Are Apple & O2 changing the subscription model?
Apple may have changed the mobile phone subscription model, without anyone yet realising… So reckons Jon Mulholland — and it’s a perspective I asked him to expand on when we were discussing it by email. He’s been kind enough to put down his thoughts thus:
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Here’s an interesting question, how do you think O2 will manage iPhone customer upgrades as future versions of Apple’s wonder-device are released?
Speculation is rife that a 2nd generation iPhone, presumably with 3G HSDPA amongst its enhancements, is on the way for next Spring. Apple will almost certainly have released a newer iPhone model before this time next year. What will happen to customers in the UK (and Germany and France for that matter), who at that point would have had their devices for less than 6 months? Will launch of the new device be delayed in these countries for the sake of this first wave of iPhone customers?
I’m betting that O2 will let customers – no make that encourage customers to – upgrade to the new device well before the end of their existing contracts. Think about it for a minute, what reason would 02 have for wanting to prevent any customer who’s just bought the first generation iPhone from upgrading to a newer model?
Usually networks prevent handset upgrades during contract term because the cost of the device is subsidised in line rental over the lifetime of that contract. This is not the case with the iPhone, as all of the handset cost has been paid upfront by the customer at point of sale. If a customer wants to upgrade from the current iPhone to a newer version less than 18 months later, where is the downside for O2? In fact, why not happily upgrade customers to a newer iPhone (taking another small percentage of the hardware sale in the process) and use that opportunity to reset and extend their existing 18 month contract?
In doing so Apple and O2 create a new contract renewal / upgrade path model, one that guarantees a ‘recurring lock in’ of iPhone customers and revenue. O2 keep extending contracts and Apple sell yet more iPhones. Smart eh?
From the outset Apple have been open about wanting to change the mobile phone purchasing experience; device registrations are done at home and sales advisors are pretty much removed from tariff selection. I’m willing to bet that changing the device upgrade path is also part of that strategy – I just don’t think that the other networks have realised this yet.
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A brief overview of Jon:
Jon Mulholland is a People & Technology Change Consultant working in the UK mobile industry. His personal thoughts, ideas and ramblings can be found on his blog (www.jonathanmulholland.com) and Twitter (www.twitter.com/jonmull).
Jon, thanks very much indeed for taking the time to write this.
What do you think? Do you think the subscription model has changed?
