Unlocked iPhone Could Impact the Subsidized Carrier Model

  • While Apple has been working on the design elegance and overall quality of its iPhone, the existing business model with carrier partners has allowed the company to hide the true cost of the device in two-year contracts. Apple’s upcoming iPhone 5 launch may change this model.
  • The company is rumored to be considering a $350 price point for an entry level unlocked iPhone.
  • T-GAAP reports: “The main purpose for such a device is to penetrate China and other regions which are not fond of subsidized programs. If Apple can deliver an unlocked iPhone starting at $350, the impact in China will be stunning, and send U.S. and European carriers scrambling.”
  • If this is the case, consumers would be able to purchase an iPhone from the Apple Store and select any prepaid plan of their choosing (such as an “all-you-can-eat $50 month-to-month T-Mobile or Cricket or Boost plan”).
  • Carriers would most likely push other phones, but it may be too late for that based on consumer demand. Their next move could be lower entry prices for the iPhone.
  • “Plan on AT&T, Verizon and Sprint offering two-year contract plans for the iPhone 5 starting at $149,” suggests T-GAAP. “Carriers wil be scrambling to protect a model that has done them so well for the past 15 years. However, Apple is about to pull it all apart with a single product launch.”