New iPhone: Carrier Cash Cow?

Apple is expected to introduce the next iPhone model on September 12, setting the stage for a critical test of wireless carriers' efforts to bend the economics of the popular device to their advantage.

At stake is how profits in the wireless industry get divvied up and to what degree the carriers reap a return on investments in their newest networks. In just a half a decade, the iPhone has become one of the most important influences on carriers' profits, and its influence is growing. Carriers like AT&T and Verizon Wireless pay huge sums for the device and then sell it to their subscribers for much less, a profit-damping subsidy that sends billions of dollars in wealth to Apple. Their subscribers, meanwhile, have increasingly been waiting for new iPhones to be released before upgrading their devices. The carriers have fought back this year, introducing new upgrade fees to reduce the cost of subsidizing all those new iPhones. But the biggest impact could come from new data plans debuting this summer, which should squeeze more money from subscribers hooked on the new phone's faster data speeds.