Bruised Mobile Carriers Fight Back at Apple

The iPhone revolutionized the smartphone industry and made Apple the world's most valuable company. But it hasn't been all good news for the mobile carriers.

The biggest benefit of the iPhone, and the touch-screen devices that followed, has been a rise in average revenue generated from each mobile user. Data-hungry customers using the new generation of devices moved to more costly plans. In the second quarter of 2007, when AT&T T became the first carrier to offer the iPhone, its average monthly revenue per postpaid user was $56.88. In the latest quarter, it was $64.93, a 14% increase. But there is a cost, and not just in the extra capital spending required to stop networks becoming jammed by the extra data usage. As more consumers have smartphones—65% of postpaid customers for AT&T and 50% for Verizon Wireless—there is less incremental revenue to be gained from selling more of them. The carriers are fighting back. AT&T's first move was to change its upgrade policy. In March 2011, it lengthened the amount of time before a customer was eligible for an upgrade to 20 months from 12 to 18 months, depending on the plan. Verizon already had a 20-month policy in place.