Filed under: Analysis / Opinion, iPhone
iPhone: it isn't the price I'm worried about
John Gruber has penned a rebuttal to Steve Ballmer's recent statement that the iPhone, an product that isn't even shipping yet, is priced too high to gain significant market share. I find myself agreeing with John's argument that the iPhone isn't priced too high. I'd plunk down $500 tomorrow for a device like the iPhone (and recall I haven't, much like most people, even touched one of these beasties yet), however, I'm not as convinced by the argument that Apple will sell boatloads of these things because they are priced like early iPods.
The rub with the iPhone isn't the price of the device itself, but rather the unknown price of the phone plan you'll be required to buy along with it. When I buy an iPod, it is mine free and clear. I don't need to pay a monthly service charge (which is signed in blood) to ensure that the darned thing will continue to function. That won't be the case with the iPhone. I'm almost certain that you will not be able to buy an 'unlocked' iPhone (that is an iPhone that you can use on any network, without having to buy a plan) for at least a year after its introduction.
'But how much could a phone plan cost, Scott?'
The truth is, we don't know yet. AT&T and Apple could be cooking up some special deal for iPhone buyers, but for the sake of argument let's just look at AT&T's current rates (as listed on Cingular.com) for the type of services that you would want on your iPhone to take advantage of all those super cool features. Here's the breakdown:- 450 minutes talktime per month (includes 5000 nights and weekend minutes): $39.99
- Smartphone Connect Unlimited (this is unlimited data transfer, since an internet communicator is sort of pointless with a data transfer cap): $19.99
- Messenger Starter (200 text messages per month, unlimited texts to other AT&T customers): $9.99
That's a grand total of $69.97 in services for your iPhone before taxes (and that's kind of on the low end of the available services. I'm sure lots of people will want more talk time, or more text messages.). Now, let's assume that Apple and AT&T will only require that you sign up for a year (I'm betting the iPhone will require a 2 year contract), that translates to about $839.64 for the first year of services (before taxes once again). Tack on $500 for the iPhone itself and you find that Apple's cool new phone is going to cost you $1339.64 (roughly).
Now, I know lots of people are going to point out that there are a number of unknowns about the iPhone, including what the service plans are going to look like. This is very true, however, Apple isn't the first company to come out with a super cool smartphone so we have some history with which to draw on. My current phone of choice is the Motorola Q, which is a Windows Mobile smartphone. I pre-ordered it for about $200 and signed up for a 2 year contract with Verizon. The Q sports EVDO, which is faster than the Edge network that the iPhone will be using, it can send text messages, browses the web, and does voicemail. It doesn't have WiFi, nor is the software that it runs as cool looking as the iPhone's. My phone plan/unlimited data/unlimited text messaging costs me about $85 a month which, in the realm of smartphone pricing plans, is a steal.
The iPhone is priced right, but the devil will be in the details of the service contract that comes along for the ride on one of those little marvels. Let's hope my worrying is unfounded, but something tells me the numbers listed in this post aren't going to be too far off the mark.
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Reader Comments (Page 1 of 3)
Brandon said 10:13PM on 5-01-2007
Well I agree to some extent with your views. However, your analysis of the pricing plan I think is off; I think in order to get a real sense of how plans will work is too look at the pricing for blackberrys (remember the whole thing about receipts for blackberry service coming out saying blackberry/iphone plan). I agree that the pricing of the iphone isn't its problem, but I don't think the plan will be either, something tells me it will be no different than most smartphones, which millions of people already have and pay for. The problems that will arise will be in several things: battery life, lack of a hard keyboard, and the notorious glitches in first run apple products (though they have been working on this for many years, so I'd expect it to be at a minimum). Also, I think there is a chance of the iphone being delicate and destroying after one drop, many people who use blackberrys and other smart phones drop them all the time, durability is fairly important. I think people need to stop arguing about the pricing and lack of 3g and start looking at software issues and battery life if they want something to complain about (but we dont know about software till we get our hands on it). I wish the iphone the best of luck, but if I'll get it at all, I'm gonna wait for version 2.0
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Scott McNulty said 10:21PM on 5-01-2007
Brandon, the Blackberry unlimited data plan costs $44, and that is in addition to any talk time plans you have. Here's hoping Apple makes AT&T offer up a simplified plan for the iPhone, though as I said I still think it'll be pricey.
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MacStansbury said 10:25PM on 5-01-2007
All the pricing plans for the iPhone have included the phrase, "with a two–year contract." So, yeah, that's the price with a two–year contract.
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Tim Yates said 10:30PM on 5-01-2007
Per Apple's iPhone spec page, 5 hours talk/video/browsing on a non replaceable battery, reality will probably put it closer to 4 hours. This doesn't include Bluetooth being active. Let's hope this get's updated before release.
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halhiker said 10:40PM on 5-01-2007
If your Moto Q costs $85.00 per month and is a bargain, why wouldn't an estimate of $69.97 (your figures) be an even bigger bargain?
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Eddie said 11:00PM on 5-01-2007
I've heard that in Australia and/or the UK manufacturers/network operators are required to unlock any phone that has been network locked if the customer asks for it to be done? Maybe unlocked iPhones, while expensive, might not be that hard to come by.
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zemek1s said 11:26PM on 5-01-2007
Man, if only there was some method to look up if people are happy with a service before signing up for it.
I heard DARPA was working on something like that back in the day... I wonder how it came out.
I never understood the rub about cell contracts. It's not like they're unbreakable, and i doubt anyone is moving to an "undisclosed location" and wouldn't need a phone all of a sudden. Except for the voice plan, all the happy tack on junk is "take off without penalty" anyways.
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Churry said 10:10AM on 5-02-2007
I agree that the plans are an unknown, and I of course would like it to be low. Though I can also say that nothing short of $200 a month is going to stop me from getting an iPhone.
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JeffDM said 11:40PM on 5-01-2007
5:
The difference is that the Moto Q is 3G, so the somewhat higher price is justifiable because it will be a lot faster for web use. I think AT&T offers the Q, but probably only with a slower internet service because it is AT&T, using the
same service plan pricing as the iPhone.
While ApplePhone pricing probably won't drop as quickly as other phones have when they started out that high, I fully expect that it will drop, maybe as fast as the iPod did, and still increase in capabilities. I really don't need a PDA, I have one that works. I don't use it much, not because it's "too hard to use" or somesuch nonsense, but because I really don't need it that much.
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tr said 11:41PM on 5-01-2007
these rates sound reasonable. i have a Sidekick right now, and pay about the same. i class the sidekick in the same boat as the iPhone, that being a "consumer smart phone", unlike the Blackberry or Treo, which seems to be more for business. i pay $19.99 for unlimited data and texting on my Sidekick, so i think that a plan like that is not unreasonable to expect for the iPhone.
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Jamesxxx said 11:58PM on 5-01-2007
I think the biggest thing holding back it's potential for growth is having to make the provider switch. Sure there's number portability and all, but if you're already locked into a multi-year plan with a provider that isn't ATT/Cingular, then your costs are going to be what you mentioned PLUS what it takes to buy out of the contract. Not to mention the pain of switching carriers. It definitely isn't like owning a Zune and going to the store and buying a Nano to replace it.
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Victor Agreda Jr said 1:05AM on 5-02-2007
As a person with kids and a zillion monthly service charges for a zillion stupid things... this sucks. All of these data plans are a ripoff. And I'm not sure if anyone has tried to get out of a contract before, but last I checked, unless you are within the 30-day window, you're gonna get charged even more...
Let's see, I could use my phone for phone calls, and use my laptop (which costs about the same as the 1st year cost of the iPhone) for everything else.
But then, remember how much Macs cost back in 1984? Now you can get one for under $1,000. So in a couple of years the iPhone will be more like a computer and maybe cost about the same ;)
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Brian said 12:25AM on 5-02-2007
I don't think the plan is much of a factor. For smart phone users this is the basic situation. The only difference with the iPhone is the upfront cost. Any one who uses a data phone on Cingular has to deal with these things, only for them the upfront cost is subsidized. It once again comes down to the $500 price tag, which doesn't seem too steep really.
The service plan is only going to be an issue for people who usually only pay for talk time, and maybe SMS.
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Stephen said 12:33AM on 5-02-2007
Call your US carrier -- They actually have to unlock all phones now... No questions asked.
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Neo said 12:43AM on 5-02-2007
I think the difference by your numbers is ~$119. $1,220 for your phone and $1,339 for the iPhone both with plans. Maybe the priceing is correct but maybe the services are slightly better for the iPhone users. The "iPhone package". It does not seem like 119 is that much of a difference. I think Steve can hold sway over the services afforded to the iPhone users. I'm sure that he would not short the iPhone experience. I can just hear him now... "Do you want to sell walki-talkies your entire life? I'm reshaping personal communications and the way people interact with information via the internet." Drink the Kool-Aid. ;)
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Thayne Miller said 1:50AM on 5-02-2007
@12: what are you talking about? Let's see some evidence to support your claim.
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mark said 2:21AM on 5-02-2007
hmmm.. i don't agree. assuming the carrier doesn't charge a premium price for airtime on the iphone, then you can't really add the cost of airtime to the bottom line.. you'd still pay that for any comparable device. period.
@15, while this isn't necessarily 'proof' i'd say #12 is on to something:
http://www.computers.net/2006/12/unlock_your_cel.html
any copyright lawyers care to elaborate?
FTA 12/6/2007
"A new ruling valid for three years issued by the U.S. Copyright Office makes it so that you can't be prosecuted under copyright law if you unlock your phone to sign up with a new carrier. The only catch: you have to own the phone.
This is being consider bad news by some carriers, which have benefited from the inability of their customers to make a switch easily. For a while now, many carriers have been claiming that the locked phones for sale were copyrighted and could only be unlocked by the carriers themselves. But expect all of that to change for at least the next three years."
I also personally know 3 people that walked into a Cingular store, asked for the unlock code and it was provided (no questions, no argument). My friends were going overseas for extended periods and wanted to take their phones with them.
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JulesLt said 3:14AM on 5-02-2007
#6 and #16 : Pretty much the same in the UK/Europe - networks cannot prevent you transferring a phone you own (it's yours, how can they?). You can also transfer your mobile number with some difficulty - ie. enough I didn't bother.
Also, phone retailers here call the shots a lot more than the carriers - from what I can see it's a rare case of our market being more competitive - I pay $20 a month for 300 mins cross-network talk, 300 texts per month, with unused carried forward, and no 12 month tie-in. Only catch is that it's with my cable/broadband provider, but other networks will match this deal.
However, with the iPhone there is the question of how useful it would be as an unlocked phone - several of the services are dependent on being supported at the backend by the network operator, and only Cingular do so at the moment.
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Stephen said 3:14AM on 5-02-2007
@15: http://www.foxnews.com/story/0,2933,235602,00.html (See 3rd
paragraph);
http://forums.cingular.com/cng/board/message?board.id=Pantech&message.id=607I
heard about it from my Uncle recently, then looked it up (Google and
other places) and found plenty of information on it.
@All: I don't know about the unlimited data. I'm with Cingular right now and I use the MEdia Net package that has 400 texts (but not unlimited to AT&T) and 1MB data. I don't think that much data will be necessary given that it has wifi.
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Mike said 3:24AM on 5-02-2007
The subscription is the subscription no matter which phone you choose, and iPhone's pricing is based on a 2yr contract as mentioned. Smartphone's aren't for everyone and the iPhone won't appeal to someone looking for a new phone for free for the price of a subscription. This is a premium phone and hopes are that it will gain 1% market share in 2008. I'm sure there are already iNano's and iShuffle's planned for other market segments.
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