This morning's earnings report from AT&T confirms that it sold more iPhones than its competitor Verizon last quarter, something it probably isn't too ecstatic about. It's not that AT&T doesn't delight in the additional 4.3 million iPhone activations, which bring in more data, talk and text plans -- the real money makers. But, the wireless company is getting tired of Apple dominance, which has started to eat at wireless carrier control of the consumer.
"There clearly is a danger now that iPhone is going to get a stranglehold of the U.S. smartphone market, and I don’t think operators are crazy about that," Tero Kuittinen, a mobile analyst told Bits Blog's Brian X. Chen. And it's doing pretty well on that road to stranglehold. Last quarter, half of Verizon's 3.2 million smartphone sales came from Apple's beloved product. And the fraction was even greater for AT&T, which sold a total of 5.5 million smartphones, meaning Apple drove nearly 80 percent of their fancy-phone business. Of course sales are good, especially in the data-dependent land of iPhones. But: "The carriers are tired of Apple calling all the shots," writes Chen.
Those shots include the whole subsidy issue, which, as the earnings report details has gotten worse for AT&T. Because of these subsidies, AT&T's operating margin income has dropped from 30 percent two years ago to 27.2 percent. But since the phone sells so well, AT&T doesn't have much bargaining power. "Carriers have very little leverage with Apple now. If the iPhone market keeps growing, pretty soon they’re going to have no leverage at all," Kuittenen told Chen. These companies also worry that Apple has too much control over all the money-making aspects of the phone biz. Apple now makes the hardware and the software and it sells the apps. All that's left for the carriers is bandwidth, an admittedly essential part of phone use.