Ars Technica takes a long look at the business issues that are holding back the iTunes phone. Carriers like Sprint and Verizon make their money on value-added services like “data” and “ringtones” not on low-profit services such as “giving customers great phone service at a sane price.” Cellular networks are top-loaded businesses. You have to shovel in millions of dollars at the outset for connections and switches, but once that’s paid, the cash that rolls in is just gravy (and we all know how good gravy tastes).
By offering music from the iTunes Music Store at the preset 99 cents, Apple is watering down that gravy. That’s a no-no. If any music service, iTunes included, takes off, it will definitely cost twice or three times that at the outset until price wars set in. It’s not like Apple to play nice when it comes to licensing out its gear and intellectual property anymore, so now we have a stalemate.
Mobile carriers balking at iTunes phone [Ars Technica]
