For as long as the iPhone has been available, people in the U.S. have been clamoring for a prepaid version of it. That was never going to happen when AT&T held the iPhone monopoly. The company has to subsidize the cost of cheap phones to customers, and long-term contracts are a way to recoup that expense. Enter Cricket, a small U.S. carrier that will release the iPhone 4S to its network with unlimited data, voice and text for $55 a month.
This is a very strategic move for Apple and an early Christmas present for Cricket. Apple is showing the Big Three U.S. carriers that it is not entirely reliant on them for iPhone sales in the U.S. One thing that Apple will be losing out on are the subsidies that Sprint, AT&T and Verizon pay for iPhones, but that cost is offset by the fact that the handsets are nearly full-priced for consumers. A 16GB iPhone 4S from Cricket will run $499.99, while an iPhone 4 will be $399.99. Apple is losing a bit of money by going directly to consumers through Cricket, but the volume of sales that Cricket will provide will be small in comparison to what the Big Three sell. For a company that makes near $12-$14 billion in profit a quarter, Apple can afford the small hit on subsidies through Cricket.
The win for Cricket is obvious. It is the first prepaid iPhone available in the U.S., and it augments the carrier?s thin line of available devices with a high-end smartphone. Check out the lineup of Cricket phones and you will understand. There is much left to be desired beyond the low-end devices from bargain manufacturers ZTE and Huawei. Cricket will offer unlimited voice minutes and texts, which has become pretty standard. In terms of data, it will technically be unlimited but will be throttled after 2.3GB of usage, which the company terms as ?fair use.?
There is one clear loser in Apple?s deal with Cricket: T-Mobile. The carrier, which struggles with competition from above by A&T, Verizon and Sprint, now must contend with competitors from below. T-Mobile is, of course, the only major U.S. carrier without the iPhone. It has said repeatedly that it can compete without the signature device and does offer several high-end Android phones. Yet, it must be starting to feel like the ugly stepchild at this point, as it's repeatedly passed over for the affections of Apple.
The biggest winners, and really the most pertinent for all parties involved, are consumers. A $55 data and voice plan is the lowest entry point for a single individual on the market. The lowest an individual can find among the top three carriers is about $60 (an AT&T voice plan of 450 minutes at $39.99 and 300MB of data for $20). Where Cricket wins in this scenario is that it is both cheap and its voice and text are unlimited. In terms of the 2.3GB ?fair usage? plan, that number is likely quantified by the average amount of data that a consumer uses per month through the Big Three carriers. Both AT&T and Verizon price 3GB plans at $30 a month. Over the length of a 24-month contract from the Big Three, consumers can save about $500. That is slightly offset by the higher cost of the phone, but Cricket does not require contracts and there is no early termination fee on the network.
Look for Apple to start making more deals with prepaid carriers both in the U.S. and abroad. It is one of the remaining untapped markets for the iPhone.
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