Greg's Bite: The Cellular Game, Spectrum and Money
TweetFollow Us on Twitter

Greg's Bite: The Cellular Game, Spectrum and Money

By Greg Mills

Apple has clearly revolutionized the cellular phone industry since the iPhone 1 was launched. In the past, the cellular carriers had all the power and the hardware manufacturers like Motorola, Nokia and RIM simply sold handsets to them and got the best deal they could. Cell phones were manufactured to please the networks first and then the customer who would use them. Exclusives on certain handset models were common.

Three companies pretty much owned the cellular handset business not that long ago. Now, all three of those giant handset makers are in a desperate race to catch up or die in the race to provide smartphones that can compete with the iPhone. The dumb phone market is collapsing rapidly as contracts expire on old cell phones or their batteries die. People want to move up to a smartphone.

The recently reveled make-or-break deal Apple made with Sprint shows how much things have changed. Apple simply doling out iPhones or withholding them is an economic power that nearly destroyed Sprint and hurt Verizon and T-Mobile in the US market.

As long as AT&T had an exclusive to sell iPhone, the other carriers were desperate to sell anything that even came close to the magical Apple device. Enter Android. Google was actually able to launch the Android OS into the market place in the void Apple left open with the lack of iPhone in the inventory of AT&T's competitors. This also played out around the world, until Apple finally got around to selling iPhone to additional carriers in each market.

The exclusive right to sell iPhone in a market came at a very dear price. Bargaining with the electronic Godfather, Steve Jobs, wasn't easy; he knew how much the other carriers desperately needed the iPhone. As Apple ramped up production of the iPhone and the hardware matured to enable an iPhone flavor that would work on any cellular radio network, the power to extract unbelievable concessions from the carriers didn't diminish; Sprint is recent proof. I have never heard what Verizon had to pay to get into the game. The current prices carriers pay is north of US $500 for a basic iPhone and more for the ones with more memory. Apple has a bill of materials of about $200 on the iPhone 4S, so to say it makes a tidy profit is an understatement.

Apple forced Sprint to agree to a deal worth twice the company's current market cap of about U$9 billion. Over the next four years Sprint has agreed to buy 30.5 million iPhones at a current valuation of about $20 billion. They must buy all those iPhones or default on the contract with Apple. Both Sprint and Apple certainly have confidence that selling iPhones will turn Sprint around. The point is, who else could force Sprint into such a make-or-break deal, who else has the handset that could make it work? No one else comes close, including any of the Androids.

While Apple has faced some criticism for holding to the exclusive cellular carrier marketing model for so long, it gave Google's Android an opening to fill the "I wish I could buy an iPhone but I will accept an Android instead" niche. That isn't any longer the case. I fully expect the Android numbers to fall dramatically soon due to four main factors.

First, the uncertainty factor. The previously free "open source" Android OS carries significant legal baggage in the form of Apple's lawsuits and lots of relevant patents that are causing uncertainty and hold major potential unknown costs for handset makers. Microsoft has cashed in recently and collects more in royalties on its patents covering its technology found in Android than it makes on Windows Mobile OS. It has been estimated that about $10 is the Microsoft "tax" on its patent license on each Android handset sold.

This does not factor in any potential damages Apple may collect for previous infringement. The legal baggage also includes the likely potential Apple will win and force a major revision in the Android OS that will orphan both hardware and apps. Then Oracle wants to force Google to pull Java out of the Android OS or license Java and comply with its standards. Building Android handsets and tablets that can't even be sold in entire markets is a major brand disaster. These terrible nightmares are not something the CEOs of the world's handset makers like to dream.

Secondly, the Android platform has some serious problems with the common piracy of apps, a severely fragmented app store infrastructure and various flavors of the Android OS that have some incompatibility issues. Apple avoids all these problems by fully controlling both the hardware and the software. The uncertainty the handset makers see in the Android OS will certainly open the door for the other platforms. Windows Mobile, Palm and other mobile OS platforms can only hope for a chance in the sun, should Android fail.

Thirdly, Google is sending mixed messages since they moved to buy Motorola. The rest of the Android handset makers rightly fear Google will try to follow Apple's lead of making both the hardware and writing the software for a better user experience and thus intentionally favor Motorola over them with Android innovation.

Finally, the exclusive iPhone market thing is over. Apple is about to really open the flood gates and sell iPhone just about everywhere. That drains the pond for the Android. Why buy an iPhone simulation when you can buy the real thing?

If I had the money I would go long on Apple and Sprint both. I figure Sprint is way down and, with their value due to sepctrum they own, either the iPhone will fix the company or it will go down and will be bought up by some company with the money to fix it. Or Apple will buy Sprint and fix it. Any way, Sprint investors win. I think the Android advantage is over and Apple is about ready to clean up.

That is Greg's Bite for today.

 

Community Search:
MacTech Search:

Software Updates via MacUpdate

Rodeo Stampede: Guide to all Savannah an...
A "gotta catch 'em all" joke seems appropriate here, even though we're talking animals in Rodeo Stampede and not pocket monsters. By now you've probably had plenty of rides, tamed some animals and built yourself a pretty nice zoo | Read more »
Is there cross-platform play in slither....
So you've sunken plenty of hours into crawling around in slither.io on your iPhone or iPad. You've got your stories of tragedy and triumph, the times you coiled four snakes at one time balanced out by the others when you had a length of more than... | Read more »
Rodeo Stampede guide to running a better...
In Rodeo Stampede, honing your skills so you can jump from animal to animal and outrun the herd as long as possible is only half the fun. Once you've tamed a few animals, you can bring them home with you. [Read more] | Read more »
VoxSyn (Music)
VoxSyn 1.0 Device: iOS Universal Category: Music Price: $6.99, Version: 1.0 (iTunes) Description: VoxSyn turns your voice into the most flexible vocal sound generator ever. Instantly following even subtle modulations of pitch and... | Read more »
Catch Battleplans on Google Play from Ju...
Real-time strategy title Battleplans is due for release on Google Play on June 30th, following its release for iOS systems last month. With its simple interface and pretty graphics, the crowd-pleaser brings a formerly overlooked genre out for the... | Read more »
iDoyle: The interactive Adventures of Sh...
iDoyle: The interactive Adventures of Sherlock Holmes - A Scandal in Bohemia 1.0 Device: iOS Universal Category: Books Price: $1.99, Version: 1.0 (iTunes) Description: Special Release Price $1.99 (Normally $3.99) | Read more »
Five popular free apps to help you slim...
Thanks to retail and advertising, we're used to thinking one season ahead. Here we are just a week into the summer and we're conditioned to start thinking about the fall. [Read more] | Read more »
How to ride longer and tame more animals...
It's hard to accurately describe Rodeo Stampede to people who haven't seen it yet. It's like if someone took Crossy Roadand Disco Zoo and put them in a blender, yet with a unique game mechanic that's still simple and fun for anyone. [Read more] | Read more »
Teeny Titans - A Teen Titans Go! Figure...
Teeny Titans - A Teen Titans Go! Figure Battling Game 1.0.0 Device: iOS Universal Category: Games Price: $3.99, Version: 1.0.0 (iTunes) Description: Teeny Titans, GO! Join Robin for a figure battling RPG of epic proportions! TEENY... | Read more »
NinjAwesome: Tips and tricks to be a mor...
Sorry about that headline, but I'm going to go ahead and assume that GameResort would not have named its game NinjAwesome without expecting some of that. It is, in fact, pretty awesome the way it combines an endless runner and old school arcade... | Read more »

Price Scanner via MacPrices.net

Haven App Launches New Age Of Wirless 911 Eme...
Haven from RapidSOS represents a transformation in access to emergency services from a phone call solely dependent on voice to a robust data connection for voice, text, medical/demographic data.... Read more
Cu Parachute 1.1 Retirement Success PLanning...
Tucson, Arizona based Indie developer Bradley McCarthy has announce the release of Cu (Copper) Parachute 1.1 for iPhone, iPad, and iPod touch devices — a tool with which users can continuously... Read more
Research and Markets Releases iPhone 6s Plus...
A new analysis report from Dublin-based Research and Markets observes that with the iPhone 6s Plus, Apple introduced a new rear camera module. The new device has similar structure and technology than... Read more
Apple refurbished Retina MacBook Pros availab...
Apple has Certified Refurbished 2015 13″ and 15″ Retina MacBook Pros available for up to $380 off the cost of new models. An Apple one-year warranty is included with each model, and shipping is free... Read more
Apple refurbished 11-inch MacBook Airs availa...
Apple has Certified Refurbished 11″ MacBook Airs (the latest models), available for up to $170 off the cost of new models. An Apple one-year warranty is included with each MacBook, and shipping is... Read more
Apple price trackers, updated continuously
Scan our Apple Price Trackers for the latest information on sales, bundles, and availability on systems from Apple’s authorized internet/catalog resellers. We update the trackers continuously: - 15″... Read more
12-inch 32GB and 128GB WiFi iPad Pros on sale...
B&H Photo has 12″ 32GB & 128GB WiFi iPad Pros on sale for up to $80 off MSRP, each including free shipping. B&H charges sales tax in NY only: - 12″ Space Gray 32GB WiFi iPad Pro: $749 $50... Read more
6-core Mac Pro available for $3799, save $200
B&H Photo has the 6-core 3.5GHz Mac Pro on sale for $200 off MSRP. Shipping is free, and B&H charges sales tax in NY only: - 3.5GHz 6-core Mac Pro (sku MD878LL/A): $3799.99, $200 off MSRP Read more
Apple refurbished Apple TVs available for up...
Apple has Certified Refurbished 32GB and 64GB Apple TVs available for up to $30 off the cost of new models. Apple’s standard one-year warranty is included with each model, and shipping is free: -... Read more
13-inch Retina MacBook Pros on sale for up to...
B&H Photo has 13″ Retina MacBook Pros on sale for up to $150 off MSRP. Shipping is free, and B&H charges NY tax only: - 13″ 2.7GHz/128GB Retina MacBook Pro: $1179 $120 off MSRP - 13″ 2.7GHz/... Read more

Jobs Board

*Apple* iPhone 6s and New Products Tester Ne...
…we therefore look forward to put out products to quality test for durability. Apple leads the digital music revolution with its iPods and iTunes online store, Read more
*Apple* iPhone 6s and New Products Tester Ne...
…we therefore look forward to put out products to quality test for durability. Apple leads the digital music revolution with its iPods and iTunes online store, Read more
*Apple* Retail - Multiple Positions, Towson...
Job Description: Sales Specialist - Retail Customer Service and Sales Transform Apple Store visitors into loyal Apple customers. When customers enter the store, Read more
*Apple* iPhone 6s and New Products Tester Ne...
…we therefore look forward to put out products to quality test for durability. Apple leads the digital music revolution with its iPods and iTunes online store, Read more
Music Marketing Lead, iTunes & *Apple*...
…Music Marketing Lead is responsible for developing robust marketing campaigns and programs for Apple Music and iTunes across the whole of Apple ecosystem. This Read more
All contents are Copyright 1984-2011 by Xplain Corporation. All rights reserved. Theme designed by Icreon.