Talk is Cheap But Data is Cheaper on The iPhone

By Nicholas Carlson

June 26, 2007

Apple and AT&T announce pricing plans for the long-awaited iPhone; one analyst's response? 'Holy Cow!'

As the technology press breathlessly anticipates the rise of the iPhone this Friday at an Apple  store near you, potential customers remain wary of the product's $500 to $600 cost.

But according to at least one analyst closely watching the situation, the pricing plans AT&T  and Apple announced today should ease some of those concerns.

IPhone owners are free to choose from any of AT&T's wireless contracts, but the companies today unveiled three new plans which include unlimited data, Visual Voicemail, 200 SMS text messages, roll- over minutes and unlimited mobile-to-mobile calling.

The individual plans, which can also be packaged into family plans, are priced at $59.99 for 450 minutes, $79.99 for 900 minutes and $99.99 for 1,350 minutes. Each plan calls for a two-year service agreement with AT&T and requires a $36 one-time activation fee, according to a statement.

"Holy Cow. This is really cheap," Cowen & Company analyst Shaun Parvez told internetnews.com.

Parvez explained that what's so cheap is AT&T's $20 charge for unlimited data, pointing out that the company typically charges $40, $60, or $80 for voice alone. Parvez said that as recently as two years ago he went with T-Mobile for himself because Cingular's offered a $40 data plan.

American Technology Research analyst Shaw Wu said a cheap data plan is especially critical for a phone that markets itself as a three-in-one device, one-third being a wireless connection to the Internet. He's even optimistic the pricing plans will help potential customer get over Apple's $500 price tag.

"We think it will," he told internetnews.com. "The price of the plan is very critical. It's something people pay on a yearly basis. In the end, the price of the phone is just a fraction of the cost of owning the phone."

iphone touch
Wireless, too.
Source: Apple

Up to this point, most analysts have reacted to iPhone pricing with skepticism, predicting that consumers wouldn't be willing to pay high prices for a mobile device, even if it's supposed to revolutionize the world.

While the voice and data plans may please analysts and consumers alike, skepticism has reigned over whether or not buyers would shell out for the devices.

"The $500 price point is far above that of most buyers," wrote Cowen & Company analysts Tom Watts and Shaun Parvez in a report published Monday.

"According to market research, 85% of US customers spend less than $100 on their handsets, leaving less than 15% of total potential phone customers in the market for a new iPhone."

That dire prediction follows a mini-survey conducted by research firm IDC earlier this month which reported that only 10 percent of those surveyed would buy an iPhone at full price.

Moreover, a January 2007 survey from online marketer Compete Inc. warned that only 1 percent of those likely to buy the combined iPod and cell phone said they'd pay Apple's $500 price tag.

AT&T and Apple are clearly undaunted and to make things easier for customers buying the iPhone, the companies today also said iPhone users will be able to activate their new gadgets from home through Apple's iTunes music software running on a PC or Mac. The idea is that users who shell out for the device won't have to suffer the pain associated with getting the phone going in the store.



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