• Financial Times, Wednesday, June 11, 2008 11 AM

Apple's switch to a subsidy versus a percentage of sales in its partnership with AT&T is an admission that the iPhone has failed to change the mobile wireless industry's business model, according to a Financial Times editorial, which adds that it's also a sensible move.

For one thing, the iPhone has not sold particularly well in Europe. That's because European competitors were able to match and then exceed iPhone 1.0's technology while selling their devices at lower, subsidized prices. This is the normal tactic of mobile operators: they offer to subsidize the cost of handsets for consumers in exchange for the right to sell them in conjunction with lucrative, binding contracts. So now Apple, with the announcement of its new 3G iPhone, is joining them, and will probably sell more handsets as a result of the cheaper upfront price.

On the other hand, the Financial Times says the move is a pity for consumers because phone subsidies are ultimately inefficient. They cause customers to change their handset every couple of years, which ultimately makes it harder for application makers, who will need to constantly redesign their programs to run on new phones.

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