Cost to Apple of an iPhone Update: The $64,000 Question

With Apple’s release of iPhone update 1.1.4 we get exciting new, um, well, nothing. Looks like it is just a bug fix release. I wish I knew what the bugs were, but they don’t say.
But anyway, it is a free release, so no big deal, right? But even though the release is free to us, doesn’t make it free to Apple. Consider just the bandwidth costs. Everyone that downloads the update is requesting 160MB from Apple. If there are 4 million iPhones out there, then that is 160MB x 4 million, or 640 million MB, which is the same as 640TB (terabyte) of data transfered. Looking around, I see that $100 per TB is “discount” bandwidth, so that totals $64,000.
That’s a nice salary for an engineer. Well, in northern California, a salary for a starting engineer.
Now, Apple probably gets even better rates on bandwidth than I can imagine. Plus, the needs of the iTunes music store probably dwarfs this 640TB distribution anyway. But the idea is that this does cost them something, so it is unlikely it is just superficial bug fixes. More likely it is something dealing with DRM, communication with AT&T’s network, hooks for the upcoming SDK or something like that. I’m sure they don’t release a set of “bug fixes” without a very good reason.

Comments: 2 Responses to “Cost to Apple of an iPhone Update: The $64,000 Question”

    Mike Evangelist
    2/27/08 @ 8:51 am

    It costs far, far more than just the bandwidth costs. They have hundreds of people working on developing/updating/testing the iPhone hardware and software. You can pretty much assume than even minor changes cost millions.

    2/28/08 @ 1:02 pm

    AND, inside that question is the answer to why the iPhone will continue to get better and better.

    The answer to how much it costs for an iPhone update (also considering the costs for all those people working on it, too) — leads one to question how they pay for and fund all those “continuing” costs, beyond simply building the product and sellling it.

    Well…, as you well know (by now), Apple gets continuing revenue from the authorized phone companies that sign up the iPhone users. And it’s — here — that we have the answer to why the iPhone will continually get better and better, all the time — even with the original model that people have purchased, without having to resort to buying a “generation 2” model. That’s because the continuing improvements are continually funded (indefinitely) by the phone companies sharing part of their revenue, when then goes into improving the user interface and continually adding features (and paying for all those people to do it).

    There’s no incentive for the other phone manufacturers to improve *anything* once they have sold you their phones. You’re stuck with the same old thing. If you want “better” you have to pay for another phone to get better.

    With the Apple iPhone, since it was designed as primarily a “software device” encased in hardware — that means Apple is able to continually improve the functionality of the iPhone, because hardly anything is “locked in stone” (i.e., “hardware” [besides a very few things]). That means the iPhone is “wide-open” for all sorts of improvements and the money to continually improve it keeps coming in every single month. Apple has a continuing cash-flow to always improve the iPhone and pay for all those people to continually do it and keep paying for all that bandwidth to continually send out those improvements.

    It’s a “model” that is — indeed — revolutionary and benefits the consumer — and all for a *very fair price*.

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