Apple Upgrade Program Strengthens Apple's Hand Over Carriers, TechRadar Says
The Apple Upgrade program, now U.S.-only, offers leasing for iPhones, Macs, iPads and Apple Watches with Klarna financing, according to TechRadar. The report says it benefits consumers and Apple but increases pressure on carriers such as Verizon and AT&T.
The program is provided by Apple with financing by Klarna, the report said. Customers pay monthly over a fixed lease period of between 12 and 36 months. At the end of the lease, they can return the device to Apple at no charge or buy it out for its remaining value. TechRadar described the buyout option as particularly attractive for customers.
TechRadar traced the shift to the years before the original iPhone. Before 2007, carriers controlled which phones were sold in stores, which phones received larger marketing pushes and which devices were certified to work on their networks. Phone makers often had to customize devices with preloaded apps and carrier branding, and carriers controlled when software updates were released. Customers sometimes blamed phone makers for software problems even when a carrier's own testing had delayed an update, the report said.
The original iPhone changed that balance. When it went on sale in 2007, the report cited a description that it had the highest interest of any consumer electronic item in history, and its $499/£269 price made it the most expensive phone at the time. Carriers clamored to stock it, allowing Apple to remove carrier branding, preloaded carrier apps and bloatware, and to release software updates globally at the same time. Apple also avoided promotional pricing longer than other major phone makers, though it now works with trade-in promotions and carrier partners. The report said Samsung, Google and LG later benefited from the new playbook Apple established.
TechRadar said the Apple Upgrade program is the latest threat to major mobile network operators, including Verizon and AT&T. The report argued that customers are no longer loyal to the carrier providing mobile service but to the brand behind their favorite phone. It called the program a great deal for consumers and for Apple but a double-edged sword for the mobile industry as a whole because it gives Apple outsized control over the customer journey.
The report also recalled the iPhone's 2007 launch. Its author, who worked for Phones4U, a third-party phone reseller in the UK, said the launch decimated the business. All carriers except AT&T in the US and O2 in the UK faced an existential threat because those two had exclusive launch rights to the iPhone, according to the report.