How AT&T should handle the iPhone 3G S price backlash

“iPhone mania is biting back at AT&T,” Rita Chang reports for Advertising Age. “A stream of online chatter that began shortly after Apple announced that a faster and beefed-up iPhone would hit AT&T on June 19 has swelled into an online tsunami of discontent among iPhone users upset that they can’t purchase the new iPhone for $199. If they want the new iPhone 3GS, they will need to fork over at least $399 for the entry-level 16-gigabyte model.”

“The outrage has led to a Twitter petition asking AT&T to ‘offer reasonable iPhone 3GS upgrade prices,'” Chang reports. “Of course, many consumers aren’t aware that the handsets they buy to go with their service plans are subsidized by the carrier, who hopes to recover that cost by locking subscribers into two-year contracts. The $199 is the subsidized price paid by current 3G iPhone users; AT&T has to pay Apple a subsidy north of $350 for each iPhone it sells, according to some estimates.”

“One quick fix for AT&T is to pound the message that, come next Wednesday, users can update their phones with new — and free — iPhone software that will have many of the new iPhone’s bells and whistles, including cut-and-paste functions, multimedia-messaging support, and wider search capabilities across e-mails and notes,” Chang reports. “‘They should remind their customers that phones that are 1 or 2 years old are getting a new operating system with most of the new features that are in the new iPhone,’ said Michael Gartenberg, VP-strategy and analysis at Interpret.”

Chang reports, “As a goodwill gesture, the No. 2 U.S. carrier ought to do some backroom analysis and package a rebate offer on the new iPhone rewarding user loyalty and past spending, said Andrei Jezierski of i2 Partners, an internet and media consultancy that counts carriers among its clients. ‘I would think that they can afford to give away a rebate of $100 or so,’ he said. ‘If you consider longevity and loyalty, I don’t think they would be losing money.'”

Read more in the full article here.

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