Much of the discussion about whether Apple needs a lower-priced iPhone has revolved around the customer, who may or may not be able to afford a device that can be outrageously expensive in some developing countries. But price-sensitive consumers may not be the most important factor to consider in the device’s potential for growth. The mobile operators who have to buy the iPhones initially and then figure out how to sell them are becoming harder to convince, Bloomberg points out in a recent report.
There are millions of people worldwide who are poised to buy their first smartphone over the next few years, CEO Tim Cook is fond of pointing out in discussions of the iPhone’s growth potential. But those people need a carrier too. And as Bloomberg notes, the number of carriers amenable to Apple’s terms for selling the iPhone is a shrinking number: there are 240 carriers that sell the iPhone today; only a handful more than when the iPhone 4S was introduced in fall 2011.
Bloomberg says there are 2.8 billion customers Apple is missing out on because of its current carrier policies.
The most often cited holdouts are China Mobile and NTT DoCoMo, two of the biggest carriers in Asia. China Mobile has technical issues, but both have also said in the past that the subsidies they’d need to provide to make the iPhone affordable for enough customers is too much.
And those concerns are in addition to the requirement that carriers buy a certain number of iPhones up front, which puts them under intense pressure to be able to subsidize and sell $600 to $800 phones. We’ve seen some carriers already having trouble with this, such as prepaid provider Leap Wireless and Telefonica Czech.
So rather than wondering if Apple can make a lower-priced iPhone that still has the consumer appeal of a high-quality device worthy of Apple’s brand name, a more pressing question is whether Apple can build an iPhone with the same cachet and price it at a way that international operators won’t find too risky.
Looking ahead to the release of the next generation of the iPhone, Apple will need to respond to this in some way. The “innovation” Apple’s recent critics say they are missing from the company may come in the form of business deals that open up bigger markets in addition to new whiz-bang hardware features.