufacturing, software and intellectual property costs), according to estimates by iSuppli, a market research firm.