How Smartphones Transformed Carriers

December 22, 2011 in Daily Bulletin

Why was AT&T so desperate to acquire T-Mobile? The Wall Street Journal took a look at how the current generation of smartphones transformed the carrier business model. They note that hardware and software “app” makers have enjoyed the benefits of the rising use of smartphones while carriers have failed to capitalize on the boom. Some of the interesting points from the article include:

  • Carriers pay Apple a subsidy of $400 each time an individual opts to purchase an iPhone with a 2 year contract. The rationale behind this is that this subsidy will encourage customers to stay on the network over the long run and purchase more of the carrier’s services.
  • The average user paid carriers $46.09 a month this quarter, which is $2 less than last year.
  • Text messaging, which in the past has been an extremely profitable source of revenue for carriers, is being threatened by new apps that let smartphone users communicate with each other directly, for free.

To read more about the struggles that carriers face, click here.

Source: Wall Street Journal