A preinstalled data-only SIM card has been inserted into the $499 iPad Air 2, and allows users to change carriers at the tap of a finger. It's available in the U.S. on AT&T (NYSE:T), Sprint(NYSE:S) and T Mobile (TMUS), and in the U.K. on EE. Consumers can buy short-term data plans and can switch between the carriers to find the best deal.
Friday, October 17, 2014
What happens when Apple makes it easy to switch between carriers?
Price competition should become fierce.
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Competition among cellular data providers is nothing new. It has however became stronger over the past few years. An example of this can be seen in the changing structure of cellular phone contracts. Phones have become more expensive to produce therefore it has become less profitable for carriers to offer subsidies on new phones every year. The new model is to subsidize two year contracts or to have customers pay a lowered monthly access fee along with a partial payment of the full retail price of a phone.
ReplyDeleteThe ability to switch between carriers is a threat to the cellular service industry but a better playing field for consumers. For the longest time consumers have been tied to long term contracts and forced to pay rates that varied slightly among carriers. New technology and change in industry structure has forced carriers to now position themselves more aggressively in order to maintain market share.
Take for instance a company such as T-Mobile. Once thought as a small fish in a big pond, their efforts to payoff contract termination agreements and better pricing has stolen customers away from AT&T as well as Verizon. Apple's effort to increase competition is needed within the cellular provider space as well as the technology industry. Apple is showing that they can adapt to the latest industry trends and also be the catalyst for change.
This is a smart idea by apple. With the price wars that are heating up between the wireless cellular and data service providers people are switching companies more than ever before. Where people may have felt hesitant to spend the money on not only a phone but an ipad on a certain service is quite an expensive commitment. And that just it, it’s a huge commitment when most of can’t even commit to one flavor of ice cream. By offering their product with no ties people will be more likely to invest in the product, because they no longer have to commit to a company as well. In addition if they start offering this on all their products they will no longer have to sell through service providers. Furthermore it will continue to fuel the fire of wireless price wars among cellular companies. But not just that is they are the first company to offer this they will improve apple’s outside options and will decrease those of competitors such as Samsung.
ReplyDeleteThese are pretty expensive stuff to work with. I believe we should be careful with these things; I do Forex trading where I sometimes work on these things, so it is always interesting reading about things. I am working with OctaFX and with them, I am able to get daily market news and analysis update, it is making things easier for me and allows me to work nicely which always get me rewards and I am able to work easily.
ReplyDelete“The back-and-forth on Apple SIM underscores the differing priorities between Apple and the carriers. Apple wants to make the process of purchasing and choosing an iPad and carrier partner as easy as possible, while the carriers want to maintain some control over the customer” (Rubin, 2014).
ReplyDeleteAs it turns out, the initiative for a data-only SIM card that would allow users to change carriers at the click of a button was short-lived. An article released in October 2014 stated “So much for a universal Apple SIM. AT&T and T-Mobile both lock down new iPad SIM cards in their stores. The difference is a T-Mobile iPad purchased at an Apple store will remain open” (Rubin, 2014). Although AT&T, T-Mobile and Sprint were listed as part of Apple’s SIM program which boasted a single SIM would handle all three carriers, two out of three of the companies have started selling iPads with cards locked to their specific company. To me, it seems this may have started as a simultaneous move game where each player decided on their strategy without knowing the decision of the other players (given this information Verizon opted out at the beginning). While the article does not state which company pushed the carrier locked SIM card first, this likely encouraged the second to do the same, suggesting it turned into a sequential move game.
Rubin, B. F. & Cheng, R. (2014 October 24). Got a new iPad and want to switch carriers? Turns out it's not so easy. Retrieved from http://www.cnet.com/news/at-t-t-mobile-both-lock-down-new-ipad-sims-in-their-stores/
“The back-and-forth on Apple SIM underscores the differing priorities between Apple and the carriers. Apple wants to make the process of purchasing and choosing an iPad and carrier partner as easy as possible, while the carriers want to maintain some control over the customer” (Rubin, 2014).
ReplyDeleteAs it turns out, the initiative for a data-only SIM card that would allow users to change carriers at the click of a button was short-lived. An article released in October 2014 stated “So much for a universal Apple SIM. AT&T and T-Mobile both lock down new iPad SIM cards in their stores. The difference is a T-Mobile iPad purchased at an Apple store will remain open” (Rubin, 2014). Although AT&T, T-Mobile and Sprint were listed as part of Apple’s SIM program which boasted a single SIM would handle all three carriers, two out of three of the companies have started selling iPads with cards locked to their specific company. To me, it seems this may have started as a simultaneous move game where each player decided on their strategy without knowing the decision of the other players (given this information Verizon opted out at the beginning). While the article does not state which company pushed the carrier locked SIM card first, this likely encouraged the second to do the same, suggesting it turned into a sequential move game.
Rubin, B. F. & Cheng, R. (2014 October 24). Got a new iPad and want to switch carriers? Turns out it's not so easy. Retrieved from http://www.cnet.com/news/at-t-t-mobile-both-lock-down-new-ipad-sims-in-their-stores/
Even though devices such as the IPhone and other 4G LTE devices is no longer carrier specific, they can still be locked. For example, if I buy and IPhone 7 on a device installment plan from Verizon and try to deactivate it and go to AT&T before the device is paid for, I may be prevented from doing so. Just because a device has the technology embedded to allow conversion to other carriers doesn’t immediately make those features available. Consumers are not educated about this from the carriers, however.
ReplyDeleteEven with this availability, carriers are engaged in practices to gain the highest market share for their service and network. They offer to pay other carriers termination fees. They will pay off device installment agreements. They will give inflated trade in values for devices and sometimes even offer gift cards in exchange for new service contracts. This is a dangerous game for the carriers big (Verizon, AT&T, Sprint, T-Mobile) and small (Boost, Pay as you go providers, start-ups) because in order to stay competitive larger and larger monetary offers need to be offered to customers. This can create a prisoners dilemma because all carriers feel the need to participate and the ante keeps rising. The days of the better network are gone, especially in bigger cities. Customers can even make a game or profit every year or two by switching carriers and win by getting the newest devices for cheap prices, not having to buy out of contracts and still receiving acceptable service network levels.
Right now AT&T is offering up to $650 per line to switch carriers (https://www.att.com/shop/wireless/switch-and-save-etf.html) and they aren’t alone. Even if there isn’t a large promotion running, simply asking a sales person could get you waived early termination fees and new phones at a discount. The intense competition works to the consumers advantage.