I know the iPhone is like so last week, but I want to ask one more question about it: why does Apple insist on users registering for an AT&T account? Officially at least, you have to agree to a two-year contract with AT&T cellular before you can activate your iPhone, even if you will never use it as a phone. (There are ways around this, but Apple seems to wish they didn’t exist.) Which is a shame, because the iPhone is a pretty nice WiFi-enabled portable computer that (to me at least) is less attractive because it’s tied to a two-year AT&T contract.
Of course AT&T is giving Apple a cut of its revenue from the contract. According to rumor, the cut is $3 per month for each user, or $11 per month for users who switch to AT&T from other carriers. Given that about half of iPhone customers switch from other carriers, that’s an average of $7 per month per user, or about $170 total over two years.
But that $170 doesn’t answer the question, because Apple could still sell a phoneless iPhone for, say, $800 while the AT&T iPhone costs $600. If you think Apple still comes out behind at $800, then feel free to pick a larger number. There must be some price point at which Apple is happy to sell a phoneless iPhone, right?
I can see only two reasons why it might be rational for Apple to refuse to offer such a product. It can’t be difficult technically – all they have to do is change the activation procedure so that it doesn’t require the user to sign up for an AT&T contract. But there are two possible reasons.
The first is that the market for a phoneless iPhone is too small, at the price point that they would have to offer. If hardly anyone would buy the device at $800, then it might not be worth the trouble to create another option in the product line. This seems unlikely.
The other reason – the only other possible reason, as far as I can tell – is that the mere existence of a phoneless iPhone makes the original iPhone much less attractive to customers, and that this effect is big enough to offset the extra revenue Apple could get by charging an even bigger premium for the phoneless version.
Why might this be? Maybe Apple thinks the iPhone will look less attractive if the value of the contract lock-in (and hence the cost of lock-in to the customer) is made obvious. Or maybe Apple wants to differentiate the iPhone from other phone handsets by making it the only handset that isn’t obviously subsidized by a carrier. Or maybe Apple is keeping a space in its product line open for a future product introduction. Apple and Steve Jobs are clever enough about these things that there must be some good reason.