The new Apple Upgrade program has a key piece of fine print: “If you’re leasing an iPhone, you’ll need to connect to AT&T, T-Mobile, or Verizon when you enroll.”
In a new post today, John Gruber at Daring Fireball has a likely explanation for this requirement.
Apple Upgrade’s iPhone limitation
According to a former Apple employee who worked on the company’s carrier team and emailed Gruber, this requirement largely stems from the deals Apple strikes with Verizon, AT&T, and T-Mobile in the United States.
Apple negotiates deals worth “hundreds of millions of dollars” with each of those carriers, and it agrees to make concessions in exchange for that money. The requirement that an iPhone purchased through Apple Upgrade be connected to a T-Mobile, Verizon, or Verizon account is seemingly one of those concessions.
That former Apple employee elaborated a bit more on these deals:
This is also why, for example, their logos appear more prominently or are the only ones called out on signage, commercials, etc… Although they really aren’t threatened by MVNO’s (the ones they don’t own) or regional carriers, it’s more like Apple is selling it as part of a package deal that’s exclusively offered to its biggest and best “tier 1” partners. It also acts as a carrot to perpetually try to motivate smaller partners into behavior Apple wants.
Another aspect of this is fraud and risk assessment. A former Apple Store retail employee told Gruber that fraudulent iPhone sales “exploded” when Apple started offering carrier financing at its retail stores.
As bad as it was with the activation requirement, it would be way worse without it. I believe it’s gotten a lot better, and the carriers have more advanced systems in place to detect and deter this behavior now. But ultimately, the carriers ate the cost for millions of dollars in devices they never got paid for.
Apple does note that while you need to connect your iPhone to AT&T, T-Mobile, or Verizon when you enroll in the Apple Upgrade program, the phone is still unlocked: “In order to lease an iPhone, you must select an eligible carrier (but you cannot use a prepaid carrier plan). A leased iPhone is always unlocked, so you can switch carriers at any time, subject to your carrier’s terms.”
You can read Gruber’s full post over on Daring Fireball.
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