CNN reports that due to the heavy discounts applied to the iPhone by carriers, sales of the device destroy their bottom lines. Take for instance Verizon, the wireless company that started selling the iPhone in February 2011. Their “EBITDA service margin,” which is a metric that carriers use to “measure their core profit as a percentage of their sales, has dropped dramatically since they began selling the iPhone.

Between 2009 and 2010, Verizon averaged a EBITDA service margin of 46.4 percent per quarter. That fell to 43.7 percent in the quarter that the iPhone went on sale. It plunged even further last quarter when they sold 4.2 million iPhones to 42.2 percent.

Funny enough, their margin bounced back up to 47.8 percent during the third quarter last year. Why is that? People stopped buying iPhones.

AT&T has always sold more iPhones than other carriers which hurts them in a big way. Their margin was at 28.7 percent last quarter, compared to 37.6 percent the year before. The main cause – they sold twice as many iPhones last quarter.

Sprint already had a low margin to begin with, but they really took a beating once they began selling the iPhone. Their margin fell to 9.5 percent from 16 percent a year earlier. Sprint placed the blame squarely on the iPhone for their poor figures.

Analysts agree that the iPhone is bad for wireless carriers. As sales of the iPhone grow beyond anybody’s expectations, the subsidies from the devices will keep on hurting the profits of their carriers.

Carriers pay around $450 per device they sell which is the highest in the industry. AT&T is hurting even more since they offer the iPhone 3GS for free.

Sprint agreed to pay $15.5 billion in up front costs to Apple over the next four years for the device. They don’t even expect to make money on it until 2015.

The cost of adding an iPhone customer is about 40 percent higher than a non-iPhone customer according to Sprint.

Why would these companies destroy themselves over the iPhone then? It’s a matter of keeping customers. Sprint’s CEO told CNN last year that they offered the iPhone because customers were leaving to other carriers that had the device.

The only way that carriers are going to make money off of the iPhone is to raise rates or force Apple to lower their subsidies. Since nobody wants to tell Apple what to do, that’s why carriers like AT&T have been coercing customers into getting more expensive plans.

That’s the only solution making any sense right now so expect to see higher monthly bills in exchange for having an iPhone.

Consumer Intelligence Research Partners has released a study today that sheds some light on the issue. According to their data, 18% of those who bought the iPhone 4S at its launch in October were switching from other smartphone platforms like BlackBerry and Android. For October, November, and December 2011 combined, that number jumps to 36%.

Additionally, CIRP’s data showed that the iPhone has had a significant impact on the market shares of the major carriers. Three of the four major carriers – AT&T, Verizon, and Sprint – carry the iPhone. The fourth, T-Mobile, does not. CIRP’s data showed that T-Mobile lost market share during the first three months of the iPhone 4S’s availability, while the other three maintained their market share.

Interestingly, the fact that 36% of new iPhone buyers were coming from other platforms seems not to have had much of an impact on those other platforms’ market share. According to an analysis released by StatCounter at the end of 2011, BlackBerry and Android continued fairly steadily in their respective trends throughout the last quarter of 2011. BlackBerry declined steadily throughout 2011, and showed no change in the rate of decline during the three months the iPhone 4S was available. Android, meanwhile, continued its steady climb throughout the year (even surpassing the iPhone in late summer), though it did show a very slight levelling off in October, around the time of the iPhone 4S’s launch.

[Hat tip, AppleInsider]

The Carrier IQ scandal broke in early December following a YouTube video by Android app developer Trevor Eckhard purported to show Carrier IQ’s software – which he called a “rootkit” – accessing a wide variety data on an Android phone. His demonstration showed the software intercepting web traffic, location data, keystrokes, and even SMS messages. Carrier IQ insisted that they had no interest in users’ personal data, and that their software was nothing more than a diagnostic tool for carriers to collect data on handset and network performance.

The scandal blossomed into a full-blown ordeal as the software was discovered on Sprint, AT&T, and T-Mobile phones. The scandal spawned several lawsuits and drew the attention of Al Franken, the FTC, and the FCC. As more information became available and cooler heads began to prevail, it began to look more and more likely that Carrier IQ’s protestations of innocence were right, and that their software really was simply a tool for diagnosing network and handset performance. Which means that in all likelihood Sprint and HTC are removing Carrier IQ from their handsets in order to replace it with something else, since they need the kind of data Carrier IQ likely gathered.

Mobile carrier Sprint is hoping to help some of these people this holiday season through its Assurance Wireless program. The program provides a free cell phone and 250 minutes of free wireless service each month for eligible participants.

Although the qualifications for eligibility vary from state to state, the program is designed to help those involved in government-assisted programs or those with low-incomes.

Jack Pflanz, a spokesperson with Sprint, told WebProNews that the mobile carrier hopes the program will help those who are struggling reduce their costs and also communicate with potential employers in order to find jobs.

“So many people are out of work, and so many people are struggling to make ends meet,” he said. “It’s a way for us to be able to assist folks who are trying to find ways to save money and for folks that are trying to find work.”

Assurance Wireless is part of the Universal Lifeline program, which is supported by the Universal Service Fund. Pflanz explained to us that each carrier is required to contribute but can create their own variation of a program.

At this point, Assurance Wireless is available in 31 states with the most recent addition of Kansas. However, Pflanz said the program hoped to expand further going forward.

For those who do not qualify for Assurance Wireless, Pflanz also told us about another option that could help people out. As he explained, payLo by Virgin Mobile is geared toward people who just need a simple phone for making phone calls and texting. This service offers rates as low as $0.20 per minute.

“What we’re trying to do is provide quality, reliable phone service to those folks who are having a real hard time in this economy and can’t necessarily afford phone service,” said Pflanz.

He went on to say that Sprint expects both programs to grow and that it would continue to provide the very best service to its users.

Unfortunately, 2011 isn’t over yet and it’s still got some despair in store for AT&T.

Consumer Reports released the results of their annual satisfaction survey today and, probably to the surprise of exactly no one, AT&T was rated the lowest among the four largest cellphone service providers in the United States for the second year in a row. Ranked worse than Verizon (which scored the highest), Spring, and erstwhile AT&T acquisition T-Mobile, the report deals AT&T some damaging news – and this isn’t even the full report yet so who knows what terrors lurk ahead for AT&T once the entirety of the results go public. Then again, maybe it’s old news to AT&T since they’re on a losing streak lately.

The report assesses customers’ satisfaction in areas of general service as well as customer-support experience. The full details of the report will be made available in the January 2012 issue of Consumer Reports. If you can’t wait to see all the ways in which the survey damns AT&T, consider what last year’s survey unloaded:

Over half of the survey respondents who used AT&T as a carrier owned some version of the iPhone, the Apple smart phone that is exclusive to AT&T, at least for now. Consumer Reports data, reflecting all versions of the phone, found that iPhone owners were much less satisfied with their carrier and rated data service (Web and e-mail) lower than owners of smart phones on other carriers that, like the iPhone, have a host of apps to encourage heavy data use.

“Our survey suggests that an iPhone from Verizon Wireless, which is rumored, could indeed be good news for iPhone fans,” said Paul Reynolds, Electronics Editor for Consumer Reports.

Not only did the prediction of a Verizon-based iPhone come true but Sprint customers got the opportunity to get their paws on an iPhone, as well, so it will be curious to see if the wider availability of iPhones affected cellphone users’ selection of service provider.

If you’re an AT&T subscriber, how do you feel about this report? Does it sound pretty familiar to your experience?

To give you a better idea, when the FCC announced its net neutrality requirements, some Internet watchdog groups made note of the lack of protection concerning the mobile web. These issues have previously caught the eye of Senator Al Franken, long a proponent of mobile device user and their privacy. So it was no surprise when Senator Franken reacted to the Carrier IQ controversy.

Over at his official site, Franken’s staff posted an in depth reaction to Carrier IQ, along with an official letter written to the Carrier IQ CEO, Larry Lenhart, asking to stop their tracking practices. There’s also an official quote from the Senator, as he furthers his position as mobile privacy champion:

“Consumers need to know that their safety and privacy are being protected by the companies they trust with their sensitive information,” said Sen. Franken. “The revelation that the locations and other sensitive data of millions of Americans are being secretly recorded and possibly transmitted is deeply troubling. This news underscores the need for Congress to act swiftly to protect the location information and private, sensitive information of consumers. But right now, Carrier IQ has a lot of questions to answer.”

Franken’s support for the PIPA/SOPA movement aside, at least his priorities are straight in relation to location privacy, a topic that is a long way from being resolved.

The fact that Carrier IQ exists and is installed by service providers proves just how unregulated the mobile industry really is. Furthermore, the fact that AT&T and Sprint would even think attaching that kind of software to products intended for consumers is prudent and/or ethical shows the need for some kind of standards and limitations when it comes to mobile devices. It’s pretty obvious a great deal of this type of data collection is for marketing purposes, but the question is, should these companies even be allowed to track their customers in such a manner?

At least one member of the United States government doesn’t think so. In his letter to the Carrier IQ CEO — it would’ve been nice if Senator Franken would’ve included the service providers as well — asked the following questions:

(1) Does Carrier IQ software log users’ location?

(2) What other data does Carrier IQ software log? Does it log:

a. The telephone numbers users dial?
b. The telephone numbers of individuals calling a user?
c. The contents of the text messages users receive?
d. The contents of the text messages users send?
e. The contents of the emails they receive?
f. The contents of the emails users send?
g. The URLs of the websites that users visit?
h. The contents of users’ online search queries?
i. The names or contact information from users’ address books?
j. Any other keystroke data?

(3) What if any of this data is transmitted off of a users’ phone? When? In what form?

(4) Is that data transmitted to Carrier IQ? Is it transmitted to smartphone manufacturers, operating system providers, or carriers? Is it transmitted to any other third parties?

(5) If Carrier IQ receives this data, does it subsequently share it with third parties? With whom does it share this data? What data is shared?

(6) Will Carrier IQ allow users to stop any logging and transmission of this data?

(7) How long does Carrier IQ store this data?

(8) Has Carrier IQ disclosed this data to federal or state law enforcement?

(9) How does Carrier IQ protect this data against hackers and other security threats?

(10) Does Carrier IQ believe that its actions comply with the Electronic Communications Privacy Act, including the federal wiretap statute (18 U.S.C. § 2511 et seq.), the pen register statute (18 USC § 3121 et seq.), and the Stored Communications Act (18 U.S.C. § 2701 et seq.)?

(11) Does Carrier IQ believe that its actions comply with the Computer Fraud and Abuse Act (18 U.S.C. § 1030)? Why?

Too bad location data and the related privacy issues don’t have the same kind of in-house support things like SOPA and PIPA do.

Over at Amazon Wireless, the details of the sale are discussed, which are as follows:

For a limited time only, all phones from Verizon, Sprint, and AT&T with a new line of service are on sale for a penny and include standard FREE Two-Day Shipping. Offer valid between midnight PDT November 21, 2011, through 11:59 p.m. PDT November 28, 2011, while supplies last. Plus, if you buy an eligible hotspot-ready smartphone and activate the hotspot feature, you’ll get a $100 Amazon.com Gift Card.

There are a number of Android-powered handsets as well as BlackBerry. However, for those of you wanting to grab a new iPhone 4S during Amazon’s sale, sorry, no Apple devices are included in the one cent blowout. That being said, the DROID RAZR 4G (from Sprint) is available, as is the BlackBerry Torch. The HTC Thunderbolt falls into Amazon’s sale, and there are a few Samsung handsets as well.

Basically, Amazon’s smartphone sale carries just about every phone except the iPhone. If Amazon’s list is comprehensive, there are almost 97 phones featured in during the one cent sale, which, according to Amazon’s disclaimer, is “valid between midnight PDT November 21, 2011, through 11:59 p.m. PDT November 28, 2011, while supplies last.”

Phones purchased during the sale are required to have a two-year contract, which is the same stipulation issued for AT&T’s one cent sale. As for the iDevice family, Apple is also having a Black Friday sale. Unfortunately, there are no one cent iPhones or iPads, although, the tablets are scheduled for an apparent markdown.

And the sales of the iPhone 4S have been good for all carriers that offer the device – AT&T, Verizon, and Sprint, who made the iPhone 4S their first ever Apple product. But the iPhone 4S performs differently on each network. And according to a study by Metrico Wireless, there are advantages to owning the iPhone 4S on both Verizon and AT&T.

First up, in terms of data speed for the iPhone 4S, AT&T dominates. They maxed out at 6047 Kbps and had a mean rate of 3210 Kbps. Second place went to Verizon, but they weren’t really even close. They maxed out at 2371 Kbps and had a mean rate of 1071 Kbps. Sprint finished in last place:

So, after scoring one for AT&T in terms of data speed, let’s score one for Verizon when it comes to reliability. Metrico tested call failure rates and found that Verizon was the best, with only a 2.1% failure rate. AT&T placed second with 2.8% and Sprint brought up the rear again with 3.7%.

Metrico downloaded 21,000 pages, made over 6,000 calls and performed 8,000 speed tests to come up with this data.

Do you have an iPhone 4S? If so, what network do you use? Do these findings hold true to your personal experience? Let us know in the comments.

Are you surprised?

Some wondered how the brand new iPhone 4S would sell right out of the gate, considering the backlash regarding the big unveiling on October 4th. If you remember, it was widely expected that Apple would launch an iPhone 5 this year, and many hoped that it would be a massive redesign. Instead they got an iPhone 4S with some upgrades on the inside (A5 processor, 8 MP camera, Siri) – but no change on the outside,

But apparently that doesn’t matter, because people forgot one simple fact – it’s a new Apple product. And it looks like the iPhone 4S has sold its pre-order stock in a way befitting any Apple device.

Apple announced this morning that pre-orders of the iPhone 4S topped 1 million in just one day. This blows the previous sales record of 600K for the iPhone 4 out of the water.

“We are blown away with the incredible customer response to iPhone 4S,” said Philip Schiller, Apple’s senior vice president of Worldwide Product Marketing. “The first day pre-orders for iPhone 4S have been the most for any new product that Apple has ever launched and we are thrilled that customers love iPhone 4S as much as we do.”

And here’s the consequence of that excitement – iPhone 4S stock is running low.

• On Apple.com, all 3 models (16 GB, 32 GB and 64 GB) say that they will ship in 1-2 weeks.
• Over at Sprint, the 16 GB iPhone 4S is listed as sold out.  The other two are still available for pre-order.
• On Verizon, you can expect all three models (black or white) to deliver on October 21st (one week after the phone officially hits stores).
• Finally, with AT&T, every version of the iPhone 4S currently ships in 3-4 weeks.

So it looks like the iPhone 4S disappointment hasn’t really been a factor. The pre-orders suggest that Apple has another massive hit on their hands.

Remember, if you can’t pre-order the 4S that you want, you can always get in line at your local Apple store. The device will go on sale at 8 am local time this Friday, October 14th. If you choose to camp out, make sure you check your town’s laws regarding urban campfires.

Just two weeks ago, speaking at GigaOm’s mobilize conference, Sprint’s CTO Stephen Bye said that Sprint was committed to unlimited data.

Now we get confirmation that Sprint will indeed offer unlimited data plans for the iPhone 4S.

Sprint spokeswoman Michelle Leff Mermelstein told All Things D that the carrier will offer unlimited data plans starting at $69.99. This plan will include unrestricted data as well as 450 voice minutes and unlimited mobile-to-mobile. If you want unlimited everything, data and voice, you’ll need to shell out $99.99 a month.

On top of those base prices, you can also expect to add a $10 smartphone surcharge.

This is undoubtedly a big draw for Sprint. They are now offering something that both AT&T and Verizon don’t offer anymore – unlimited data on an iPhone. New customers signing up with AT&T or Verizon will learn that their data plans now work on a tiered pricing structure.

Will Sprint be able to keep unlimited data plans? Back in September, analysts speculated that Sprint might not be able to offer unlimited indefinitely – that they might opt to switch to a tiered structure once they have pulled a number of users away from AT&T and Verizon.

As far as all the new traffic that will come from gaining the iPhone – Sprint says they can handle it: “We have every confidence in the ability of our 3G network to handle the influx of devices we expect to get,” said Mermelstein.

Sprint CTO Stephen Bye, last month at the mobilize conference, said that there was “clearly a cost to support unlimited,” but they were committed.

The iPhone 4S will drop on October 14th on the Sprint network.