Quite an interesting article about the iPhone and its effect on cell phone providers. Not only have the big cell phone carriers been required to spend billions to support smart phone data hogs, particularly the iPhone (I admit, I’m probably one of those hogs), carriers typically take a back seat as Apple gets the positive product afterglow and the negative stuff (dropped calls, etc.) ends up in their lap. Now they’re basically being forced to incur negative financial results just for the privilege of providing the iPhone as an option to consumers.
Apple wants the relationship to be that way for the most part. A decision for the carriers to make: JOIN US OR BE UNCOOL. And their white hot stock price shows to some extent, they are winning that critical decision. In most businesses, such an arrangement might be simply a form of investment for the future, sacrificing something in the short term. But, in typical situations, businesses have more control over that future opportunity. In this situation, Apple controls a large part of the potential long term benefits and in turn profitability. They dictate the product refresh timeline, the advertising concepts and style, the highly sought after media content the iPhone delivers, and of course, the coolness factor.
If this doesn’t remind people of high school, I don’t know what does…to stay relevant or “cool”, each carrier has made a critical strategic decision to trade financial performance today for the potential years away. In high school for example, that would be the equivalent of taking a short cut on tonight’s Calculus prep for your exam on Friday, to spend more time hanging out with the cool kids, tonight.
If you play the analogy forward, what did high school and especially the last 50 years of technology invention show us? Those same cool kids who cut corners don’t often finish first. Being cool simply today does not guarantee success in the long term. Actually, it’s at least as likely that the Calculus nerds that could care less about being cool today, dominate longer term. See Gates, Page, Brin, Zuckerberg, and Allen as possible examples.
You can’t cut corners on your “homework” and expect to end up on top. Any finance person would tell you that $1 today is far more valuable than a “dollar” in 2015 as the date the article references as Sprint’s target to make money on their Apple iPhone deal. The carriers may have a fun time hanging with their friends tonight, but it appears far more likely that only the nerds in Cupertino will be the cool ones in the future.