How Apple Is Escalating the Wireless Wars

For years, US wireless carriers have been trying to exit the business of subsidizing phones. Now Apple’s latest move may be too much of a good thing—and could force carriers to lower plan prices even further. Apple’s plan, which would allow customers to upgrade as frequently as once a year, could further fray the somewhat tenuous ties that bind subscribers to their carriers.

Even worse, it may bring further pressure to bear on carriers’ margins. With Apple financing phones, there will no longer be anything financially tying subscribers with the new plans to their carriers. All an iPhone user would have to do to switch carriers is get a new SIM card. Granted, carriers will still be competing on the basis of network quality. That should remain an advantage for Verizon and AT&T. But given that T-Mobile and Sprint charge less for service, the two larger carriers could also see churn rise. That could push them to respond by lowering the cost of device or service plans, effectively bringing subsidies back, New Street Research notes. This, in turn, could pressure operating margins already dinged by price wars.