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Why do mobile networks charge so much for the iPhone?

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Photo credit: BullionVault (Flickr)

The day before the iPhone 4 was launched I had a very insightful conversation with a member of the Vodafone UK web relations team.  Whilst his call was to offer me an iPhone 4 pre-order (despite a proper facility not existing) we had a lengthy chat about various topics including jailbreaking and the costs involved in iPhone ownership.

According to the agent, Vodafone UK did have the opportunity to carry the original iPhone and the iPhone 3G; however they chose not to because they didn’t believe that their customers would be prepared to be held to ransom by the manufacturer regarding a price point i.e Apple dictate to any carrier whom wants to retail their product what their minimum price has to be.  He said that they now realise how wrong they were given the hordes of people desperate to part with their hard earned cash in order to own an iPhone.

For most, the cost of the handset (upfront) even on a contract becomes a bitter pill to swallow because we are so used to our networks subsidising the cost of our handsets by offering them for very little or no “cost” in order to secure a contract for service with them.  Apple’s stance with their respective carriers removes this flexibility and no matter how hard anyone I know has tried to negotiate a better deal, I know of no one who has got an iPhone 4 without paying the asking price.

We’ve seen articles previously that explain the cost of the components that make up the iPhone 4.  Of course, none of us expect Apple to run at a loss.  Their company has other costs beyond buying components to assemble.  We can gripe all we like about the cost of the handset to us consumers however the laws of basic economics are very much at play here.  Apple have created a highly desirable product, they currently can’t meet the demand for supplying it and as such can name their price.  Sure, there will be people who won’t be able to get one despite their desires to own one, and there will be consumers who won’t get an iPhone out of principal; time has however proved that Apple will bring home the bacon at a price they are more than comfortable with and they’ll do so in abundance.

How do you feel about Apple’s pricing strategy and hold over network operators and consumers alike?  Got opinion or view you’d like to share on the matter? Then please join in the discussion below in our comments section.

NOTE: Notice how I’ve not even touched on the difference in price between regions?  I’ve done that intentionally since it just results in a troll flame war in the comments! =)

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