Does Apple’s iPhone face ‘Carrier Barrier?’

“Consensus among gadget gurus has it that the iPhone is a winning product, deftly blending the three most ubiquitous hand-held devices–cell phone, PDA and iPod–into one. It has an unusually wide screen and incorporates some clever new technology, such as the ability to display voice mail messages in a manner similar to e-mail. And, true to Apple tradition, it has an undeniable cool factor,” Marc E. Babej and Tim Pollak write for Forbes.

Babej and Pollak write, “But beauty, inside and out, does not necessarily make for commercial success. The big sticking point could be price: $499 to $599 with a two-year Cingular contract. Will consumers be willing to pay eight to nine times the average price of a cell phone, or two to three times the price of a smart phone, for Steve Jobs’ new wonder phone?”

Babej and Tim Pollak write, “Many analysts have examined the design and features of the iPhone and deemed them sufficient to justify the price tag. But there’s another, potentially bigger cost issue here: switching networks, in terms of time and money. Buying a new computer or iPod is a straightforward product purchase. Buying a new iPhone, on the other hand, requires time, commitment and–at an industry standard of $175 to cancel an existing wireless carrier contract–a not insignificant amount of money. With a total real cost of $674 to $774, and potentially another $36 in activation charges, can the iPhone become a runaway hit to rival the iPod?”

Full article here.
Cingular has not announced their iPhone pricing, either, so the $499 to $599 price with two-year contract could just be conjecture right now; things can change before or after iPhone’s launch. Luckily for us, we’ve been following iPhone rumors for nearly half a decade, so we haven’t been under contract for years now. Other users under contract with other carriers do have the option of just waiting for the damned thing to finally expire, so they can get their iPhone without the additional $175 cancellation fee. We see no worries: consumers will buy as many iPhones as Apple can produce initially and Apple will have a built-in, up-to-two-year* ramp up period where cancellation-fee-averse users let their contracts lapse and switch to iPhones and Cingular.

* Really a year-and-a-half, because anyone who wants an iPhone isn’t signing up for a contract now that they’ve seen the iPhone and know it’s coming in June.

[Thanks to MacDailyNews Reader “Bill C” for the heads up.]

Related articles:
Research in Motion downgraded due to Apple iPhone competition – January 23, 2007
RealMoney: Apple just blew up the whole damn mobile-phone supply chain with its new iPhone – January 11, 2007
eWeek: Apple iPhone fallout: ‘They must be crying in Nokia-ville and other telephony towns today’ – January 10, 2007
Jefferies downgrades Motorola on fears of market share loss to Apple iPhone – January 10, 2007
Time: ‘iPhone could crush cell phone market pitilessly beneath the weight of its own superiority’ – January 09, 2007
Apple debuts iPhone: touchscreen mobile phone + widescreen iPod + Internet communicator – January 09, 2007

56 Comments

  1. conjecture?

    Even in the keynote address it was clear what the price will be and it will require a 2 year contract with Cingular. One thing we know from history, the price will be what Jobs says it will be and if you don’t follow the rules, “no iPhone for you.”

    Also, the CEO of Cingular stated that Cingular will have exclusive rights to additional iPhone models.

  2. It took two guys to write an article that proposes a question and answers it with a “who knows?” Geeze, my 13-y.o. is more insightful.

    And that “carrier barrier” word play is so… so… for want of a better word…gay? Ahh…it’s on Forbes!

  3. Conjecture? What planet are you from?

    The CEO of Cingular, Stan Sigman, was on stage with Steve Jobs at the iphone keynote — 5 minutes after Steve Jobs announced the 2 year contract price. Stan Sigman didn’t correct the pricing.

    While pricing can be changed in 6 months time — Cingular has officially announced their pricing at the keynote with the CEO showing up on stage.

  4. conjecture ???
    Sometimes MDN responses are a little over the top ” width=”19″ height=”19″ alt=”smile” style=”border:0;” />
    As mentioned by AL; in the keynote they did CLEARLY specify that the prices were with a two year contract. Which is what bummed me cos I was hoping for 499 / 599 retail meaning it would have be discounted further with a contract. But hey even at that price it is VERY tempting for all that it is.

  5. Terrible reporting by MDN. A couple clicks and thirty seconds is all that it takes to verify the pricing for the iPhone. Sure, MDN can criticize other’s for their innacuracies, but MDN, of course, isn’t required to let facts get in the way of a good, biased take.

  6. I really hate the exclusivity of the Cingular deal. I went to Cingular 3 years ago, and was told that (because of some medical expenses involving a hit-and-run), my credit score required me to pay a $400 deposit to sign up, or get a Go-Phone, and have access to basic phone functions only. I went with the later, and made payments on time every single month for 2 years. One would think that would give them cause to allow me to get on a normal plan sans deposit, but no.. they still wanted it.

    About a year into the Cingular fiasco, I went to get my Wife a phone. Her father works for Seimens in Venezuela and so she wanted a Seimens phone. The only carrier who had one was TMobile, and they actually treated me like a human being, allowing me to have a real plan without a huge deposit.

    For me, getting an iPhone means $175 for contract cancellation + $599 for the iPhone + $400 for Cingular’s absurd deposit requirement. So without getting into the unknown of monthly rates, I am already looking at a nearly $1,200.00 price tag for the iPhone.

    I really want one of these things, but that is a tough pill to swallow.

    *sigh*

  7. With no immediate 3G EDVO access. The iPhone is less and less desirable for those whom depend on such access. For those whom do not care, this is the phone to switch too. Those of us that need EDVO or the like will have to wait until the next version of iPhone is producted.

  8. Here’s where I am and, I bet, so are many others.

    My current phone will do just about everything that iPhone was doing for Steve (often, no, every time, Steve has better luck with his products than do the average consumer once we get our hands on them) – just not as pretty.

    I can make and receive calls, connect others (conference), take pictures, send ’em pictures, get and send email, look around on the ‘net, and even zoom in by bringing the phone closer to my nose.

    Most importantly, I’m connected via a network far more reliable than Cingular. Cingular, at least where I am and where I travel, sucks sucks sucks.

    So, I’m in no hurry. Maybe I’ll look it over in a year or so, maybe not. Once consumer reports of how well the thing works, not just how it works for Steve, will convince me to be a buyer or not.

    Sexy and pretty? iPhone wins. Competition, by the time I’m a potential buyer, will probably have done themselves a make over and, if my network offers a prettier phone for free – like they always do – I won’t ever own an iPhone.

    Is that a sucking sound I hear on this forum? Yes, I’m sure it is. In spite of all the talk, the iPhone will NOT change the world. It might not even cause a pimple on the hindside of the world.

  9. The iPhone is going to be an unequaled success in the cell phone industry. How do I know? The press.

    All this conjecture about pricing, features, interoperability, 3G and a bunch of other issues none of the authors have a clue about, is just fanning the fires of consumer interest. By writing stupid stuff, the press is insuring the iPhone’s success. The entire ‘smart phone’ industry isn’t getting this much press – combined. And it doesn’t cost Apple a dime.

    That interest will result in demos at Cingular and Apple Stores, where the truth about iPhone capabilities, etc. will be seen first hand. Apple is going to have to increase its Store’s staffs just to accommodate iPhone interest. Demos equal sales.

  10. My contract with Verizon is up in August 2008. I’m hoping that around that time Apple releases a 2G iPhone with something like 32 GB of flash memory, 3G data, and even more polish (and many of the kinks of a 1.0 product gone).

    I can wait. My current phone still makes calls and I can at least use OnSync to sync my contacts.

  11. My Verizon contract ended in May ’06 … I’ve been waiting all this time for the iphone to come out. I haven’t switched to Cingular yet, b/c I’m waiting on the final specs for the phone/service plan… but I’ll more than likely get it once it comes out.

    What really surprise me though, is the number of “ordinary” people (not ipod owners, not apple aficionado’s) in my social circle and at work who are ansciously waiting for the iphone to hit the market… so many people here in Atlanta have mentioned they are not switching carrier/cell phones until the iphone comes out.

    On another note, has anyone notice the announcement from Cingular/AT&T that their subscriber base surged beyond expectations to an additional 2.1 million members, bring the total to 61 million subscribers? Thats amazing!

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