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.

 
AAPL
$99.80
Apple Inc.
-1.83
MSFT
$46.49
Microsoft Corpora
+0.25
GOOG
$576.89
Google Inc.
+3.79

MacTech Search:
Community Search:

Software Updates via MacUpdate

Adobe Acrobat Pro 11.0.09 - Powerful PDF...
Adobe Acrobat allows users to communicate and collaborate more effectively and securely. Unify a wide range of content in a single organized PDF Portfolio. Collaborate through electronic document... Read more
Adobe Reader 11.0.09 - View PDF document...
Adobe Reader allows users to view PDF documents. You may not know what a PDF file is, but you've probably come across one at some point. PDF files are used by companies and even the IRS to... Read more
iFFmpeg 4.6.1 - Convert multimedia files...
iFFmpeg is a graphical front-end for FFmpeg, a command-line tool used to convert multimedia files between formats. The command line instructions can be very hard to master/understand, so iFFmpeg does... Read more
NTFS 11.3.62 - Provides full read and wr...
Paragon NTFS breaks down the barriers between Windows and OS X. Paragon NTFS effectively solves the communication problems between the Mac system and NTFS, providing full read and write access to... Read more
OS X Yosemite 10.10 DP8 - Developer Prev...
Note: This is a Developer Preview. You must be a registered Apple Mac Developer to download this update. You can also sign up for the free OS X Beta Program to download and preview public beta... Read more
FotoMagico 4.5 - Powerful slideshow crea...
FotoMagico lets you create professional slideshows from your photos and music with just a few, simple mouse clicks. It sports a very clean and intuitive yet powerful user interface. High image... Read more
Screenshot Path 1.2.1 - Change the defau...
Screenshot Path lets you change the folder where OS X saves screenshots. Screenshots are saved by default to the user’s desktop. This is handy for the occasional screenshot but those looking to take... Read more
Fantastical 1.3.16 - Create calendar eve...
Fantastical is the Mac calendar you'll actually enjoy using. Creating an event with Fantastical is quick, easy, and fun: Open Fantastical with a single click or keystroke Type in your event details... Read more
GIMP 2.8.14 - Powerful, free image editi...
GIMP is a multi-platform photo manipulation tool. GIMP is an acronym for GNU Image Manipulation Program. The GIMP is suitable for a variety of image manipulation tasks, including photo retouching,... Read more
HoudahSpot 3.9.3 - Advanced front-end fo...
HoudahSpot is an advanced file search tool built upon MacOS X Spotlight. Spotlight unleashed Create detailed queries to locate the exact file you need Narrow down searches. Zero in on files Save... Read more

Latest Forum Discussions

See All

Hyper Trip Review
Hyper Trip Review By Jennifer Allen on September 16th, 2014 Our Rating: :: HYPER TWITCHYUniversal App - Designed for iPhone and iPad Tough and unforgiving, Hyper Trip is a bit like Snake – if Snake was really harsh.   | Read more »
Collectible Card Game Earthcore: Shatter...
Collectible Card Game Earthcore: Shattered Elements is Set to Arrive on iOS in 2015 Posted by Ellis Spice on September 16th, 2014 [ permalink ] Polish developers | Read more »
Boogey Boy Review
Boogey Boy Review By Jennifer Allen on September 16th, 2014 Our Rating: :: PRETTY BUT BASICUniversal App - Designed for iPhone and iPad It looks delightful but lack of Game Center support and more variety really affects the fun... | Read more »
Vizzywig 4K (Photography)
Vizzywig 4K 1.0 Device: iOS iPhone Category: Photography Price: $999.99, Version: 1.0 (iTunes) Description: REQUIRES: iOS 7 on iPhone 5S with 32GB or 64GB. (Do not use iOS 8)The world's FIRST mobile 4K video capture, editing and... | Read more »
The Sleeping Prince Review
The Sleeping Prince Review By Jennifer Allen on September 15th, 2014 Our Rating: :: RESTRICTIVE KINGDOM SAVINGUniversal App - Designed for iPhone and iPad The Sleeping Prince looks and feels great to play, but its lack of peril and... | Read more »
It Came From Canada: Terra Battle
In some way or another, most Japanese RPGs owe something to Final Fantasy. But with Terra Battle, the now-common mix of Western medieval fantasy with Eastern anime aesthetic feels earned. After all, its developer, Mistwalker, was founded by the... | Read more »
Five Nights at Freddy’s Review
Five Nights at Freddy’s Review By Rob Thomas on September 15th, 2014 Our Rating: :: FIVE FRIGHTS AT FREDDY'SUniversal App - Designed for iPhone and iPad Can you survive five nights as the new night watchman of Freddy Fazbear’s... | Read more »
Phantom Rift Review
Phantom Rift Review By Nadia Oxford on September 15th, 2014 Our Rating: :: FRIENDLY PHANTOMUniversal App - Designed for iPhone and iPad Despite a snag here and there, Phantom Rift is a well-crafted and imaginative adventure RPG.   | Read more »
Phantom Rift – Tips, Tricks, Strategies,...
Hello, Wanderers: | Read more »
Meet the Newest Character for Temple Run...
Meet the Newest Character for Temple Run 2, from National Geographic Kids’ Action-Adventure Book Posted by Jessica Fisher on September 15th, 2014 [ | Read more »

Price Scanner via MacPrices.net

Free GIMP Professional Grade Graphics App Ver...
The latest 2.8.14 version of the oddly-named GIMP (acronym for: GNU Image Manipulation Program) open source, high-end image editing and creation alternative to Adobe’s Photoshop and refuge from... Read more
10% off iPhone 6 and 6 Plus Otterbox cases
Get 10% off on popular Otterbox iPhone 6 and iPhone 6 Plus cases at MacMall through September 19th. Use code OTTERBOX10 to see the discount. Read more
15-inch MacBook Pros on sale for up to $125 o...
Amazon has the new 2014 15″ Retina MacBook Pros on sale for up to $125 off MSRP including free shipping: - 15″ 2.2GHz Retina MacBook Pro: $1899.99 save $100 - 15″ 2.5GHz Retina MacBook Pro: $2374... Read more
27-inch 3.2GHz iMac on sale for $1698, $101 o...
Abt has the 27″ 3.2GHz iMac on sale for $1698 including free shipping. Their price is $101 off MSRP. Read more
More To Making A Larger iPad Than Expanded Sc...
CNET’s Ross Rubin has posted a thoughtful analysis of prospects for a larger display iPad Pro, noting that Microsoft and Samsung currently have the large-display touchscreen tablet category to... Read more
SwiftKey Keyboard Finally Coming To iPhone An...
At the TechCrunch Disrupt event in San Francisco, Swiftkey unveiled the first details about SwiftKey Keyboard for iPhone, iPad & iPod touch. SwiftKey’s philosophy is that you should be able to... Read more
Save $75 on the 16GB iPad mini with Retina Di...
Best Buy has the 16GB iPad mini with Retina Display on sale for $324.99 on their online store for a limited time. Their price is $75 off MSRP, and it’s the lowest price available for this mini.... Read more
21-inch 1.4GHz iMac on sale for $979, $120 of...
B&H Photo has the new 21″ 1.4GHz iMac on sale for $979.99 including free shipping plus NY sales tax only. Their price is $120 off MSRP. B&H will also include free copies of Parallels Desktop... Read more
Apple restocks refurbished 21-inch 1.4GHz iMa...
The Apple Store has restocked Apple Certified Refurbished 21″ 1.4GHz iMacs for $929 including free shipping plus Apple’s standard one-year warranty. Their price is $170 off the cost of new models,... Read more
13-inch 2.6GHz/256GB Retina MacBook Pro on sa...
Adorama has the 13″ 2.6GHz/256GB Retina MacBook Pro on sale for $1379 including free shipping plus NY & NJ sales tax only. Their price is $120 off MSRP, and it’s the lowest price available for... Read more

Jobs Board

*Apple* Retail - Multiple Positions (US) - A...
Sales Specialist - Retail Customer Service and Sales Transform Apple Store visitors into loyal Apple customers. When customers enter the store, you're also the Read more
*Apple* Retail - Multiple Positions (US) - A...
Sales Specialist - Retail Customer Service and Sales Transform Apple Store visitors into loyal Apple customers. When customers enter the store, you're also the Read more
*Apple* Retail - Multiple Positions (US) - A...
Sales Specialist - Retail Customer Service and Sales Transform Apple Store visitors into loyal Apple customers. When customers enter the store, you're also the Read more
*Apple* Retail - Multiple Positions (US) - A...
Sales Specialist - Retail Customer Service and Sales Transform Apple Store visitors into loyal Apple customers. When customers enter the store, you're also the Read more
*Apple* Retail - Multiple Positions (US) - A...
Sales Specialist - Retail Customer Service and Sales Transform Apple Store visitors into loyal Apple customers. When customers enter the store, you're also the Read more
All contents are Copyright 1984-2011 by Xplain Corporation. All rights reserved. Theme designed by Icreon.