They should have just given everyone that bought one of these beauties a full refund. Apple may TEND to have good product quality, but they have their share of lemons too, and when they do they are just as reluctant to make things right as the next company over.

sell users the apps and services

BUT… I think it is fairly well accepted that what is revolutionary about the iPhone doesn’t have all that much to do with the physical hardware. I don’t think it is unreasonable to think that the hardware is really nothing special in terms of the technology (looks good though as is typical of Apple).

I’m glad for the existence of the iPhone because I think it proves that the industry could have been doing a lot more than they were. The existing (pre-iPhone) cell-phone industry was comfortable tinkering with price-plans built around a common set of hardware. Much of THAT hardware was (and still is) overpriced too. My phone (an “ordinary” smart phone from Motorola) was listed at something like $400 when signed up for a two-year plan. That number is ludicrous! Nobody in their right mind (and spending their own money) would pay that much for the hardware alone. But we’ll hold our nose and pay $50 for it with a two year commitment. However it is worked out between Motorola and Sprint (my bargain-basement carrier) I don’t care. But I’m sure neither of them are losing money, and in the mean time I have a crippled (by Sprint) phone that allows me to check my mail while on the road and gives me 10 times more “talk-time” than I typically use.

The carrier’s gimmick is to get you to not think about all the minutes you are not using each month for that fixed fee. The hardware-makers gimmick is to bundle their hardware with a plan so that they get their money up front and the carrier plays the roll of banker.

I think Apple could, and SHOULD take over more of the market, for its own good. The reason is that unlike the vacuum that iTunes moved into, there is already a large (maybe too large) cell-phone infrastructure. They may be putting a hurting on some of the marginal players now, but eventually they are all going to wake up and start responding, whether with Android, Windows, or something else. At that point a lot of the people who jumped to get an iPhone may jump to get something else. Remember, tons of people were not happy with having to go with AT&T here in the US just to get the fun new toy. When there are half a dozen iPhone alternatives (in functionality) and a variety of plans from a variety of carriers we are going to see a re-play of the PC-wars of the 80s. The results will be the same too, and not good for Apple, unless they do something differently this time. Having more of the market locked up at the start of this new competition is one thing they can do now. There are other things they will need to do later as well (like deals with other US carriers for example).

What is his estimate based on? Some geek’s deconstruction of the iPhone and guessing what the parts costs to build the phone? (Ignoring labor and manufacturing costs, shipping, marketing and time spent on shelves, of course.)

I suspect Apple’s profit margin is already closer to 30 percent. A friend of mine who is an insurance underwriter for large construction companies told me (long before this economic downturn), “I’d kill to have a seven percent profit margin.”

I’m pretty sure AT&T worked out the math when they agreed to the subsidy – it’s not like there are any surprises in the numbers. A device that pulls subscribers so easily from a competing carrier doesn’t come along every day, or even every year. I’d say AT&T is pretty happy with the relationship.

As far as the $99 phone goes: Apple knows how to protect their brand. This is not a device they want to associate a $99 price tag with, it devalues the brand. The iPhone is their mobile platform for the near future. Apple wants to make sure consumers regard it as the premium product that it is.