

Sprint to 'Bet the Company' on iPhone - nicksergeant
http://online.wsj.com/article/SB10001424052970203405504576603053795839250.html

======
kenjackson
BGR is reporting that the iPhone5 may be a Sprint exclusive. That's pretty big
for Sprint. Explains why Sprint has been completely mum about Windows Phone
Mango. If this is true, it might be time for me to leave Sprint.

[http://www.bgr.com/2011/10/03/sprint-guarantees-to-buy-
over-...](http://www.bgr.com/2011/10/03/sprint-guarantees-to-buy-
over-20-billion-in-iphones-from-apple-launching-the-iphone-5-exclusively/)

~~~
acslater00
If Apple made the iphone5 a Sprint exclusive, it would be unavailable to every
single one of their existing customers. Literally...Every...Single...One.

There's a better chance that Tim Cook will eat an iPhone than announce a
Sprint exclusive.

~~~
jwallaceparker
Customers are loyal to the iPhone, not the network it runs on.

I left Sprint to get an iPhone. If I need to rejoin Sprint to get the next
iPhone, that's no problem.

~~~
Lewisham
I wonder how true this is outside techies. I'm personally network-agnostic, as
I only use my "phone" for data and calls from the wife. I use about 100
minutes a month, so it doesn't matter.

My wife, however, makes at least 60 minutes of calls on more days than not,
keeping in touch with friends and family (basically all the social lubrication
I do with email and Google+). For her, the network effect is incredibly
strong: all her friends and family are on Verizon, so she is very hesitant to
switch as she gets the in-network minutes free. It was a huge deal for her
when I announced I wanted to leave Verizon (for a Virgin Mobile Android) and
how many minutes that would add to her plan.

I think a lot of people are loyal to their network not because of what they
get from it, but about the people they know on it.

~~~
dvdhsu
> For her, the network effect is incredibly strong: all her friends and family
> are on Verizon, so she is very hesitant to switch as she gets the in-network
> minutes free.

Sprint has unlimited mobile to mobile for plans with data, so as long as the
other person is on a mobile line (probable since they are on Verizon), the
call is free.

------
Urgo
I know I'm surely in the minority here but back in August I was so fed up with
AT&T that I spent most of the month planning a move to Sprint. I was in and
out of stores, researching phones online, talking to friends and more. Even
with their poor coverage (my parents live in western mass and basically that
entire side of the state is a black hole for sprint) I was so close to making
the switch, at least for a one month trial.

The main reason I wanted to switch to Sprint was they seemed to be really for
the consumer and pushed that they offered Unlimited Data. Most months I stay
under 5gb (though its close) on my android phone but occasionally I travel and
do use quite a bit more.

Before I did sign up though the rumors started coming out about the iphone
coming to sprint which I immediately predicted would kill their unlimited data
deal, which though its not on the phones themselves _yet_ has been enforced on
hotspot users.

I know people _love_ their iphones but I just really hate how it is ruining
networks for everyone. Every network they move to kills their unlimited data
plan with their arrival. :(

~~~
sankara
May be someone could answer a question I have for a long time.

There are two different modes of operations wrt the mobile phone industry. US
and most other European countries package phone and services together. Whereas
in a lesser sophisticated market like here in India phone and services are
independent of each other.

Both have their own pros and cons - Here I would never choose a crappy network
because they have a better phone (I buy the phone of my choice) but at the
cost of paying an extra premium (and that's quite a bit) for the phone (and
the freedom to switch network anyday). The advantage wanes away as more
operators provide better choice (but there is always the possibility that a
phone maker could enter into an exclusive agreement).

Which of these models would result in a better service for the customer? Which
is likely to succeed (or rather, be more successful)?

~~~
slykat
I worked with carriers on handset pricing strategy so I'm familiar with this
issue. There is a reason many country telecom regulators ban subsidization of
handsets - in most cases bundling is anti-consumer.

Bundling uses a common pricing psychological trick - by reducing the fixed
price (i.e. the phone price) but increasing the variable charge (i.e. the
monthly bill) the consumer has a perception that the deal is "cheaper". I'd
venture to say that the wealth level of consumers who buy high end smartphones
in the US is lower than those who do in other markets - essentially the lower
one time charge encourages consumers to buy phones they really can't afford
(it's like layaway for mobile phones). Furthermore, the consumer is locked
into a long term contract (usually 2+ years) so they can't churn.

Finally, carriers can exploit uninformed consumers. For example, you can offer
two free phones with a plan, one of which has a cost of $300 and the other
$200 to the carrier. You can list both phones at a fake MSRP $350 making both
phones seem like equivalent deals when in fact consumers who buy the $200
phone are essentially writing a $100 check to the carriers. Since carriers
bundle phones with the service and most models are carrier specific, there is
no perception of the actual value of a phone and thus, it's really easy to do
this.

In general, the US market is pretty anti-competitive because of i) bundling
ii) carrier locked phones iii) lack of pre-paid options (esp on the high end)
iv) long term contracts v) CDMA networks which prevent re-using phones with
another carriers

So in general US customers get a raw deal when compared to other markets
(don't get me started on how we get charged for incoming calls and SMS). On
the plus side, we do tend to get coolest phones first.

------
biot

      > "Five years ago, the Motorola Razr was the top-selling phone," says
      > Credit Suisse analyst Jonathan Chaplin. "Imagine trying to sell 6 
      > million of them today."
    

The thing about the RAZR is that it was a sleek, small form factor. I don't
remember anyone who had one tout its functionality as the reason they got it.
So the next sleek phone or better featured phone could easily displace it. The
iPhone on the other hand combines excellent engineering of its hardware with
tremendous strength in the software; not to mention the brand cachet. That's a
significant competitive advantage and is harder to displace.

~~~
joe_the_user
Actually, I remember numerous friends describing the original iPhone as having
terrible reception. An old boss switched to skype for phone calls so he could
keep using his iPhone for its apps (or something).

It seems more like the iPhone combines generally good-but-not-fabulous
engineering with the continued irrational loyalty of "Apple Fanboys".

Edit: But this too may indeed be a competitive advantage that's hard to
match...

~~~
flamingbuffalo
There are over a hundred million "Apple Fanboys"?

~~~
jfoutz
Yes. That's how mac works. The instant anyone ever purchases an apple product,
they are irrevocably an apple zealot.

Frankly, I'm surprised they haven't organized into a massive armed malita,
given the amount of hatred and bigotry apple fanboys bring to a discussion. It
seems like the complete solidarity of everyone to ever pass a credit card to
Apple would make them a formidable force.

~~~
jarek
<http://en.wikipedia.org/wiki/Malita,_Davao_del_Sur> ?

~~~
rads
Militia

~~~
jarek
thatsthejoke.jpg

------
steve-howard
I like my Sprint service. The reception is far from legendary, but it's there,
and the data is unlimited. If I wanted an iPhone, I'd do what everyone else
does and switch to AT&T (and now Verizon). I suspect that folks who really
care that it's an iPhone and not an Android (or potentially WP7, if that ever
gets off the ground) have already made their move.

~~~
henrikschroder
Why wouldn't you buy an unlocked iPhone?

~~~
rtrunck
Maybe I'm missing something, but why bye an unlocked phone? You pay more up
front and the same monthly fee for network access. Is it just the contract you
don't want to enter?

~~~
henrikschroder
The price of the phone is the same whether you pay upfront or through an
increased monthly fee, but with the unlocked phone I can pop in a local sim-
card if I travel, and I can change my provider whenever I want.

The only benefit for the locked ones are that you get to buy it on what is
essentially cheap credit, but it's not like you save any significant amount of
money on that.

------
jcampbell1
It sounds like Sprint is going to start a price war with Verizon and AT&T.
Music to my ears.

~~~
baddox
I'll be impressed if any of them allow people already under contract to get a
better price.

------
ajays
It would be great if someone could come up with a summary of the offerings by
the big 3 carriers; and the quality of service on the network. I'd love to
switch to Sprint, but I'm not sure how their cellular network stacks up to
ATT/Verizon when in remote areas. I'm on ATT currently, and was surprised to
get reception at the top of HalfDome (though I have trouble getting it in my
neighborhood in SF :-/ ).

------
jinushaun
If Sprint keeps unlimited data for at least the 2 years that I'll be on
contract, I'll sign up for Sprint the day the iPhone 5 is available. Sprint
needs to compete on price and unlimited data to compete with Big Red and Big
Blue and stay alive.

------
andrewljohnson
If Sprint gets an exclusive on iPhone 5, there is going to be severe backlash.
I know many people waiting to upgrade their phone until iPhone 5 comes out,
and they aren't going to switch to Sprint to do it.

This would be a betrayal of all of their customers holding iPhone 3G/3GS/4
waiting to upgrade on Verizon or AT&T, and it will be a big chink in the armor
for Android to exploit.

It would annoy me as a developer too.

For these reasons, I sort of find it hard to believe that an exclusive is
possible, but I guess $20B is a lot of money.

~~~
jsz0
Disagree.

There's no 3G/3GS on Verizon and exactly zero iPhone 4 Verizon customers are
eligible for a subsidized upgrade yet. So it only affects the tiny number of
customers who are going to pay $600 for an out-of-contract upgrade. The vast
majority of Verizon iPhone owners would have to wait for their subsidized
upgrade date which for most is March/April 2012 at the earliest.

For AT&T customers things are a bit more tricky. Any iPhone 4 owners are in
the same boat as Verizon customers. Most won't have a subsidized upgrade
available until late December. (if you have a more expensive plan with AT&T
your upgrade date is earlier) This also goes for people who bought the 3GS in
the last 14 months. The people who opted for the 3G in the last ~20 months
decided to buy a low end model. For them the iPhone 4 or 4S would be the
natural upgrade path and a massive upgrade.

No doubt there are some risks but I doubt Sprint would have a very long
exclusivity period so even if Apple takes a beating for a month or two it will
be of little consequence compared to $20B in the bank.

~~~
mikeash
But it's not $20B in the bank, it's a commitment to buy $20B worth of phones
over four years. Assuming 50% margin on Apple's side, this deal is worth about
$2.5B/year. Compared to Apple's revenue of $65B/year or profit of $18B/year,
this is peanuts, and not worth any sort of beating, especially since many of
the sales they would make from such a deal would not be new, but merely
shifted.

~~~
stock_toaster
So a guaranteed 2.5B/year for a few months of exclusivity? Seems like a pretty
big win to me.

> especially since many of the sales they would make from such a deal would
> not be new, but merely shifted

Possibly, but they could pick up new customers as well (existing sprint
customers that want to upgrade to a smartphone, etc).

~~~
pieter
You have to compare it to the alternative -- how many sales on Verizon / AT&T
will they lose with this exclusivity? How many phones would they sell on
Sprint if it was available there, just not exclusively?

------
bound008
If sprint throws in tethering for those two years they will certainly poach a
lot of customers. But with their overall network quality, it's likely that
they suffer an AT&T style meltdown. Their 3G speeds are already the slowest of
all national carriers, and an LTE rollout looks far off.

------
blinkingled
I am unsure that lack of iPhone is Sprint's sole big problem. For some time
now they have messed up with 4G and their 3G speeds aren't anything to write
about either. And last time I drove through the US across 4 states my wife's
Epic 4G had the least coverage.

And iPhone is more available today - you can buy it unlocked, you can buy it
on AT&T or Verizon. So the only people that are really going to buy iPhone on
Sprint are the smaller number that have only Sprint coverage (theoretical -
not sure if that is valid) and only want an iPhone. The second smaller group
will be the people within Sprint's 4G coverage areas that like Sprint's data
plan better - as the speeds aren't all that great on WiMax compared to
competition.

------
usaar333
As a Sprint customer, I worry that it's barely acceptable call and data
quality will suffer with a massive injection of iPhones.

------
Skroob
I'm not sure I understand. Is Sprint planning on undercutting the "regular"
subsidized cost of the iPhone? Because otherwise, unless they're going to do
something that really stands out, it seems like a case of "the only way to
beat them is to be exactly like them".

~~~
dangrossman
At the moment, they're the only major carrier to offer non-capped unlimited
data, and their "simply everything" plans (unlimited talk/text/web) are as
cheap or cheaper than the Verizon/AT&T equivalents.

------
dr_
Although exclusivity is hard to believe, the only thing that makes this
plausible is that it makes sense for Apple to want multiple carriers for their
products, each with lesser influence, than one or two major carriers with
major influence.

------
skizm
I really hope this happens. I want Sprint to succeed so when my verizon plan
runs out I can still get unlimited data somewhere for a reasonable price.

------
acslater00
Flashback to 24 months ago, when Sprint "bet the company" on the Palm Pre.
Something tells me this is going to go just as well.

~~~
insanecanadian
To be fair, they are "betting the company" on something that the lack of
probably lost them a large number of potential customers.

------
chaselee
In other news, I'll continue to revel in unlimited data and Android updates on
the Nexus S.

------
suhlash
i am a sprint customer and i hate this move. the android market may be chaotic
but there is more freedom for the user. this is a dangerous move for sprint.
android will only gain in market shares baring any great upset in the current
trends.

~~~
Anti-Ratfish
This is besides the point. Android seems to sell 3-4 phones to each iPhone
sale (citation needed) so sprint is cutting itself off from 20ish percent of
the market. That's what matters. Quenching the bleeding might be another
perspective.

------
hwf829
OMGWTFBBQ

