Don’t blame Apple for the US smartphone market, blame US airlines
Write this down because I’m going to tell you my secret to understanding the American mobile industry over the past twenty years. The answer to everything is ‘The Carriers’. Every question, every riddle. Do you want to know why we DO have this, or NOT have that? The answer is the US carriers: AT&T, Verizon and T-Mobile. How did Apple manage to gain monopoly power in the US and incur the ire of the Justice Department? The answer is the US airlines.
One of the strongest points Apple makes in its rebuttal to the government’s lawsuit is that the government is only considering the U.S. market, but Apple competes on a global scale. On the global market, Apple’s market share is much smaller than just in the US. It owns almost 20% of the global market, as opposed to more than 60% of the US market.
Why is there such a big difference? Is it because Samsung is incredibly popular all over the world? Will Google Pixel phones and Motorola Razr phones take off like wildfire? Of course not. That’s because there are many phones in the rest of the world that you simply can’t buy here in the US.
Half of the top 10 phone manufacturers don’t sell phones here
The top ten phone manufacturers in the world include Apple, Samsung, OnePlus and Motorola. It also includes Xiaomi, Oppo, Vivo, Huawei and Realme. While Oppo’s subsidiary OnePlus sells phones in the US, neither of the latter brands is available here. Why not? Check your notes, you wrote down the answer.
It’s because of the American airlines. Okay, we can’t blame the US airlines for the US government’s ban on Huawei products (although the government has provided no specific evidence to support that ban). However, the rest of the phones are not available in the US because the carriers do not sell them. You can find them through gray market import channels, but they have no local warranty and may not support local networks well.
It’s unclear why US carriers don’t sell half of the top phone brands here in the US, and we can only add blind speculation. Is there a political motive since all these brands are Chinese? I personally heard from a mobile industry analyst that the US government somehow influenced the airline’s decision to stop selling most new Chinese phones. That analyst wouldn’t officially mention it, so I’m taking that possibility with a big grain of salt.
The other possibility is that it is simply unaffordable for a foreign manufacturer to sell phones here. If you want to sell phones in a US carrier store, you need to work with the carriers. That means sending hundreds of devices to labs for testing, and adjusting everything on the device that doesn’t pass the rigorous testing.
It means a lot more localization work for each phone. The US carriers will also want a marketing commitment, otherwise the phones will end up on the back shelves, behind all the iPhones and Galaxy phones and unnamed budget phones branded with Verizon or AT&T.
It’s easier for US carriers to sell you an iPhone
if you have a problem with your iPhone, you don’t have to call Verizon. You can call Apple
The same motivation that keeps US carriers from selling these competing phone brands also keeps the iPhone at the top of the list. It is very easy for American carriers to sell the iPhone. Apple spends a large portion of its own money on marketing, in addition to whatever the carriers spend. There are rewards and incentives for selling more iPhones, especially if AppleCare is tied to them.
Best of all, if you have a problem with your iPhone, you don’t have to call Verizon. You can call Apple. In fact, Apple would probably prefer you call them directly.
Most companies hate customer service calls because they cost a lot of money and don’t increase sales. Carriers will refuse to stock phones if these phones cause a lot of customer service calls. That’s another reason why we don’t see Chinese phones, which tend to have poor localization and language issues, in US carrier stores.
America’s airlines buy more iPhones than anyone else
Apple is not responsible for its overwhelming market share. Instead, blame the biggest customers, the ones who buy so many iPhones that Apple’s dominance is inevitable. Apple’s top customer is not you or me. It’s the American airlines. Apple sells millions of phones directly to US carriers, and they sell them to us.
Most people in the US still buy their phones directly from their mobile carrier. Although Apple and Samsung both sell directly, and Apple even has a store in a local mall, most iPhone owners in the US bought their phones from AT&T or Verizon or T-Mobile, or from one of the smaller (often full-scale) networks who buy bandwidth of those three. After all, the carriers will give you the best deal on a new phone if you sign up for a long-term contract, and who can afford to pay hundreds upfront these days?
If there’s one reason the Apple iPhone is the dominant phone on the market, it’s the US carriers. They sell more iPhones than Apple directly, along with the Apple Watches that keep you locked into Apple’s platform. Verizon often gives away a free watch and a free tablet if you connect all your devices to their network; we see this deal every time a new model is launched.
Not only is Apple not solely responsible for its dominance of the US market, but it’s also fair to say that the US mobile market could use some exploration. After T-Mobile swallowed up Sprint, American customers were left with a much less competitive market.
Instead of going after Apple for dominating the market, the Justice Department should encourage U.S. mobile networks to offer more options in stores. The rest of the world has many more options and the global market is more competitive. If US airlines are the reason we don’t have the same choice as the rest of the world, maybe it’s US airlines that are the problem, not Apple.