Filed under: Analysis / Opinion, iPhone
iPhone vs. the world
BusinessWeek.com has a really interesting article online today theorizing about the potential impact the iPhone 3G will have on other smartphone manufacturers and the wireless industry at large. The $200 introductory price point can lure lots of customers over to AT&T and put the price crunch on other smartphone manufacturers. Plus, now that the phone has been out for a year, consumers are more eager to upgrade. As the article points out, the trend of cell phone carriers subsidizing the price of handsets was on the wane, but now that the iPhone 3G is going to be released at a subsidized price, other manufacturers might want to follow suit, and that may mean cutting their prices on bulk orders.
Even before the 3G announcement last week, Apple has already forced the other mobile players to up their game. Not only are future phones adopting more iPhone-centric interfaces and features, wireless carriers who can't offer the iPhone to their customers are spending more to remind users of their offerings. According to the BusinessWeek article, Verizon's ad budget increased 30% in the first quarter of 2008.
While AT&T is surely going to continue to benefit from being the sole iPhone carrier in the United States, they also stand-out as being expensive. To help cover iPhone subsidies, AT&T is raising the data plan $10 a month. As BusinessWeek mentions, this could be an area that other carriers could seize on. By offering more features for less money, other carriers have an incentive that while not as flashy as the iPhone, might be more financially practical for lots of customers.
Still, as I said in last night's talkcast, I think the $200 price point is going to vastly reduce the barrier to entry for lots and lots of users. The data plan price increase is going to be more a determent for existing iPhone users, not new users to the fold. Just as the iPod really hit its stride when it became available for under $400, the $200 pricepoint on the iPhone is going to be extremely tempting for anyone approaching the end of a cellular contract. The other phone manufacturers SHOULD be concerned; the war for mobile domination will not be won or lost based on the iPhone 3G, but Apple is a very, very deft opponent.
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Reader Comments (Page 1 of 2)
Brandon Martinez said 1:44PM on 6-16-2008
I want to switch over to AT&T not only for the fact of them having the iPhone, but they have much better service and coverage compared to Alltel (my current phone provider). Sadly, my contact is split into two: mine ending this month, and my fiance's ending in January!
Plus, there's the fact of me not "needing" an iPhone, being that A.) I already have an iPod touch, and B.) even at $200, which is a great deal, the plan is still a little higher than we might be able to afford (poor college students).
Maybe I'll be able to finagle something...
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J said 7:42PM on 6-16-2008
If you're in no rush, I'd recommend waiting for Jan when your fiance's plan comes up as well. By then, I expect Apple will have bumped the 8GB/16GB offering to 16GB/32GB...
Galley said 1:49PM on 6-16-2008
I'd upgrade if it weren't for the fact that I would have to pay $15 more per month than my current iPhone plan.
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Jason Hung said 2:29PM on 6-16-2008
To AT&T's credit, they are charging you ten dollars more for a service that is at least 3.2x faster than EDGE. To put this into comparison, a download might take 19 seconds via EDGE. The same download would take 5 seconds via 3G/UMTS, and 3 seconds if downloaded via Wi-Fi.
Too many people make it seem like AT&T is offsetting the cost of the phone through the data fee. You can still purchase EDGE phones if you want (and I am sure those will drop to $199) if you really don't want the faster service. 3G/UMTS is a much faster service, and obviously the upkeep will be more for both customer and supplier.
kirk said 1:56PM on 6-16-2008
AT&T is not using the $10 more in data fees to offset the subsidy. ATT's standard 3G data for its other 3G phones is $30/mth compared to the $20/mth for EDGE plans.
It is more accurate to say AT&T is charging $10 more to allay the costs of building out its 3G network. AT&T charges you more to use the 3G network if you're using an iPhone, a Blackberry or any phone.
If the new phone wasn't 3G and they charged $10 more, then yes, it would offset the phone subsidy.
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conigs said 2:03PM on 6-16-2008
Still, though, the cost can still be a deterrent. The 3G data plan cost will always be compared to the old iPhone data plan, fair or not.
What really bothers a lot of people isn't necessarily the higher rate for 3G, but the lack of included SMS.
Anecdotal as it may be, take me for example—I already have an old SMS plan ($3/mo for 100 SMS). With the old iPhone I was looking at spending an additional $17/mo for data. With the new iPhone and 3G data plan I'm looking at spending an additional $32/mo if I want SMS ($5/mo for 200 SMS). I just can't justify the extra $384 a year, so I'll live without the internet in my pocket. (And this is comping from whom many would argue is an Apple Fanboy.)
Ryan said 2:28PM on 6-16-2008
I TOTALLY agree, and feel that everyone is missing this point. 10 dollars more is just cause its 3G, NOT cause of a subsidy.
Karl-Franz said 1:58PM on 6-16-2008
Don't you think stating that "To help cover iPhone subsidies, AT&T is raising the data plan $10 a month. " is a bit inaccurate? After all, AT&T's current pricing for all 3G data services is already $30. The $10 difference is to switch from an EDGE plan to a 3G plan and doesn't really have anything to do with the phone subsidy. In fact, the reason for the subsidy is that Apple agreed not to collect a monthly fee from AT&T for each phone under contract.
It's not really fair to say that they simply raised their data plan. Yes, I know if you get the new iPhone you don't get a choice of getting the older EDGE plan. But you are at least getting something more for your $10.
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David said 2:23PM on 6-16-2008
Let ATT get me into a contract with Voice only plan $39. I don't need 3G or Edge. Will they do it? Since most user never need this and
Jake said 1:58PM on 6-16-2008
I dunno. I must be in the distinct minority. Sell me an unlocked unsubsidized IPhone. Then I'll figure out the best deal for service afterwords. I don't believe that the $10 increase in cost of data use is to cover the subsidy of the IPhone's price, because I don't think anyone can reproduce with any certainty the actual cost/profit structure of this deal for ATT. It is all way too fungible to be trustworthy, and that fungibility can only be to the advantage of profits. Sure, businesses are for profit, but so are most criminal enterprises. I think I'll just keep the unlocked dog-eared Blackberry. At least, for a while.
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punkassjim said 2:16PM on 6-16-2008
The $10 increase isn't meant to cover the subsidy...all 3G data plans tend to cost about the same $30/month. The subsidy on the cost of the phone is (as it is throughout the rest of the industry) just AT&T's way of hooking you into a contract for two years. Essentially, it's a "high-volume, lower profit" strategy. Very effective.
They would have offered the same sort of subsidy from the outset last year, if they hadn't done the profit-sharing thing with Apple. There was no way they were gonna do both.
punkassjim said 2:09PM on 6-16-2008
my GF was considering getting an iPhone 3G when they introduced the lower price. She's really not the type to get a phone that even costs $199, so considering such a move is huge for her. But as soon as she realized it'd be almost $2000 over two years, she backed out entirely. Her current phone plan will only cost her $1000 over the same time period. Twice the expense is hard to swallow, when putting another $1000 into savings or retirement would be a much better idea. I totally wonder how many people even bother to think like that. They should....but I don't :-) I'll stick with my $1800-over-two-years original iPhone.
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Rick said 2:14PM on 6-16-2008
We might not see it anytime in the next year or so, but when we do, I think an iPhone Nano will be the end of other phone manufactures; just like when we saw the iPod truly dominate when the Mini/Nano came out.
It could be something as easy as a iPhone half the size that only had phone and iPod functionality. No 3G, no wifi, just a great phone and iPod. It'd cost Apple a few bucks to manufacture, and selling it for $50 would blow away any competition.
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YodaMac said 2:54PM on 6-16-2008
@Rick-
Not sure I "get" your idea of an iPhone-Nano. The whole point of an iPhone (and what makes it so great) is the "Internet in your pocket". Anyone can do a phone with just a music player in it.
It's the "Internet Communicator" part of the iPhone that makes it so awesome to use and awesomely powerful as a future platform for mobile computers.
Even the iPod Touch has a Wifi connection, so don't expect to ever see an iPhone come out without that!
Rick said 3:06PM on 6-16-2008
@yodamac
Yeah, I see what you're saying, and I definitely agree that having Safari with me wherever I go is fantastic. I just think that a bare-bones phone made by Apple would still appeal to people, especially people who don't want internet with them at all times, or people who just want a phone that's refreshingly easy to use. Rather than thinking of it as a stripped down iPhone, think of it as an iPod Nano that can make phone calls. Anywho, I'm in no position to start production on this thing, nor am I someone who can make big decisions for Apple, I'm just saying it might be a nice little money-maker for them.
tevetorbes said 2:18PM on 6-16-2008
I'll be keeping my current iPhone with the $20 data plan and free 200 SMS messages, tyvm.
I am kinda disappointed with the new iPhone (crummy GPS, still no multimedia messaging!) and the higher price point really turns me off.
The lower price point will attract many people, indeed, but I can't justify the increased monthly fees.
I'll wait until my current contract runs out and take a look at some of the non-Apple offerings (X1, HTC Touch anyone?)
And yeah, I feel the same way conigs: I was trying to justify my original iPhone purchase to all my non-fanboy friends, so this has got to be surprising for them.
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tevetorbes said 2:20PM on 6-16-2008
Kinda contradicted myself there: the higher overall price, I meant ($2000 over 2 years) as opposed to the lower initial price point ($199 for the phone).
nomadic0ne said 3:21PM on 6-16-2008
I've been bouncing back and forth between the X1 and the 3G iPhone myself because of features, but if your reason for looking at the X1 or the HTC Touch is because of the monthly or overall cost, you're missing the fact that you still will be paying $30 for unlimited internet + voice plan + messaging plan.
The $30 is AT&T's PDA data plan. The $20 for the EDGE iPhone was worked up special for the iphone.
All AT&T is doing is going back to their original pricing and plan structure.
That said, I agree that they are charging an arm and a leg for their plans.
I wistfully look forward to the day that these services are considered common necessities and the prices settle. :-)
Until then, we'll have to pay to play on the fastest 3G network in the US.
(oh, and I am looking forward to market saturization of smartphones with unlimited data where txt messages are replaced with mobile chat. Then we won't need separate messaging plans.)
johnmc said 3:22PM on 6-16-2008
What the hell is it with people wanting MMS? It's just a crappy half-assed alternative to the full freakin email that's already on the iPhone.
nomadic0ne said 3:28PM on 6-16-2008
The appeal of MMS is the compatability and ease.
Yes, full featured email has it's advantages, but if you want to quickly send a picture of something you saw to a friend, MMS is usually the easier method.
As far as compatability, not everyone has email on their phone (yet!) or they don't have unlimited data, so one email with a photo would cost quite a bit.