First, let's look at the carriers. Today, ATT announced an earnings of $3.23 billion last quarter. Depends on how you look at it, they had a great quarter with 2.4 million new iPhone subsidized, but it also meant they would take a short-term hit on earnings.
And this goes to a much larger issue of how wireless carriers do business going forward. In order for other carriers to compete with ATT, they would also have to provide larger subsidies than they traditionally would offer. According to JP Morgan analyst, Michael McCormack, he was distressed by the drop in margin for ATT and has thus lowered the forecasted margins for Verizon and Sprint as well. He points to the price of Sprint's Instinct as an example of how carriers are forced to defend their business and top handsets to lure customers.
Right now, no one knows how much Blackberry's Storm is going to cost Verizon to put on the market. ATT's Blackberry Bold will be available on November 4th for $300. It's like Verizon will need to match that price at the very least but lower it even further to $200 to compete with the iPhone.
To make matters worse for ATT's competitors, Apple seemed very confident about the iPhone's competitive situation. If customers are not buying handsets that are not competing on price with the iPhone alone, ATT's competitors could be missing out on another source of revenue, 3G wireless plans that smartphones require to take advantage of all the features they offer.
We'll know the extent of Apple's impact in the mobile market on earnings when Verizon and Sprint report their earnings and, later, how Storm will be priced next month. And just so we're clear, the Blackberry Storm may not cheap to subsidize.
Note: We'll get into iPhone's impact on gaming and advertising next.