EU scrutinizing Apple’s ‘unusually strict’ iPhone contracts with carrier

By , Mar 22, 2013

iPhone 5 (introduction video, white, perspective 001)

The cost of selling the iPhone is anything but cheap – just ask Sprint. Because Apple makes the iconic smartphone which helps sell pricey wireless contracts, carriers typically agree to Apple’s way of doing biz that entail committing to large-volume iPhone purchases costing billions of dollars in upfront payments.

Sprint, America’s third-largest carrier, for example, bought an astounding $15.5 billion worth of iPhones to be sold over the course of four years. The New York Times reported Thursday that European Union regulators are taking a closer look at Apple’s iPhone distribution agreements with European carriers, who remark that these contracts are “unusually strict” and assert that Apple’s behavior could be viewed as anticompetitive…

According to the New York Times story, a group of unnamed wireless carriers in Europe are complaining about their iPhone distribution contracts with Apple being too restrictive, requiring large commitment, increasing carriers’ exposure and forcing them to pay for the unsold units.

It was unclear how many carriers were in discussions with the European Union. Based on several interviews with people briefed on iPhone contracts, it appears that Apple’s contracts with some smaller European carriers were stricter than those with larger companies.

People briefed on the carriers’ relationships with Apple, who declined to be named because Apple does not permit them to speak publicly about the contracts, said the terms that some European carriers must accept to sell iPhones are unusually strict, making it difficult for other handset makers to compete.

One person mentioned Apple’s contracts with French carriers as an example of possibly anticompetitive behavior on Apple’s part. These carriers recently submitted information about their contracts with Apple to the European Commission, one source noted.

They, however, did not filed formal complaints, meaning the Commission won’t launch a formal antitrust investigation unless it receives a formal complaint of anticompetitive behavior. However, a spokesman for the Commission did confirm that “we have been contacted by industry participants and we are monitoring the situation.”

An Apple spokeswoman told the paper that “our contracts fully comply with local laws wherever we do business, including the E.U.”, with one carrier exec noting that, yes, Apple’s terms are aggressive, but not unreasonable.

iPhone 5 (three-up, profile, front, back, black and white)

I’m not sure what to make of this other than that carriers are very much interested in loosening Apple’s grip on the industry. I mean, it’s not like Apple is forcing them to sell the iPhone.

So what exactly are these people whining about?

It’s not like they’re losing money on the iPhone – quite the contrary.

Now I understand better why Steve Jobs felt disdain for telcos.

If it were up to wireless carriers, they’d still control handset features,  infest user experience with their bloatware and force us into overpriced long-term contracts.

It should be interesting seeing how U.S. telcos react to T-Mobile’s March 26 press conference where the Deutsche Telekom-owned carrier is expected to put an end to device subsidies and switch to a more reasonable monthly installment scheme.

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  • Drbballwater

    “It’s not like they’re losing money on the iPhone – quite the contrary.” Of course, but neither is Apple Christian. Both the telcos and Apple are just doing what they do best, which is taking the end user to the bank.

    • iDon’tWantToShareMyDetails

      Of course Apple is not Christian, if they were we would be giving at least $5k for a phone. The damn phone assembled costs $200 and they want $600 for it, there are rarely business that thrive with such a giant overhead. More to the point if you let companies go wild, no matter how noble their intentions are – they’ll always fuck it up.