Analyst: Forget about near-term AT&T subsidies on Apple’s next-gen iPhone

“Next week, Apple Inc. CEO Steve Jobs is expected to announce the next iteration of the company’s iPhone at Apple’s annual developer conference,” Phil Carson reports for RCR Wireless News. “In the run-up to the purported announcement, several issues have been bandied about by the global media, which has been fascinated by the device and its disruptive effect on the cellular industry — effectively creating the buzz that Apple’s PR department could never deliver.”

“One of the most-discussed issues is whether AT&T Mobility — and, conceivably, other operators across the globe — will subsidize the device to a disruptive price point from its current perch at $400 and $500, for 8 GB and 16 GB models, respectively,” Carson reports.

“Recent, general remarks about the efficacy of subsidies by AT&T Inc.’s CFO Rick Lindner on May 22 at a Reuters conference in New York further fueled speculation on the issue. Media speculation has focused on possible iPhone pricing as low as $200. Neither Apple nor AT&T Mobility have publicly, directly addressed the topic,” Carson reports.

“Analyst Roger Entner at Nielsen/IAG, however, dashed some cold water on the notion of near-term subsidies last week,” Carson reports,. “‘There’s no need to upgrade the device’s capabilities and lower its cost at the same time,’ Entner said. ‘AT&T Mobility first will have to see the effect that a 3G iPhone will have on its HSDPA network. Right now, that HSDPA service is robust, with only a few million laptops riding on it. Add a few million iPhone users, who are heavy users of the Internet, and it could be like shaking a skyscraper. AT&T Mobility is not just selling a device, it’s selling a service. AT&T Mobility doesn’t want complaints about its service. That would spell out no abrupt price subsidy for the device.'”

Carson reports, “An iPhone subsidy, should one be contemplated, would represent ‘a secret weapon for Christmas’ should Apple and/or AT&T Mobility determine that they need to gin up device sales to reach or exceed Apple’s 10 million-unit goal by the end of 2008, Entner said.”

Full article here.

26 Comments

  1. Another $200 price drop for the Holidays? Great way to piss off everyone all over again. I think the price drops now (or there is some sort of incentive for signing up with a carrier) or not at all.

  2. It makes sense what he says. I wasn’t holding my breathe for subsidy price. anyway. Not so much the service part but the whole share profit contract between at&t;apple nobody knows if it is a percentage off bill or is a set number for every iphone account. So don’t put your heart into getting it on the cheap only to be let down if the prices hold. To me the iPhone has worth every penny since day one.

  3. The best salespeople for the iPhone are the ones who already own version 1. Apple should make sure they offer an upgrade program that is simple (sell your phone to a friend, transfer the SIM easily, and get a bonus for buying version 2).

    That will ensure a few million in sales without much effort.

    I’m ready for version 2.

  4. Why can’t Apple sell both? It seems that they could continue to sell the first generation iPhone at a reduced cost while introducing a 3G version at the current price point. This would allow even more iPhones to be sold to people not willing to fork out $400 but might be tempted at a $200 – $300 price range.

  5. I don’t understand why people keep contemplating a “subsidy.” Doesn’t AT&T;already pay Apple a percentage of the monthly fees? Shouldn’t we be contemplating an increase in subsidies?

  6. Mas:

    You can’t be serious! I’m curious, what do you think would be the minimum time frame a business is required to wait before they would be allowed to lower their price?

    The article suggest that there would be no price change now. In other words, iPhone 3G would be sold at the same price iPhone 2.5G was for the past nine months. Such a policy would be mostly in line with Apple’s past practices with iPods, Macs etc (Product refresh at same price point). This price would presumably hold until Christmas. Do you honestly believe that there should be NO price change at all (not even at the end of this year)???

    I wouldn’t be surprised if the fully subsidised price continues to be $400 (let’s not forget, AT&T;is passing those subsidies back to Apple, not to the consumers, as they usually do with other handset makers). With all the additional agreements around the globe in place, Apple should have no problem meeting the target, even at existing prices.

    The price reduction can only be used if really necessary (at the end of the year) to meet some more aggressive numbers.

  7. “”Why can’t Apple sell both? It seems that they could continue to sell the first generation iPhone at a reduced cost while introducing a 3G version at the current price point. This would allow even more iPhones to be sold to people not willing to fork out $400 but might be tempted at a $200 – $300 price range.”
    @Macmental
    Using version 1 iPhone at a lower price point is a perfect way to introduce iPhone goodness at a lower price point. I, for one, am not interested in 3G since I am around WIFI all day long. Unless there is some other compelling feature (and GPS is not it) I will not be buying one. I’ll upgrade to 2.0 software and see what happens.

  8. @mas
    If the iphone does sell for $200 in christmas that is through AT&T;’s doing… not apple. And if people fear the price drop then they can wait and see if really does drop. It wont help anyone that already has a plan though. I’d assume most definitely that it requires a 2 year activation to get the discount. I already have a phone on a business account so I’ll be paying whatever the cost is for the iphone.

  9. I’m with you MacMental. I think the iPhone will split into the iPhone and the iPhone Pro . . . that way they can achieve the lower costs, but keep the price higher on the model that gets all the new hardware features. Why not make everyone happy . . . and help yourself to more profit while you’re at it.

  10. I think this may be a golden opportunity for Apple to help curb the number of people unlocking the phone. I know Apple doesn’t really care much about this but I bet AT&T;does. Apple could probably convince AT&T;that this is the perfect way to ensure that people sign up with AT&T;. All they have to do is keep selling the phones them selves, for $400-$500 but offer an immediate $200 rebate to your credit card as soon as you active the phone via iTunes.

  11. Mas:

    Get over it. Prices drop or functionality goes up (sometimes both) as time rolls on. It’s just the real world.

    As a phone example: a few years ago Motorola was selling it’s Razor through Cingular at list price with a two year contract for many months then as a special for Father’s Day Cingular offered the phone a *zero* cost with a two year contract. Did Motorola or Cingular even offer to compensate *anyone* who bought the Razor a few weeks or months previously at list, or near list, price? No! In this regard Apple has been much nicer to the iPhone purchasers than virtually any competitor has ever been.

    If you really don’t want prices to go down, I’ll sell you my original 128k Mac and Imagewriter at the original price. I’ve got them in a closet somewhere collecting dust.

    Apple/AT&T;dropping the price by 25% or more on Black Friday would be a great way to get a large influx of new iPhone purchasers over the holiday season.

  12. “The best salespeople for the iPhone are the ones who already own version 1”.

    Too bad, as my experience with ATT&T;has been painful at best. I have 2 dead spots, home and work, more dropped calls in 1 day than over 10 years with Verizon. Both ATT&T;and Apple have tried to help, very professional etc.. bottom line is the service is just bad for me. Actually have had to borrow customers phones at work to complete business!. I still think the device itself is the best available, if 3G offers an improvement in signal, I would buy it no matter the cost.

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