Deutsche Telekom’s premium for unlocking the iPhone: €600
Now we know what a legally unlocked iPhone is worth: 999 euros, or $1,477.
That’s what Deutsche Telekom’s T-Mobile unit in Germany is charging for a contract-free iPhone in the wake of Monday’s court injunction ordering it to cease selling locked iPhones. The price for an iPhone with a two-year contract is 399 euros, or $590.
Apparently T-Mobile simply baked the revenue it would have received from the two-year contract into the initial sales price.
To put it in perspective, a black MacBook or the 20-inch iMac with the 2.4 GHz processor costs about the same as an unlocked German iPhone.
At first it sounds crazy. Who would pay that much money for a cellphone? And while such a customer is free to choose his or her cellular provider, that still means shelling out even more dough for monthly service.
And yet that is the crux of T-Mobile’s (and presumably, Apple’s) strategy. By offering an unlocked iPhone at an outlandish price, T-Mobile satisfies the demand of the court order while simultaneously discouraging anyone from taking advantage of it. The court order said nothing about a decent price. Expect the unlocked French iPhone, due out by the end of this month, to carry a similar weighty premium.
Not everyone faces the tough choice between paying a reasonable price and freedom of carrier choice, though. Any lucky ducks who already had bought an iPhone in Germany from T-Mobile can have the SIM lock on their phones removed at no extra charge.
In a post yesterday I suggested that the legal problems in France and Germany will be repeated as the iPhone launches in other parts of the world, and that Apple needed to re-evaluate its “one-country, one carrier” policy.
I’m not sure that charging an exorbitant amount for an unlocked version of the iPhone will be the answer in every case, but it could work in Europe. In countries with more active underground economies such as China -- where the black market price of unlocked iPhones already has dropped below $500 -- the strategy could backfire.
Apple has created a bit of a trap for itself in brokering these clever revenue-sharing deals with carriers that depend on locked in customers. They’re lucrative for Apple, but not very customer-friendly. A lot of customers want unlocked iPhones, but unlocked iPhones wreck the business model. Ugh.
Eventually Apple will need to come up with a better answer that preserves a decent profit for itself without alienating the millions of customers it needs to ensure the iPhone’s success.
I don’t envy the guy with that assignment.
Comments
Shouldn't that be 600 euros or 887 dollars? Both T-mobile and Apple get their share, whether with contract or not.
As iPhone ramps in production, Apple will likely reap its usual margin from just the $399 hardware price. So it seems to me the lock-in and premium is a way to shift customers to the winning cellular carrier, with Apple demanding and getting a portion of that benefit because it is driven primarily by iPhone and not the network.
If the lock-in and premium needs to go away to gain further iPhone customers, then it will, and Apple loses its gravy, and the winning cellular carrier returns to competing as it did before. No big deal.
Posted by: mark | November 21, 2007 4:44 PM
Mark:
Thanks for the catch. Changed $ symbol to € symbol.
Posted by: Dave Zeiler | November 21, 2007 4:54 PM
Unlocked iphones should cost a bomb!
I bought one the other day for £269 not cheap, on the o2 contract!!!
But they also have the ipod touch out which is the same minus the phone for similar prices! I usually always go for contract phones that are free but this iphone blew me away, I had to have it!
Getting back to the point, I am in an 18 month contract at £35 a month for 200 mins and 200 txt, which is not as good as normal tariffs!
But I live with it because the internet is free and not everyone can have one. So if they are allowed on any network sim free they they should cost the earth as otherwise it takes away the prestige of having one and it would annoy me if they were not a bigger expense than what I paid for it, on a strange contract!
And would everyone else have full access to the internet and the 7.500 public wifi spots free etc?
Posted by: jennie | November 22, 2007 4:24 AM
I think Apple have to think well as it continues to challenge and make it difficult and pricey for customers to get iPhone unlocked.
I work in a relatively big institution, where a lot of people like and own Apple products. Since the problems about unlocking the iPhone surfaced, I have been hearing again and again complaints and remarks about Apples greedy and arrogant attitude. Apple has to watch out not to gain the image of a customers unfriendly company. If another company gets a product with the services the iPhone offer, I think many will do punish Apple by shifting from Apple products as they already promised to do. I have even heard that a group of people are organizing a campaign in Denmark prior to the launch of the iPhone asking customers to boycott Apple products as the company is "insensitive to customers and greedy".
Posted by: ialmodhwahi | November 22, 2007 6:05 AM
Short-term the six hundred Euros will bolster cash flow. Wonder if this premium will be recognised over 24 months? Any idea?
Vic
Posted by: victor Minton | November 22, 2007 8:18 AM
One "soft" way of locking in the iphone is emphasizing Visual Voicemail to the public. Only carriers that have specifically worked with Apple will have implemented Visual Voicemail service for an unlocked iphone. Carriers that have not worked with Apple won't have visual voicemail service. I call this "soft" locking though because most new customer won't care about the loss of visual voicemail because they never had it and never got used to it and if they never choose the Apple designated carrier they will never ever see it.
Posted by: Wilson Cheung | November 23, 2007 7:53 AM
Whether you activate the O2 contract or not, Apple has no right to deny access to all the other "non-mobile" aspects of the phone such as the music player. Maybe they should be giving the iPhone away for free and charging £60 a month, because the phone is worthless until you unlock it.
Posted by: jason Mayo | November 24, 2007 3:42 AM