iPhone subsidy rumors false, 4 reasons why

Posted April 30, 2008 at 05:04 PM by JG Mason

Section: Apple, Communications, Cellphones, Smartphones, Mobile, Originals

OK kids, get off the Kool-Aid.  AT&T, no matter how cool (or lame) you think they are, is not going to subsidize the second coming of the phone that made people sleep in streets to be first in line to get it.  There are probably a lot more than four reasons, but these four make a pretty solid case.

Reason 1: If we are to believe the current crop of improvements over the orignal: thinner, new color, GPS, 3G, Exchange-friendly and 3rd party app groupie; anyone really believe either company is going to offer it for less than the current price?  Frankly, I’ll be astonished (and rethinking my AAPL stock purchase) if they don’t introduce a new higher price point.

Reason 2: We paid the ridiculous opening price in droves.  We basically told Apple, you make it and we’ll buy it, no matter the cost.  Maybe they won’t hit targets this way with the mass populous, but the fun loving iPod (sans Shuffle) isn’t below $149 for a reason.  Apple knows we are willing to pay, why would they leave money on the table?

Reason 3: AT&T’s exclusive deal with Apple isn’t over yet.  When it is, you bet they’ll compete on price.  Until then, it is a potential cash cow that they’ll milk whilst they can.

Reason 4: I don’t believe Apple will stop selling the first gen iPhone.  There are enough people that still live without GSM coverage and don’t care about GPS or being thin.  AT&T could offer the first gen with a discount and place the gen 2 at the old price (or slightly higher) with no big change other than more sales of gen 1.  I bet a lot of folks would jump on that gravy train and I am sure AT&T has some kind of marketing analysis to back that up.  iPhone 1 at $199 with the SDK fruit is a pretty compelling argument for folks who’ve been on the fence.

What is your take?  Or are you hopped up on the “K” (as we call Kool-Aid on the street)?