Why Telstra does not want you to buy its iPhone 3G

Stan Beer
Friday, 11 July 2008 10:23

Business IT - Technology

For an organisation like Telstra, run by sales staff, less profit from an iPhone 3G than say a Nokia N95, may well dictate the terms which product gets preferential treatment.

Judging by Telstra's data plans, which are virtually unaffordable for ordinary iPhone users, Telstra does not really want the device to be used in the way for which it was designed.

Profit per unit sold aside, the iPhone presents Telstra with a direct competitor to its own mobile music store. The vertically integrated Telstra sales division responsible for music store sales could not possibly tolerate a much better and globally far more powerful competitor taking away business.

So why did Telstra build one of the best 3.5G networks in the world if it didn't want its mobile phone users including owners of the iPhone 3G to use it? Simply because what Telstra had in mind was selling NextG data cards and access plans to laptop computer users not mobile phone users.

What Telstra wants to sell to mobile phone users are voice and SMS services supplemented by its own integrated consumer 3G data services. It doesn't want mobile phones to be used as roaming Internet access devices with push email and downloading music from iTunes because that would rob it of revenue.

Keeping the network expensive also keeps more people off the network, as cheaper prices would encourage more people to jump on board. But more people means more congestion and the need to increase capacity faster. Telcos always need to increase capacity and certainly Telstra is already upgrading the Next G network for faster speeds - 21Mbps by the end of the year and 42Mbps by the end of 2009.

But all this expansion doesn't come cheap, and to flood the network with too many users now simply means more problems to have to deal with - plus you make less money per user!

So keeping prices high, whether for data card users, mobile phone users, smart phone users iPhone users is a firm part of the plan and seems only likely to change once Optus and Vodafone's 3.5G rollouts are complete.

That's because they can apply some nationwide competitive pressure on coverage, speed and data, but that's not the case today, so once again, why drop prices? So you can make less money? That's not the Telstra way, so prices stay high, Telstra has a greater ARPU (average revenue per user), lower congestion, fewer complaints - but still gets to sell the iPhone anyway.

As far as the iPhone 3G is concerned, Telstra doesn't have a problem as long as it's used as a phone and to send costly SMS messages. However, as we all know, the iPhone 3G transcends those boundaries - and that's something Telstra takes a dim view on.