Apple’s position in the smartphone industry allows it to extract the best deal while negotiating with small carriers and retailers. A CNBC report highlights such cases in which Comcast and Charter as a part of their agreement with Apple to sell iPhones were also required to sell a large number of other Apple devices.
Comcast offers a MVNO service called Xfinity mobile with a subscriber base of 1.5 million, while Charter’s MVNO has 300,000 subscribers.
Both companies realised that to attract new customers and to offer them a better experience, they need to sell iPhones on their network as well. Coupled with their small size, this gave Apple an advantage in the negotiations.
Comcast agreement with Apple requires it to sell a certain number of iPads — somewhere in thousands — at a subsidised cost. The difference in price would then be borne by Comcast. This agreement was struck between the two companies over two years ago. Comcast sells the 6th generation 9.7-inch iPad for $422.99, while its retail price is $459. The $29.01 difference is then paid by Comcast to Apple.
Apple’s iPad revenue growth began to slow in 2016 and declined on an annualized basis during the first two quarters of 2017, prompting Apple to push the large iPad selling requirement on Comcast, one of the people said.
Charter’s agreement with Apple is slightly different because of its position as the second-largest U.S. cable company. It allows customers to use an Apple TV as a set-top box instead of its own Xfinity X1 box. This helps in the sales of Apple TVs and it is beneficial for customers as well since it offers a better experience than Charter’s own Xfinity X1 box.
As a part of its deal with Apple, Charter sells the Apple TV at $7.50/month to customers for 24 months. That’s the same price as its Xfinity X1 box but the difference is that at the end of 24 months, customers own the Apple TV while Charter will take back the Xfinity box. This deal has proved beneficial for Apple as Charter has become the largest third-party seller of Apple TVs.
While selling iPhone and other Apple devices alongside it has been beneficial for Charter and Comcast, the deal also highlights how Apple uses its position in the industry to squeeze out better deals from smaller players.