Demands on Network Are an iPhone Hang-Up
The iPhone has made AT&T the cool kid on the cellphone block, bringing in lots of new customers all eager to play with the shiny new device. — Trouble is, the iPhone is expensive for AT&T, and not just because of the heavy subsidies on the initial purchase price.
Context & Ripple Effects
AT&T’s effort to retain the iPhone, reflected in its chief’s push to keep the handset, shows why the carrier accepts a costly arrangement: the device is bringing in new customers. The trade-off is becoming clearer as those customers’ usage adds demand to AT&T’s network alongside the upfront subsidy burden.
First-order effects
- AT&T gains iPhone-driven customer additions while carrying both heavy purchase subsidies and higher network demands from those subscribers.
Second-order effects
- AT&T’s return on iPhone customer growth becomes more dependent on network capacity, because each additional user raises costs beyond the initial handset subsidy.
Third-order effects
- The arrangement illustrates the leverage created by keeping the iPhone: a carrier can be pushed to absorb device-acquisition and infrastructure costs in exchange for subscriber growth.
The trend: High-demand smartphones are shifting more of the cost of customer acquisition and usage growth onto the carrier that secures the device.