Following a great deal of anticipation Apple finally unveiled its upgraded iPhone with support for faster 3G networking earlier this month, along with a much-welcomed price cut that makes the coveted device available for a breakout new price of $199 (8GB) or $299 (16GB). But who is paying the bill for this consumer-tempting price cut and how much is it costing?
Well, according to Oppenheimer analyst Yair Reiner, AT&T is paying Apple $325 in subsidies on each iPhone 3G and another $100 if the purchaser is a new AT&T customer – totaling an unprecedented $425 in potential commissions per device sold. The subsidy is said to be more than 50 percent higher than on most other smartphones, reflecting AT&T’s confidence in the iPhone’s ability to lure in new subscribers and help it make money on higher margin services and data plans.
They’ve also taken steps to ward off phone unlockers and secure both companies’ revenue, with the new iPhone having to be purchased and activated in an AT&T or Apple store in person. That way Apple gets its money and AT&T gets the subscriber for two years. The end result is that Apple will supposedly earn just as much money under the new way of selling the iPhone as under the old, with the main difference being that AT&T is paying Apple from the start, rather than on an ongoing basis as was the case with the revenue-sharing agreement.