AT&T claims that Iphone customers generate much higher revenue per user than the average, close to $100 a month. However to keep Apple happy, AT&T paid a $400-a-phone subsidy to keep the Iphone cost down for those who signed away their souls on two-year contracts to buy the thing.

For an Iphone customer to make AT&T any cash they have to pay the telecom firm $2,000 a year. If AT&T is right, on average punters are paying $2,400 during that time. But $400 over two years is nothing, really.

But actual revenue figures might be even worse than AT&T is letting on. […] In fact the Iphone subsidy depressed AT&T profit margins, he claimed.
[…]
Then there is the small problem of AT&T’s network. From day one Apple users have complained that the telecom’s network was not up to scratch. Now they are really hammering it, downloading material online for a flat $30 a month fee.




  1. bobbo, I admit I don't understand the structure says:

    But that usb phone jack indicates phone service is all profit, less 19.95 per year? I sense ATT has a different “real” cost structure, but my impression is that ATT has been coasting off old charge structures needed to build out their system but they keep it now that the system is built and paid for.

    Anyone got the straight poop on this?

  2. jeremyji says:

    I’m thinking if AT&T can’t make a profit on a $400 investment that yields a minimum of $2400 return over 2 years, something is seriously wrong. Even if they invest $800 for every one of those users in upgrading the network, that’s a $1200 profit. I think they need to stop complaining about how little they are able to screw their users and start trying to figure out why their coffers are leaking like a siv.

  3. KMFIX says:

    AT&T owes Apple a huge THANK YOU! If it wasn’t for Apple, AT&T would have nothing to compete with the other carriers with and their network would have never been upgraded, causing more customers to defect. They are lucky to be the sole provider in the US with the iPhone.

  4. Uncle Patso says:

    bobbo,
    “my impression is that ATT has been coasting off old charge structures needed to build out their system but they keep it now that the system is built and paid for.”

    The century-old hard-wired infrastructure may be mostly “paid for” (though, reliable as it is, it still requires some maintenance), but the wireless network is much newer and more costly and the technology keeps changing rapidly, requiring frequent hardware upgrades and constant software updates. Cell towers aren’t cheap, and neither is wireless bandwidth and the demand just keeps increasing more and more.

    Personally, I can’t see paying thousands of dollars a year for connectivity. But then, I’m a cheapskate.

  5. Buzz says:

    Math errors.

  6. Angus says:

    Not an ATT lover or hater, but I look forward to the day when the iPhone opens on the Verizon network, so all the San Fran Tech wonks can start to complain about the bad Verizon network coverage.

    Anyone ever wonder if the bad iphone connections and performance are a result of the every other person in Techland having an iphone that’s constantly hitting the network simultaneously!?!?! I’ve always said it’s a volume problem, not a network problem. I’m sure the first non ATT iphone network will have similar issues.

  7. Uncle Dave says:

    #9: AT&T had performance issues in the Bay Area long before the iPhone.

  8. Dale says:

    ..I’ve always said it’s a volume problem, not a network problem. I’m sure the first non ATT iphone network will have similar issues.

    Angus, I’m pretty sure that volume problems and network problems are synonymous. Should AT&T expand the network capacity that would eliminate the volume problem. But I agree that the concentration of iPhones in the the silicon valley, San Fran area due to geek gadget-itus is the cause for much of AT&T’s bad press about their network reliability. That and the terrain..lack of towers, etc.

  9. MikeN says:

    $100 a month is $1200 per year, less than $2000

  10. Blueverie says:

    Volume is a problem that AT&T should be happy about. It’s one thing for them to be caught off guard with the original launch but for this far down the road it’s embarrassing. If you have more traffic in a given area than your network can support that also means you have more revenue in a given area with which to account for the extra load. The fact that AT&T hasn’t done should be embarrassing.

    Volume is by no means the only network problem. I travel through a variety of urban and rural areas and with the exception one dip in one road where my father’s Verizon drops out and my iPhone doesn’t it is at best on par with any other network. Their coverage and reliability is truly embarrassing. The number of dropped calls I have tripled from Vzw to AT&T. In an non tech savvy area with only a couple hundred thousand residents volume is not the issue, it’s just a plain shitty network.

    Where I live now (I moved halfway through my contract) not only does every carrier I have ever heard of provide at least some coverage if not full, I have to drive 20 minutes to reach AT&T’s coverage area. I get better 3G coverage on my kindle than any signal at all from AT&T.

  11. Shogun says:

    If some of the other reports are correct..ATT may lose its exclusivity with Apple. If this is the case, I am not surprised ATT put their own spin on this to try to screw over apple.

    Didn’t another report came out and said 40% of ATT’s new customers switched for the iphone? and if you consider that if Apple were to offer the iPhone on another carrier, ATT has so much more to lose.

  12. BigBoyBC says:

    I wonder if this is just AT&T trying to save face? Maybe they already know that their current deal with Apple is going to end?

  13. Unimatrix0 says:

    #12 – You must be using AT&T math.

    It is $2000 a year. A two year contract at $100 a month is $2400, minus the $400 ATT had to pay Apple for the phone subsidy leaves…are you ready for it…$2000

  14. e.e.cummings says:

    And it is still difficult to get intelligible voice on damned near any cell phone. They ought to fix that before any more bells and whistles.

  15. ECA says:

    Idea,
    Portable computer,
    Hand held
    Works on mobile system.

    Corp thinks..
    WOW
    Cool
    And if we BID on it and apple gives us the contract we get MORE USERS..more users=more money=more PAY..

    So they all bid, and APPLE doesnt do their HOME WORK to see if ATT can handle “ALL THAT IS APPLE IPHONE, and its abilities”.

    But the truth is…WHO COULD?
    Cellphone companies depend ON THE WIRED BACKBONE.
    There is ALREADY a major strain on the Phone corps and INTERNET. Add to the pile MORE access to the net and Cellphone/txt msg/wireless Net/MMS use and we are over 110% usage in the last 10 years.
    USAGE is the key.
    When the phone was ONLY at home, it was USED AT HOME. NOW we have people chatting 99% of the time. In one form or another.
    MANY phone systems in the cities WERE designed for company USAGE in the day time, as MOST OF US were at school and work. NOW its 24/7 access.
    The Phone corps had setup services in the 1995 time frame, to about 6%-10% usage rate.
    In 1995, the internet and browser HIT HARD and service had to GO UP to 80% USAGE by 2000.
    NOW add Cellphone(no internet) and USAGE probably hit 110% by 2005. And RECENTLY with all the wireless INTERNET and MMS and TXT, we have gone past 150% usage from 1995.

    NOW you may not know, but there IS the big controversy of SPEED on the net, and how the CORPS want to restrict it in the USA. The USA is 30th(?) in NET access speeds.
    but you must consider. HOW can we make it faster?
    MORE FIBER..Ok, we could do that. and CHARGE IT TO YOU. CABLE TV/INTERNET/CALLPHONES/WIRELESS INTERNET/MMS/SMS all REQUIRE the telephone BACKBONE.
    To FIX this 2 things need to happen.
    ALL these other corps NEED to get off the backbone, and MAKE THERE OWN BACKBONE.$$$$
    Telcos, NEED to REWIRE the WHOLE country. and BUILD more interconnects in the major cities.
    NOW. there are a few FANCY tricks with Fiber. AND IF’ they are going to do the WHOLE nation, why not ADD the power companies TO THE LIST.

    Features to FIX a nation.
    FIBER can be used to POWER your home.
    Wired access to the NET,
    Phone service,
    Low powered Multi station CELLPHONES. Cellphone antenna can be setup on Every connection to a HOME. Makes it CHEAP and easy for all cellphone users, as WELL AS internet wireless and ALL other services.
    CABLE TV with channels to EVERY INTERNATIONAL TV station..

    All this could be your IF’ we can get the corps to FIX the nations infrastructure. 2-4 fiber wires to EVERY HOME.

  16. SB says:

    Coming soon to the iPhone, bandwidth caps I’m sure. $30 dollars a month for the data plan and in the fine print…. 3gig limit, $1.99 per MB for any overage beyond that.

    If bandwidth is a problem for them why don’t they talk Apple into allowing the use of WiFi. Then when people are home they can use their faster home internet connection and not stream using 3g. That is obviously possible because the iPod Touch uses WiFi.

  17. ECA says:

    SB,
    WOW logic.
    BUT, then they wont MAKE MORE MONEY..
    And you think watching Videos/vid podcasts/movies off itunes is CHEAP??

    HIT the cap and tell me that.

  18. Ron Larson says:

    #1 bobbo: “…ATT has been coasting off old charge structures needed to build out their system but they keep it now that the system is built and paid for…”

    That is the problem. AT&T build a wireless network, then sold it. Then they had to buy it back from Craig McCaw in 1994 for $11.5 billion.

    So they have had to pay for it more than once.

  19. jaywontdart says:

    Trying to comment on more diverse issues 🙂

    If you want an iPhone and live in America, you dont have to be trapped on AT&T. Just get an unlocked iPhone, or do it yourself, you download a program like QuickPWN etc, plug in the iPhone and BOOM all your AT&T bitching will stop!

    Heck, as I often say, I bought a brand new Original iPhone, before they were out in my country (we only got the 3G on) for slightly under $500 american including shipping. I am off plan, I just pay as I go, I must spend around 100 bucks NZ on my iPhone, thats something like $75 US a year, sure I dont use it that much, but eh, I have a cheap iPhone!

    I do hope the AT&T deal ends soon for my American friends!

  20. ECA says:

    Jay,
    Go for it..
    Pay $500 for hardware thats worth $100.
    Why dont you look at the Ducomo network..I think its available in your area.

  21. Brent says:

    #16 – You must be using Bizarro World math.

    It is $1000 a year. $2400 for TWO years, less the $400 subsidy, is $2000. $2000 divided by 2 years is $1000/year.

    Nick Farrell, the author of the cited Inquirer article, is a moron who can’t do basic math. Can’t believe Dvorak here didn’t recognize that Farrell did an abysmal job of plagiarizing … err, paraphrasing the WSJ article used as the source. My response is posted under the original article on the Inquirer website, but in a nutshell, just do the basic math: 10 million new iPhones times $2000 net revenue per phone equals $20 billion (yes, BILLION) in revenue from the iPhone deal alone over the course of the 2-year contracts. For the mathematically challenged like #16 and Farrell, that’s $10 billion in net revenue per year. Shafted? Give me a break. Someone could shaft me on a daily basis for 1% of that.

    Yet another example of people in such a rush to jump on the “let’s bash Apple” bandwagon that they don’t bother to actually think for themselves.

  22. I would be honestly surprised if AT&T truly regretted the iPhone deal. It’s currently the only thing keeping them on top and the very second that they lose their exclusivity they’ll be hurting bad.


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