Apple, welcome to the handset business. Apple's sweetheart deal with AT&T, which grossed Apple an extra $360 for every iPhone sold, is over. AT&T will buy iPhone 3G wholesale, mark it up and discount (subsidize) it for new customers buying a 2-year contract. Apple's net is the margin for the sale, period. There's no more monthly start-up stipend. That's how it works for other handset manufacturers, and as odd as it seems after a year of special status, AT&T is turning Apple into one of the herd. Apple saw this coming, and it has spent the past year setting itself up for life after AT&T's unique generosity.
I've seen it written that this apparent $360 drop in revenue per iPhone will hurt Apple. The naysayers aren't doing their math. I estimate that, compared to iPhone, Apple will clear an additional $100 in wholesale price from AT&T for each iPhone 3G sold. Apple's sales volume will explode at AT&T's subsidized prices, so component and manufacturing costs will plummet as Apple crosses higher volume discount thresholds with suppliers. The high cost of AT&T "enterprise" coverage plans that permit access to Exchange Server e-mail will steer professional users, as well as consumers, toward MobileMe's integrated collaboration and over the air sync services. A MobileMe subscription adds $198 to each iPhone's gross revenue over the course of a 2-year wireless contract. Apple also reaps a fixed 30 percent margin on all iPhone software sold through AppStore, and a minimum of $99 from every iPhone developer. Keep in mind, too, that writing code for the most developer-friendly handset on the market, and gaining entry to the world's largest mobile shareware marketplace, requires a Mac. Developers will buy Macs to get to iPhone.
Then there's iPhone's role as the ultimate media player. It's so idiot-simple to buy music and TV programming from iTunes that iPhone users will be walking cash machines to a greater extent than any iPod allowed. Users can buy and download content over 3G whenever and wherever the impulse takes them, and it will take them often.
All of this new revenue is Apple's; none of it earns AT&T an extra dime. In fact, except for supporting a hike in coverage plan pricing, iPhone 3G will hit AT&T's infrastructure harder than any device except for tethered notebooks. With a treasure trove of Apple and third-party-hosted content at their fingertips, iPhone users will put the "unlimited" in unlimited data. They'll be downloading, surfing, and streaming because they can. There's no guarantee of a particular speed for 3G connections, so if the network creaks under the strain, don't call AT&T. Call all your iPhone-toting friends and tell them to get off YouTube.