The iPhone 3G is radical – but the business model is conventional

The new iPhone 3G, announced yesterday, looks like a very cool device.

But one of the more striking features from a business standpoint is that Apple appear to have reverted to a much more conventional business model than for previous versions.

 

iPhone 3G

When the original iPhone was launched, Apple managed to convince operators to enter into a revenue-sharing model, where they would take a proportion of the call revenues flowing to the operator. This required a very close relationship with the operator. The balancing factor in the deals was operator exclusivity for supplying the iPhone in a given territory. All of this ran counter to the prevailng industry trends, where the movement has been away from such approaches, with handset subsidies and operator locking gradually diminishing, and  revenue sharing almost unheard of, certainly in the case of handset manufacturers.

But with the release of the new device, reports suggest that Apple have reverted to a conventional hardware sale, leaving the operator to collect the revenues in the normal way. They also seem to be moving away from operator exclusivity. The technology may be revolutionary, but it seems that simple business deals work best for all concerned.

 Update: Interestingly, some reports have suggested that the net result is not necessarily favourable to operators, as the reduced retail price of the iPhone 3G requires operators to provide larger subsidies. I suspect operators ae smarter than that, and expect the device to drive take-up of data services and increased loyalty which which will provide a net positive effect.

 

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