Apple Makes $831 On Each AT&T iPhone

Ponca City, We Love You writes "The NYTimes reports that Gene Munster, an analyst at Piper Jaffray, has studied Apple's financial statements and come to the conclusion that AT&T is paying Apple $18 a month, on average, for each iPhone sold by Apple and activated on AT&T's network — up to $432 over a two-year contract. This shows how much incentive Apple has to maintain its exclusive deal with AT&T rather than to sell unlocked phones or cut deals with multiple carriers. Last week Apple disclosed that 250,000 iPhones had been purchased but not registered with ATT that Apple thinks are being unlocked so Apple has now taken action to curb unauthorized resellers by limiting sales of the iPhone to two per customer and requiring that purchases must now be made with a credit or debit card — cash will not be accepted." The latter article links to a US Treasury page explaining the incorrectness of the widely-held belief that cash cannot be refused for any transaction.

Math.

[attemptedgoalie]

$399 phone
$432 from 24 months @ $18/month
----
$831

Getting around the cash thing....

[registrations_suck]

It's worth pointing out that you can still avoid having to use a personal credit card with your name on it by getting one of those re-loadable Visa cards. Yeah, there is a small cost involved, but it can be worth it if you value having the ability to buy without using your own, named card.

Re:Too bad apples lawyers do not understand Law.

[Nixoloco]

in the United state of America it is a felony to not accept United States currency as legal tender.

It says right in the summary that you are incorrect. You are required to accept cash/legal tender for payment on a "debt" only, not for purchasing a product or service.

Re:Too bad apples lawyers do not understand Law.

[Todd Knarr]

Cash must be accepted as payment for debts. IOW if you owe someone money and offer cash in payment, they can't legally refuse to accept it. If you do not owe them money, though, then no debt exists and that rule doesn't apply. A merchant's entirely free to refuse any method of payment for a transaction where no debt exists yet.

For the iPhone, this means that if you walk up to the counter wanting to buy, they're allowed to refuse to sell for cash. Once you've bought the phone and used the service and now owe them money for that service, however, they're not free to refuse a cash payment.

Re:Too bad apples lawyers do not understand Law.

[rueger]

Sigh... from the US TREASURY PAGE that is LINKED from THE SUMMARY above:

Question: I thought that United States currency was legal tender for all debts. Some businesses or governmental agencies say that they will only accept checks, money orders or credit cards as payment, and others will only accept currency notes in denominations of $20 or smaller. Isn't this illegal?

Answer: The pertinent portion of law that applies to your question is the Coinage Act of 1965, specifically Section 31 U.S.C. 5103, entitled "Legal tender," which states: "United States coins and currency (including Federal reserve notes and circulating notes of Federal reserve banks and national banks) are legal tender for all debts, public charges, taxes, and dues."

This statute means that all United States money as identified above are a valid and legal offer of payment for debts when tendered to a creditor. There is, however, no Federal statute mandating that a private business, a person or an organization must accept currency or coins as for payment for goods and/or services. Private businesses are free to develop their own policies on whether or not to accept cash unless there is a State law which says otherwise. For example, a bus line may prohibit payment of fares in pennies or dollar bills. In addition, movie theaters, convenience stores and gas stations may refuse to accept large denomination currency (usually notes above $20) as a matter of policy.

Of course, perhaps you just don't believe what the US Government would write on their own web site. Which raises the question of why you would trust their currency enough to use it.

Re:Hard to believe.

[krakass]

You have to remember that AT&T is just redirecting the money they would normally pay towards discounting the phone to Apple. And when you consider that they usually don't discount phones by $432 ($18*24 months) they're actually probably making more money from iPhone users.

Re:Too bad apples lawyers do not understand Law.

[religious freak]

Once you've bought the phone and used the service and now owe them money for that service, however, they're not free to refuse a cash payment.

If you're referring to the cell phone service provided by AT&T then they are, in fact, able to refuse cash for payment of cell phone service. You have signed a contract and they are providing a service. In many (all?) states, this would not be considered to be a "debt", and as such, can be considered to be a transaction, just like buying an iPhone.

Re:Too bad apples lawyers do not understand Law.

[Lehk228]

debts are not payments for services.

if i am selling oranges at the side of the road, i can demand only to be paid in venison. if you owe me $10,000 i CANNOT demand you pay back in gold or euros or anything else. i can ask to be paid in that manner but if you choose to pay back the debt in greenbacks and i refuse, the debt is canceled.

Re:Exactly! also this exaplins a lot.

[goombah99]

NASA had many cost overruns and did pay to test out the wazzoo. They even used old technology sometimes when they were not sure. (e.g. The First Mars landers used Core memory because they were not sure of the radiation hardness of chip memory) You also have to realize that when this thing was being rolled out they were in the midst of a recall on sony batteries, and Dells were catching fire. There has to be a risk margin. I was just surpised how large it was. Turns out it was fractionally less than I thought.

Re:Cingular/AT&T doesn't get my phone purchase

[AHumbleOpinion]

business...simply because their rebates are in the form of 'pre-charged debit cards' which I still haven't found a method of depositing the value of into my bank account without incurring a fee.

The card I received from cingular/att was equivalent to a VISA check/debit card, I spent the full amount without fees at the grocery store. Surely you buy things at some place that accepts VISA cards?

Re:Hard to believe.

[PipsqueakOnAP133]

Actually it isn't hard to believe.

Apple's not only providing the phone, but also providing the means for the iPhone users to handle activation, as well as the majority of customer support (warranty, assistance, marketing and training).

Yes, AT&T stores have marketing materials and people who can help you with the iPhone, but not much more than a normal phone. The idea is that you'll typically go to the Apple store for iPhone specific support.

This $18 isn't just a share of the plan. It's a share of what it would have cost AT&T to get and MAINTAIN the subscriber, seeing how for iPhones, Apple is handling a lot of it.

So buy prepaid credit cards...

[bradbury]

I do not think the Apple strategy will fly. It is easy enough to purchase prepaid credit cards and to use those to purchase iPhones. They may add a level of indirection but I doubt they will be able to prevent it.

If technology is driving down the cost of hardware (circuit complexity increasing by 2x every 2 years -- classic Moore's Law according to Wikipedia). Meaning you can compress data at a lower cost, you can transmit more data at a lower cost. Then why should not communications costs be declining at that same rate? I could care less if I get video on demand. My voice comununications should be almost free. The challenge to AT&T, Verizon, Comcast, etc. is why our bills (adjusted for quantity of data delivered) should not be declining by at least 1/2 every 2 years.

Apple can sell a fancy phone, whose advanced features I do not have to use. Lower the costs of my minimal connectivity. That is all I (as someone 51 y.o) needs to have I mean *really* what the hell does an iPhone provide that an easily available terminal cannot provide. And if you do not have an easily available terminal -- where the hell are you living? (And as a brief aside I have had dinner with Steve Jobs -- though I respect him as an individual I wasn't that impressed.) I would cite Google as being much more likely to change the playing field than Apple at the current time. It could strongly be argued that Apple has sold out to AT&T. Fortunately the hackers will defeat their efforts to completely manipulate their technology -- which customers have purchased. My hardware. My right to program it for my purposes. Claim otherwise. You will lose.

Re:Good bye Apple

[CaptainZapp]

You'd better point me at where the iPods are "locking" you into iTunes. According to all reports 90% of iPod content is not fro iTunes.

he's probably talking about iTunes, the software, as opposed to iTunes, the store.

And yes Apple started to implement a hash to the iPod database. This is probably in order to lock out 3rd party software in the future (it was easily hacked this time). They also started to disable video out signals unless you connect it to Apple TV.

So I think his point is very, very valid and since there is competition in the cell phone -, as well in the portable media player market it's not really that hard to pull off.

Re:"cash will not be accepted."

[justinlee37]

It's only illegal not to accept legal tender as payment for a debt. I.E., if you already owe me $800, I can't refuse payment in cash. However, if I want to sell you my car for $800, I can accept or not accept whatever form of payment I damn well please.