John Paczkowski

Recent Posts by John Paczkowski

Apple CEO: Enough of This iPhone Subsidy Silly Talk

Apple CEO Tim Cook has some advice for investors concerned that subsidy cuts and/or stricter upgrade policies by U.S. wireless carriers could undermine iPhone sales.

Don’t worry so much. Apple doesn’t.

Remarking on the subsidy issue during the company’s second-quarter earnings call Tuesday, Cook dismissed it, essentially saying that the iPhone is so exceptionally profitable for carriers that they’re not likely to mess with it.

“From the carriers’ perspective, it’s important to remember the subsidy is not large relative to the payments across a two-year contract period,” Cook said. “Any delta between the iPhone and another phone is even smaller.”

Beyond that, there are a number of advantages to carrying the iPhone.

“A number of carriers have told me that churn from iPhone customers is lowest of any phone they sell,” Cook said. “That’s obviously a significant, direct financial benefit to the carrier.”

But the iPhone’s greatest advantage is this: It’s a device that customers want to use every day.

“At the end of the day, the vast majority of carriers want to provide what their customer want to buy,” Cook said. “That’s what motivates them. … The iPhone is the best smartphone on the planet to entice a customer who is currently using a traditional phone to upgrade to a smartphone. This is by far the largest opportunity for Apple and our carrier partners. It’s a win-win. All of these factors are missed in this discussion of subsidy.”

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Just as the atom bomb was the weapon that was supposed to render war obsolete, the Internet seems like capitalism’s ultimate feat of self-destructive genius, an economic doomsday device rendering it impossible for anyone to ever make a profit off anything again. It’s especially hopeless for those whose work is easily digitized and accessed free of charge.

— Author Tim Kreider on not getting paid for one’s work