While Apple has strong-armed wireless heavyweight AT&T for much of their iPhone deal, the subject of pricing in the carrier's go-to-market strategy may still be up in the air, recent discoveries show.The Wall Street Journal on Saturday published an exhaustive investigation of the iPhone's tumultuous development cycle that exposed the sheer amount of control Apple wielded over the whole affair -- including the touchy subject of prices.
Even though Apple's partner AT&T (recently known as Cingular) has been adamant in the past that it had "bent" the Cupertino firm to its will by signing a multi-year exclusive deal, the Journal's Amol Sharma revealed that the latter had squeezed an immense number of concessions from AT&T, which normally holds all the cards in its negotiations. Some of these are by now legendary, such as the near-total absence of carrier branding and the insistence that the iPhone only sell in the controlled environments of Apple and AT&T retail stores.
Standing out among the claims in the report, however, was the apparent confirmation of a revenue-sharing plan. Apple would snatch a part of the monthly subscription fees for every iPhone sold, Sharma said. This contrasts sharply with the profit-taking deals for other cellphone makers, which often end as soon as their devices reach a customer's hands. Verizon was known to have turned down a similar offer before the AT&T deal had been struck.
The agreement undoubtedly skewed the pricing arrangement in favor of Apple, guaranteeing a steady cash flow from every iPhone buyer that passes through AT&T's doors. What's less than certain is Apple's influence over the final sticker price, according to a PineCone Research survey leaked online.
ATT/Cingular iPhone pricing survey | Source: PineCone Research.
Discovered (and later pulled) by Apple iPhone Review, the now authenticated study showed a sample ad that deliberately lowered prices to gauge customer reactions to different price levels. Surprisingly, the two-year contract prices in the mockup fell to $299 and $399 for the 4GB and 8GB models respectively -- a precipitous $200 drop from the figures given by Apple at the Macworld keynote in January. Calling and data rates were unchanged.
Although far from a confirmation of a new strategy, the leak has uncovered AT&T's willingness to toy with the pricing of what will almost certainly be a cash cow for the provider. It also calls into question the pricing scheme floated by PiperJaffray analyst Mike Wakley, who suggested last month that the carrier wouldn't subsidize the initial cost to protect the iPhone designer's premium reputation.
It remains to be seen what part, if any, Apple has played in the test pricing.