when the news first broke that the iphone had been unlocked, everyone’s first reaction was that at&t is screwed. while it’s definitely true that at&t is screwed (since the iphone was clearly the best thing they had going for them), here’s a reason why this unlocking screws over apple just the same.
according to gene munster, a lead analyst with piper jaffray,
While we do not know the exact details of the agreement, we conservatively estimate that AT&T gives Apple $3 per month (over the life of the 24 month contract) for every iPhone customer already with AT&T and $11 per month for every new subscriber.
furthermore, according to a note from american technology research, another financial firm,
About one quarter of consumers adopting Apple’s heavily-hyped iPhone handset are ‘switchers’ to AT&T from other carriers
so if apple is to recieve $3 per month for every current at&t customer purchasing an iphone, and $11 per month for every new at&t subscriber, if the iphone is locked, this is money apple could’ve gotten but won’t. using these statistics, and the projection of 10 million iphones expected to be sold by the end of 2008, here’s the amount of money apple stands to lose from the iphone’s unlocking (due to people abandoning or not signing up with at&t):
the calculations are done as follows:
- percentage of unlocked users multiplied by 10 million (total users projected by end of 2008) = total unlocked users.
- 25% of total unlocked users multiplied by $11 plus 75% of unlocked users multiplied by $3 = total shared revenue lost per month.
- total shared revenue lost per month multiplied by 24 (total duration of iphone contract) = total shared revenue lost.
now let’s take a look at the amount of shared revenue apple could lose:
- if 10% unlock: $120,000,000 lost
- if 25% unlock: $300,000,000 lost
- if 50% unlock: $600,000,000 lost
- if 100% unlock: $1,200,000,000 lost
it is clearly not logical to expect many people already in a contract to jump ship (because of the fine they would have to pay), but if 100% all potentially new at&t subscribers (which means 25% of all iphone buyers) go the unlock route instead, in that case, apple stands to lose $660,000,000 in shared revenue from at&t.
it seems reasonable to expect that a substantial amount of new iphone buyers would have heard about the unlock and will opt to not activate with at&t. even if 50% of only the new users go the unlock route, apple loses $330,000,000.