During Apple's Q1 2013 conference call, when asked about the mix of iPhone 5 compared to the lower priced iPhone 4S and iPhone 4 still on the market, Apple CEO Tim Cook responded that not much had changed from last year's iPhone 4S mix relative to the iPhone 4 and iPhone 3G, then the discount options.
When all was said, done, and factored, the average selling price (ASP) was essentially the same. Why would carriers keep paying Apple their premium rates to stock the iPhone 5, and why would people keep paying more to buy it, when the iPhone 4 is now a cheaper, free-on-contract option? Horace Dediu of Asymco did the math:
The clue comes from the fact that the consumer is not the only buyer. It’s operators who buy and re-price the product. They are hiring the product to sell broadband and the newest variant is still the best hire to do that job. This observation is crucial to understanding the growth dynamics of the iPhone and consequently, of Apple itself.
Carriers want to sell data services, we want to use data services, and the iPhone is still the best way to do that for everyone. This year, add LTE to the mix, and the iPhone 5 is the best iPhone.
Apple might one day find compelling business reason to explore less expensive iPhones for emerging, non-contract markets, but it looks like the top line is doing just fine.
Check out Dediu's full post for all the charts, and his exploration of how the iPhone business looks now that Apple is reporting is separately from accessory and services revenue.