Fortune reports that AT&T is preparing to offer a $200 subsidy for buyers of the next-generation iPhone, widely expected to be introduced this summer. It writes that since the new, presumably faster models will start at the same $399 base price as the current iPhones, that will drop the effective price to $199.
I certainly assume that Apple and AT&T are working hard to get the iPhone to a price that puts it within reach of the most people. Fortune writes that AT&T has found that iPhone owners spend twice as much as the average customer because they buy data plans. (This is consistent with what AT&T said to investors on its earnings conference call last week.)
But as reported, there are some bits of the story that don’t make sense. Fortune wrote that AT&T will offer the subsidy to people who buy the phones in its stores, but not to those who buy in Apple stores. I can’t imagine that Apple would want to sell iPhones for even a dime more in its stores than in another store. (Apple keeps exceedingly tight control over its pricing.)
And there is no underlying economic reason for AT&T to offer anyone an incentive to buy the iPhone in its stores. No matter where you buy your iPhone, the only way to use it legitimately is on the AT&T network, which requires a two-year contract. What’s more, Apple has a much greater incentive to get people into its stores — where it can try to sell them Macs — than does AT&T — which has little more to offer than the odd headset and case.
My guess is that this report may be pointing the way to one of two (not mutually exclusive) developments:
AT&T wants to lower the price of the phone and raise the price of the data plans. Right now the unlimited data plan for the iPhone costs $20 a month, far less than the $45 a month the company charges for unlimited data on a BlackBerry. Now that the iPhone can also connect to corporate e-mail networks, AT&T may not be able to justify a gap in the monthly fees for its smartphones. To make up the difference, it could raise data rates and subsidize the phones. My guess, however, is that the $200 subsidy would be available to people who buy the phones from Apple stores as well.
Apple will start selling unlocked phones. Apple has found that an enormous number of its customers are unlocking the phones, using third-party software, to use on carriers of their choice. If Apple were to remain in keeping with its culture, it would simply try to make the next-generation iPhone even harder to unlock. But then again, it could decide to avoid this fight, change its business model and just sell phones. That would mean, presumably, giving up the monthly fee it gets from AT&T and other carriers. In this scenario, Apple might well raise the price of the iPhone to, say $599. But then it would have carriers offer subsidies in return for contracts, as most other handset makers do.
Here’s one prediction I will stand by: We will have more leaks that don’t entirely make sense and are not consistent with each other until Steve Jobs ascends some stage somewhere with some answers.
[Thanks: http://bits.blogs.nytimes.com]
Canadian consumers may see cheaper wireless data rates when the promised iPhone finally arrives in Canada later this year, analysts said Tuesday in the wake of Rogers Communications’ announcement it has officially struck a deal with Apple.
Industry watchers also say news that the iPhone will be available sometime later this year indicates the company is staking its claim ahead of possible competition that could arise from Ottawa’s upcoming wireless spectrum auction.
“The really dramatic development wasn’t this sleek phone, it was this radical pricing change that AT&T introduced with this phone - they introduced the first truly flat-rate, all-you-can-eat data plan in the United States,” said Lawrence Surtees, telecommunications analyst for technology research firm IDC Canada. “[Apple CEO Steve] Jobs wasn’t going to do the deal in Canada if it was going to be priced as usual, because he knew the iPhone wouldn’t sell.”
The iPhone was first announced by Jobs in January, 2007, and was launched on the U.S. market last June. The U.K., Germany and France followed in November, and last month iPhones arrived in Ireland and Austria.
Rogers is currently the only one of Canada’s three major wireless network operators that operates on the GSM (Global System for Mobile Communications) platform required for the iPhone’s technology, and Surtees said the company might have been anxious to lock up the deal with Apple before a possible GSM newcomer made a market debut.
“Why would you announce it now and then say ‘Wait to the end of the year [to get the phones]?’” he said. “If you think about what is happening in the wireless space, there is the forthcoming wireless spectrum auction to license a fourth national player.
“If you’re Rogers, you want to keep Apple away from the potential newcomer, but you are not in a hurry to launch the iPhone until the new guy is ready to go so you can pre-empt him in the market.”
Apple aficionados will still have to await details of timing and pricing.
The iPhone announcement came as Rogers rolls up big gains in first-quarter revenue and profit in results released Tuesday. The company reported net earnings of $344 million, or 54 cents a share, in the first quarter ended March 31, up from $170 million, or 27 cents a share, in the same period of 2007.
Revenue grew 14 per cent to $2.61 billion, up from $2.3 billion. Rogers added 46,000 subscribers to its voice-over-cable telephony services on a net basis. Its Internet subscriber base grew by 41,000 to 1.5 million, and digital cable households climbed by 49,000 to 1.4 million.
Even though the iPhone has been long awaited here, the news was somewhat anti-climatic and short on detail.
“It is too little, too late,” said Eamon Hoey, a telecommunications consultant with the firm Hoey Associates. “It is just an indication of how far behind we are on the world markets. This should not be a day of celebration, there should be full recognition that Canada is very far behind our competitors.
“There was no reason for us not to have the iPhone last year other than the slowness with which wireless companies in general bring new services and products to Canada.”
Kaan Yigit, president of the Solutions Research Group, said while the iPhone’s arrival is late, it will position Rogers to take advantage of the growth in smart-phone sales.
“Just over one in 10 cellphones in Canada are smart phones now, and that’s going to double in the next two years,” he said. “It is late to the market, but from a timing standpoint, if Rogers had introduced the iPhone a year ago it wouldn’t have had the same impact it will have now.
“The smart phone is booming.”
Michael Geist, Canada Research Chair of Internet and E-commerce Law at the University of Ottawa, said Apple has “played hardball” in the jurisdictions where the iPhone sells, extracting a good deal for itself and for consumers by insisting on data-rate packages that will ensure consumers are not be deterred by high pricing from buying the devices.
“Rogers may have had some initial reluctance, but the public demand for this service is such that they were willing to strike a deal,” he said. “I don’t think anybody should hold their breath thinking Canadian rates are going to match what they have in the United States.”
But he said the iPhone will likely come with a pricing plan that makes it more affordable than current data pricing, “whether it is all you can eat or at least a more affordable version that covers 95 per cent of users.”
Telus spokesman Shawn Hall said with a number of competing touch phones released in the past year, the iPhone may have lost some of its cachet.
Telus launched the LG Venus, another touch mobile entertainment device that incorporates Web browsing and other features of the iPhone and the HTC Touch was introduced here last fall.
The iPhone debuted at $599US for the eight gigabyte model with that price later dropping to $399. A 16 gigabyte model is $499. Some Canadians have bought the phone from across the border and unlocked it to operate on the Rogers network.
LG scooped the iPhone announcement in Canada with its own announcement several weeks ago about a new line of touch phones that will offer models on all three major wireless networks.
“I think there definitely is and has been a need by Canadians to have touch interactivity with their cell phones,” said Frank Lee, spokesman for LG Electronics Canada.
He said with LG’s Venus touch phone available now through the Telus network and two other models, the Vu and Vantage to be rolled out within a couple of weeks through the Bell and Rogers networks, his company is already meeting consumer demand for touch phones.
“Right now the impact for us is that it is no surprise,” he said. “We know touch is important to Canadians and we are just glad we can do it with all carriers.”
gshaw@png.canwest.com
Follow me on Twitter
