Why is everyone making such a big deal about this $200 iPhone report from Fortune? Evidently, the same folks who are praising AT&T and Apple didn't read the report and are naive enough to believe that this is ever going to happen. There's no chance that the next iteration of the iPhone, presumably featuring 3G, will sport such a low price tag.
According to Fortune, "When the 3G iPhone is introduced this summer, AT&T, the exclusive U.S. iPhone sales partner with Apple, will cut the price by as much as $200, according to a person familiar with the strategy."
That price cut will put the two versions of the iPhone -- an 8GB model and a 16GB model -- at $199 and $299, respectively.
Fortune said that a person close to the dealings believes the subsidy will only apply to AT&T stores and if anyone purchases the 3G iPhone in an Apple store, they will be forced to pay full price. According to the report, all cash lost on the subsidy would be recouped on the service charges after a few months.
Fortune and its hotshot source is kidding, right?
Why would Apple agree to a deal that would see the subsidized iPhone only be available in AT&T stores? Did everyone just happen to miss that special piece of this report? What this source claims is that the iPhone will have two different prices -- one for AT&T customers signing a two-year contract and one for Apple customers looking for the latest iPhone. I just don't see why Apple would be willing to give up its position of power to AT&T on the retail front and allow the carrier to charge less for the same device.
Further, why would AT&T agree to that deal? People were more than happy to purchase the first-generation iPhone at a ridiculous price, why wouldn't they want to do the same with a 3G iPhone featuring a host of new features?
Subsidizing the price of a cell phone isn't ideal for a carrier; it's the result of a struggle between all the companies looking for more customers. But if you have the most popular device on your own service, there's no reason to worry about enticing more people to your side. In other words, AT&T will do just fine with the higher price, especially considering the 3G iPhone should be more business-friendly.
I know some have said that this could be a reaction to Apple's decision to unlock the iPhone, but that's pure rubbish. AT&T would never allow that to happen and I'm sure that neither company would really want to deal with that headache.
The second problem with this report is that the economics of the deal don't make any sense. If AT&T is sharing plan profits with Apple at a rate of anywhere between 9 percent and 25 percent, according to Fortune, why would the company want to lose even more on the deal?
Invariably, most would claim that it would sell more iPhones and it would all work out, but that would only help if Apple stops sharing the profit on the plans. And with such a unique deal already in place that allows both companies to profit exceptionally well, I just don't see why either company would agree to something that would effectively take cash out of both of their pockets.
The idea that AT&T will sell the iPhone for $200 less than its current price is both ridiculous and outlandish. The company would have no reason to do such a thing and would probably lose out significantly if it ever did.
When Steve Jobs announces the new iPhone in June, look for (at most) a $100 break in price for every retail location; not $200.