Monday, February 23, 2009, 07:45 am PT (10:45 am ET)
AT&T rivals seen driving down cost of iPhone serviceTough macroeconomic conditions are causing wireless carriers like Sprint and T-Mobile to become more aggressive with pricing of their monthly service plans, a move which could ultimately help drive down the cost of owning an iPhone.
In a report published Monday, Kaufman Bros analyst Shaw Wu compared the trend to that of DSL and broadband pricing, which has fallen considerably over the past several years.
"It used to cost $50 per month for access and now there are many plans for $15-$20 per month as well as faster tiered pricing," he said. "Customer adoption of broadband accelerated as pricing dropped."
While top tier providers AT&T and Verizon have yet to follow their smaller rivals with similar reductions, Wu thinks it may be only a matter of time before they do, or at least consider implementing several more tiers of internet data pricing.
"Sprint's Boost Mobile unit now offers a $50 plan that includes unlimited talk, messaging, web, and walkie-talkie while T-Mobile is test marketing a $50 unlimited voice plan and $25 more for unlimited data/Internet," he wrote. "This compares to $130 for both AT&T and Verizon for unlimited voice and unlimited data/Internet."
The analyst cites high service plan pricing — as opposed to hardware pricing — as the cause for slowing iPhone sales and reduced smartphone adoption in general. And while he acknowledges that Sprint and T-Mobile aren't catering to the majority of smartphone customers, he believes their "lower prices will likely help them participate more in this secular trend and cause AT&T and Verizon to also lower prices in response."
Going forward, Wu said any reduction in service plan pricing at AT&T and Verizon would be seen as a positive that should help smartphone adoption remain healthy despite the troublesome economy.
For the current quarter ending March, Wu is 'erring on the conservative side' and modeling Apple to sell approximately 3 million iPhones. However, his supply chain checks suggest the Cupertino-based company could actually sell anywhere from 3.25 to 3.5 million of the handsets.
In recent weeks, several Wall Street analysts have combined to suggest that some of the biggest news surrounding the next generation of the iPhone will be pricing. Wu cited his own sources as saying that Apple and AT&T are discussing the possibility of offering customers more data plan options, while Bernstein's Toni Sacconaghi came away from a chat with Apple interim chief Tim Cook believing the company is looking into "different pricing/price points" for the next-gen handset itself.
On Friday, RBC charted over a half-dozen emerging iPhone competitors as yet another reason why Apple and its wireless partners may inevitably elect to trim the cost of owning the touch-screen handset.
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