Is the iPhone Bad for Carriers?

Posted by: Olga Kharif on December 8, 2008

Denmark-based researcher Strand Consult just came out with a list of reasons why carriers should run away from the iPhone. Talk about a contrarian view. Today, carriers like AT&T are touting the iPhone as a tool that helps them attract new subscribers and to increase their revenue per user.

As contrarian as Strand’s view sounds, many of these reasons make a lot of sense. For example, Strand suggests that many of the iPhone buyers have been heavy wireless data users before the iPhone came out. So while carriers like AT&T may claim that all their iPhone holders buy a wireless data plan, that may not be much of a deviation from these users’ prior purchasing habits.

Another bummer: Owners use their iPhone browsers to view ordinary Web sites instead of sites optimized for mobile phones. An ordinary Web site runs around 1 Megabyte, while a mobile version is typically less than 100 Kilobytes. “It is significantly cheaper for an operator to produce 100 Kb data than it is to produce 1 MB data, and it is much more fun to deliver 100 KB rather than 1 MB when you are selling data at a flat rate,” Strand explains. In other words, iPhone users are a major drain on a carrier’s network resources — more so than users of other phones.

Strand lists a ton of other issues carriers may face due to the iPhone. But here’s the bottom line: “There are already a number of operators that have issued profit warnings related to their iPhone ventures and our research shows that there is not one single Apple partner in the world among the mobile operators that has increased their overall turnover, profit and market share due to the iPhone,” according to Strand. Lots of food for thought.

Reader Comments

blah

December 8, 2008 10:13 PM

blah, blah, blah

Greg, Mystic, CT

December 9, 2008 6:13 AM

Ummm, numbers please? These are BOLD statements / suggestions with no figures of merit to back them up.

Plus (speaking to US market), ATT has already stated that ~40% of iPhone subscribers are from other carriers. If that's the case, who cares if they were heavy data users before? They're new to ATT.

And I suspect that many users are like myself who never had a smartphone until the iPhone came out, which was an awakening in terms of phone functionality.

So yes, I'm sure there are subscribers who had data plans and just changed phones with ATT. But it's not a majority by any means. Clearly something's going right.

Richard Reeves

December 9, 2008 6:24 AM

Cough, Cough ... what about O2 in the UK? Despite operating in the most competitive market in Europe, O2's exclusive iPhone deal has driven it to new heights in terms of both service revenue market share and relative profitability. Ask Vodafone where its most profitable customers have churned to in the past year and I think you'll have a better idea of the impact of the iPhone as a differentiator.

MB

December 9, 2008 6:31 AM

"...there is not one single Apple partner in the world among the mobile operators that has increased their overall turnover, profit and market share due to the iPhone,”

I, for one, switched from Vodafone to O2 in the UK to have an iPhone.

Furthermore, I was with Vodafone for four years. The only data I ever used was to access the (pathetic) Vodafone Live! portal. My monthly bill is now higher than it ever was at Vodafone. But, in my opinion, the iPhone is worth it.

JM

December 9, 2008 1:29 PM

IPhone lovers are Ipod lovers rather than data users. The data use is not the reason why to switch to Iphone but a great pros. For that reason carriers whith Iphone sale more data. it is not true that their network gets "drained" but otherwise expanded to cover more usage. The statement sounds narrowed and unsupported.

TI

December 9, 2008 2:43 PM

My husband, who will NOT touch a computer, who is a contruction worker and musician, and a heavy cell pnone and iPOD user prior had his life transformed by the iPhone. You should have seen him brag the day he came home saying he'd spoken into Google mobile
App and found something his team needed FASTER than the guys hen pecking at a computer with high speed cable access. iPhone is THE game changer. The whole e-World is accessible now, anywhere, anytime, by everyone with an iPhone.

Biker Y

December 9, 2008 6:06 PM

We dumped AT&T when they and CellularOne teamed up. The two worst customer service groups, joined. I was given an iphone, it had no bars where I needed it. So much for thier ad oh and in europe I am on Vodafone so no worries. I am on Verizon, and now have a storm for work and the voyager for personal. Apple, rotten to the core.

Truth

December 9, 2008 6:38 PM

To help, AT&T is expanding its Wi-Fi presence. This will help AT&T from having to expand its Mobile Data Network so rapidly. I for one, did not have a data plan until the iPhone, and now I am hooked.

Rokr

December 9, 2008 9:29 PM

1mb per page? I feel sorry for those who are still on dialup.

iChad

December 10, 2008 12:08 AM

First, it's not about how the evil iPhone drains data networks, it should be about the iPhone revolution and how it changed the face of the cellular industry. That is the real story here. I have a suggestion for all cellular carriers that want to succeed in the future. Get used to heavy data traffic on your networks, build for it and welcome it with open arms. If not, people are going to migrate toward the providers offer the best data plans as internet friendly phones become more and more affordable. Phones are changing into multimedia devices, used for everything from navigation by pulling maps from the internet, music & movie streaming, online gaming, online social devices and general internet browsers. Until free public Wi-Fi is widespread (hopefully Obama was hinting at supporting this in his Meet The Press interview last week) I think cellular providers currently hold the golden ticket to providing widespread internet data services to the masses, at least for the next 5-10 years. Take advantage of this changing market, build your networks to support it as best you can or get left behind in a cloud of Megabytes ;)

Azimuth

December 10, 2008 10:58 AM

There’s Something Rotten In Denmark and now I know what it is - the researcher Strand Consult and their "study". Let them go and tell AT&T how bad the iPhone is for their business.

But what do I know. I am just a guy who had every possible high-end smart phone for the last 3 years and ended with the bad iPhone.

Yes, I had a data plan with my HTC Touch Pro. But since I got the iPhone I upgraded to a plan with more traffic.

RLA

December 10, 2008 7:17 PM

Keep in Mind the report was from Denmark ? Nokia is geeting
its ass kicked by Apple !! The rest of the story

Bill

December 12, 2008 1:21 AM

HA HA IPHONE IS JUST A WASTE AND NOT WORTH BUYING. It lacks so many features like Copy and Paste in which Windows Mobile Smartphone has this feature for 7yrs now. Now you know why Windows Mobile Smartphone is the best and more reliable. Dump Iphone it just looks good is all it is. It not even a business phone it just a personal phone. Windows Mobile Smartphone is both Personal and Business phone. Now I know which phone is Smarter. And yes it is Windows Mobile :)

iChad

December 13, 2008 8:14 PM

I'm not sure what Windows mobile Smartphone Bill is using, but I've used Blackberrys, T-Mobile Dash and Motorola Q's and configured all for VPN as well as exchange servers and active sync. The Q is a IT dept. nightmare to set up. You also might want to google how the trend for businesses is quickly turning in favor of the iPhone and their newer firmwares should begin addressing many of the issues businesses dislike about it. Until you actually use an iPhone for a few weeks, you will never really appreciate the underlying feature set and overall more intuitive functionality. I have to disagree with Bill, the iPhone is just a better device overall in my opinion. I can live without cut and paste (I actually think there is a free third party app that will let you do it anyway if you need it ;)

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Bloomberg Businessweek writers Peter Burrows, Cliff Edwards, Olga Kharif, Aaron Ricadela, and Douglas MacMillan, dig behind the headlines to analyze what’s really happening throughout the world of technology. Tech Beat covers everything from tech bellwethers like Apple, Google, and Intel and emerging new leaders such as Facebook to new technologies, trends, and controversies.

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