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back to article 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 …

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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.

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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.

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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.

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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.

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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...

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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.

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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.

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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.

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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.

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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.

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Anonymous Coward

Re: Message to mobile operators

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

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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...

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Linux

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)

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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_

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Thumb Up

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?

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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.

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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.

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Re: Message to mobile operators

Hard facts or it didn't happen - I left Vodafone to get an iPhone, but let's not exchange anecdotal evidence forever; it's pointless. Facts, as I say, or it didn't happen. Give us numbers.

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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.

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Anonymous Coward

I bet

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

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Bronze badge

Re: Message to mobile operators

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

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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.

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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!

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Facepalm

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".

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Pint

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.

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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.

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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?

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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?

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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.

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FAIL

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.

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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.

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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.

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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.

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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?

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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? :)

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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.

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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.

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@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.

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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".

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Pint

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.

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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.

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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.

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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.

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

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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?

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Anonymous Coward

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

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

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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.

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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.

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

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