If you look at a pure telecom company like Verizon, they're at $13.6 billion in profits (for 2017) on $125 billion in revenue. Apple is at $50 billion in profits on $229 billion in revenue (for 2017). So Apple's margin is almost double.

Also, "consumer revenue" is the key word. The biggest R&D players in telecom don't sell to consumers. Intel and Qualcomm sell chips (and ARM just sells you IP). They don't make the chip in house and sell you a complete phone. At the same time, a company like Verizon or Comcast that sells to consumers isn't vertically integrated and doesn't do its own R&D. They buy all their equipment from other companies that do the R&D. You don't have vertically-integrated company that uses consumer revenue to bankroll the R&D. You have specialization and market transactions mediated by, among other things, patents.

Contrast web technology, where there’s no patents and no markets. Nobody sells browser engines. There is no specialization. It’s all driven by Apple, Microsoft, and Google, who invest in the R&D to further their consumer-facing platforms.

Verizon (and most telecoms for that matter) plays games by being hundreds if not thousands of tiny partnerships, which obfuscates their profit.

Verizon is a holding company. It's structured as a holding company with numerous subsidiaries because it's got physical property all over the country, and is subject to literally thousands of different regulatory regimes: federal, 50 states, thousands of city and county utility boards. But its profit figures are reported on a consolidated basis. (And if you have hard evidence to the contrary, man do you have a valuable lawsuit on your hands.)

It's setup in slightly different ways for different niches in the market, but on the mobile side it's a holdover from original FCC regulations on how ownership of spectrum worked. The FCC wanted to encourage competition, so they heavily emphasized partnerships with little mom and pops for each local region of spectrum. After the FCC removed those regulation requirements, those partnerships were still useful as sort of bellows of profit so that the C level can manage their growth curve.

This is all not really private information, is how pretty much all of the telecoms are structured, and isn't illegal.

Is profit from those partnerships not being reported as income to the holding company?

Not the other 30% or 49% or what have you that's not owned by the national company. But the nature of how the national company handles so many services for the partnerships means that 'negotiations' can change how the money flows around year after year in a way thats controlled by the national company (I say national company because they really are more than just holding companies, they handle large pieces of the business as well).

The profit that accrues to those partnerships either never gets back to Verizon (in which case how is it relevant?) or simply "bellows" (as you put it) the cash flow to Verizon. In the latter case, it'll still show up in long-term measurements. But at the end of the day, Verizon's 5-year profit margin is 13% while AT&T's is 11%. That's about the same as Starbucks. Google and Apple are at 20%+, and Facebook is at 28%.

>What are you talking about?

I suspect what the poster is talking about is telecom equipment manufacturers, not service providers. Yes service providers reap obscene profits. Equipment manufacturers are typically much more challenged by competition and commoditization.

It used to be that the service providers did massive amounts of R&D. Hell, Bell labs was one of the most impressive R&D laboratories of all time. The service providers just decided that it was better to buy themselves protective laws, and to squeeze out any R&D than to try to actually compete.

This isn't a sign of how important patents are, but a sign of how the extreme rent seeking behaviors of the telecoms greatly manipulated many aspects of the market that they're in.

AT&T (of which Bell Labs as a subsidiary) was a vertically-integrated nationwide monopoly that bankrolled its R&D using its massive consumer revenue. Most people would consider the current market structure, where service providers are separate from equipment manufacturers, to be an improvement.

And yet, it was the fiscal year of 2017 that has had the historical highest profit margins, not their years of (highly regulated) national monopoly.

https://www.thestreet.com/story/14243906/1/how-at-amp-t-mana...

You're still only pointing to two different basic models: companies that recover R&D expenses through vertical integration and direct-to-consumer sales (old AT&T, Apple, Google), and companies that recover R&D expenses in markets mediated by patent protection (Intel's wireless business, Qualcomm, Broadcom). Is your point that the former is preferable?

Also, you're comparing apples and oranges. AT&T today sells a different, much more valuable product than AT&T in 1970. Back then, a household might have one phone line and demand growth was basically nothing. Today, households have multiple cell lines, they're willing to pay much more for them, and demand keeps exploding. Likewise, Google is more profitable than AOL was at it's peak--it sells a different, much more valuable product.