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5/9/09

AT&T Reported Considering Price Cut for iPhone Plan

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From: newsfactor.com By Frederick Lane May 7, 2009
AT&T is reportedly considering a $10-a-month price cut in the wireless service plan for Apple, Inc.'s iPhone. AT&T and Apple are facing rising competition from BlackBerry devices, the Palm Pre, Android-powered devices, and Nokia. The upcoming Worldwide Developers Conference may let Apple and AT&T stir up more excitement for the iPhone.

Over the last two years, Apple and AT&T have collaborated on one of the most successful product launches in recent history, using a wave of positive press to help sell more than 17 million iPhones.

But the three-year anniversary of the iPhone is fast approaching, and as phone manufacturer Motorola can attest, few high-tech devices remain shiny and compelling forever. The seemingly endless number of apps available for the iPhone may help delay consumer ennui, but Apple -- and particularly AT&T -- are clearly worried about the rising buzz for new entrants in the smartphone category.

The Blackberry Curve, for instance, has earned some rave reviews, as has the Palm Pre. Android-driven phones are slowly gaining market share, aided by a surprisingly quick upgrade of Android to version 1.5. And Nokia, which has long been absent from the high end of the smartphone market, is reportedly set to introduce three different touchscreen models this summer.

Same Data for Fewer Bucks?

Given the rising competition among smartphones, it's not surprising that analysts are speculating about an AT&T price cut. Cote Collaborative analyst and pricing strategist Michael Cote told TheStreet.com Thursday that he thinks AT&T will cut the cost of the iPhone's monthly service plan by $10, from its current $69 per month to $59.

If AT&T does so, it will cut $240 off the $1,656 cost for a two-year service plan for the iPhone. Cote argues that the cut is necessary for AT&T to extend the reach of the iPhone beyond early adopters and Apple fans to more price-conscious mainstream consumers. Cote, who wasn't available for comment, told TheStreet.com that the high cost of the service plan "does not address the whole market."

Cote's reasoning is based in part on Apple's experience with offering its iPhone at Wal-Mart, where sales haven't met expectations, and the reaction of consumers to the significant price drop that occurred when AT&T agreed to substantially subsidize the cost of the new iPhone 3G. When the purchase price of the phone dropped to $199, sales took off.

New Phone, New Plan

Things are hardly bleak for either Apple or AT&T. The 17 million or so people who have purchased the iPhone have proven to be fairly loyal customers, and the iTunes App Store is an obvious success, having just distributed its one billionth app.

Moreover, the upcoming Worldwide Developers Conference offers Apple (and AT&T) yet another opportunity to generate excitement for its iconic device. Version 3.0 of the iPhone OS is scheduled for release, with a number of features much sought after by consumers, and there are widespread rumors that an updated version of the phone will be introduced.

Better hardware Relevant Products/Services and software at a lower access price? Ten dollars may not sound like much, but it would go a long ways toward staving off the rising number of iPhone competitors.

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