Thursday, May 07, 2009, 08:00 am PT (11:00 am ET)
Rumor has AT&T lopping $10 off future iPhone rate plansA new report is rejuvenating chatter of cheaper iPhone service plans from AT&T that could be announced alongside the introduction of new models in the coming months, such as a $10 drop in the cost of the most basic service plan.
Cote Collaborative analyst and pricing strategist Michael Cote said this week there's a "strong possibility" the exclusive US iPhone carrier will drop its entry-level iPhone plan to $59 from $69, adding that the announcement could come as early as next month at Apple's annual developer conference.
The move, which would theoretically shave 14% off the cost of owning an iPhone — dropping combined 2-year service fees to $1,640 from approximately $1,880 — would represent a concerted effort on the part of both Apple and AT&T to push the iPhone into the hands of consumers who find the pair's current offerings too pricey for their shrinking budgets.
In particular, Cote noted that sales of the touch-screen handset have thus far proven disappointing at Wal-Mart, the largest big-box retailer in the U.S. catering to a less than affluent demographic. Wal-mart has proven critical to Apple's iPod business and is believed to move considerable volume for the Cupertino-based company each quarter.
Cote's comments on the matter are fairly inline with earlier remarks from a couple of his peers. In February, Kaufman analyst Shaw Wu similarly characterized current iPhone service plans as "too high" for the handset to have broad market appeal. He cited sources who said Apple and AT&T were therefore mulling a plan that would offer future iPhone customers the option of selecting from a tiered set of data plans rather than continuing to pitch the current $30 take-it-or-leave-it option.
Less than a week later, Bernstein analyst Toni Sacconaghi sat down with Apple interim chief Tim Cook, chief financial officer Petter Oppenheimer, and marketing chief Phil Schiller, who similarly told him that the company was considering "different pricing/price points" for the iPhone this year, with Cook reportedly adding that he was "examining iPhone's business model" to see if there was room for other possible changes.
A rocky economy and pullback in discretionary spending on the part of consumers aren't the only factors that may compel Apple and AT&T to rethink their pricing strategies going forward. The 1 billion+ global cell phone market is quickly becoming saturated in certain regions, meaning carriers will need to begin offering existing wireless subscribers heftier incentives to switch carriers rather than fishing in a evaporating pool of potential new customers.
In recent months, Apple has also faced increasingly worthy competition from BlackBerry maker Research in Motion, which sold twice as many smartphones in its most recent quarter than the iPhone maker.
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