Patt Morrison For February 9, 2012

Wireless service providers lose $$$ on iPhones, is it time ditch the contracts?

Apple's New iPhone 4s Goes On Sale

Justin Sullivan/Getty Images

Apple Store customers look at the new Apple iPhone 4Gs on October 14, 2011 in San Francisco, United States. The new iPhone 4Gs features a faster dual-core A5 chip, an 8MP camera that shoots 1080p HD video, and a voice assistant program.

Apple’s iPhone is the most profitable handheld device on the market, right? Wrong, at least for mobile service providers. The iPhone is unquestionably profitable for Apple, but the top three wireless carriers, Verizon, AT&T, and Sprint, are all taking notable earnings hits because of high subsidy fees they pay Apple to carry the white-hot device. For instance, Sprint, the latest service provider to offer the iPhone, sells the device to customers for $99 or $199, but it pays Apple up to $600 per unit. All smartphones are subsidized, but the iPhone fee is the highest in the industry. Is it time to untangle phones from service contracts? It would give consumers the freedom to roam without being locked into a two-year contact and the wireless service providers the opportunity to charge market value for the phones they sell.


Are you ready to buy your next iPhone without a pesky contract, but at a higher price?


David Lazarus, business columnists at the Los Angeles Times

Chris Guttman-McCabe, vice president of regulatory affairs for CTIA-The Wireless Association

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