Despite higher ARPU generated by smartphones, carriers still complain of subsidy burden
Shameless Carriers — By Jean-Louis Gassée in mobile internet 4 Comments Tags: att, iphone, verizon … Until about two weeks ago, it seemed that our major wireless carriers had given …
Context & Ripple Effects
Carrier concerns around the iPhone date back to 2009 coverage of network demands tied to the device and 2011 reporting on the iPhone’s strain on carrier economics. A 2013 account that iPhone users generate the highest carrier bills makes the tension sharper: smartphone subscribers lift revenue while carriers still bear substantial device-acquisition costs.
First-order effects
- Wireless carriers must weigh higher smartphone ARPU against subsidy expense; added revenue per subscriber does not by itself settle the economics of subsidized handsets.
Second-order effects
- Carrier handset offers and acquisition decisions face pressure to reduce subsidy exposure, because higher-billing smartphone customers can still be costly to win and retain.
Third-order effects
- If carriers continue to contest the subsidy model, mobile service economics will increasingly favor arrangements that separate the cost of the handset from recurring network revenue.
The trend: Smartphone adoption is exposing the limits of using carrier-funded devices to acquire higher-value subscription customers.