Tuesday, February 24, 2009

Analyst: iPhone service plans too pricey. Duh!

Opinion – Kaufman Bros. analyst, Shaw Wu, released an enlightening research note today. Those pricey iPhone service plans may actually be limiting the growth potential of the iPhone, creating an opportunity for AT&T’s rivals. Really? If one looks beyond the splashy iPhone style to see how AT&T may have been able to take advantage of the hype to date, the opportunities afforded to others may soon force AT&T to finally bring its level of service quality and features into parity with what it charges.

Over the past two years, I have really written enough about the fact that the iPhone is one expensive toy. The fact that the actual cost of the device over a 2-year service period (and beyond) is deceiving, and the fact that many people who own an iPhone may not actually be able to afford it. You can chastise me for those opinions, but I won’t change them because the at least $80 per month phone service and Internet access cost, excluding taxes and fees, turns the iPhone into a $2000+ toy. Most of us mere mortal consumers could not justify such an expense for a phone that can also surf the Internet -- at least if we took off our Apple blinders, that is.

Do I sound upset? Yes, there are plenty of reasons for being upset about the iPhone and what we the consumers have to accept just to use one of them.

Now we find Shaw Wu is quoted saying "Sprint's Boost Mobile unit now offers a $50 plan that includes unlimited talk, messaging, web, and walkie-talkie while T-Mobile is test marketing a $50 unlimited voice plan and $25 more for unlimited data/Internet," he wrote (see our coverage, which includes a chart showing how many months it would take before you'd be saving money by switching). "This compares to $130 for both AT&T and Verizon for unlimited voice and unlimited data/Internet."

According to Apple Insider, the “analyst cites high service plan pricing - as opposed to hardware pricing - as the cause for slowing iPhone sales and reduced smartphone adoption in general. And while he acknowledges that Sprint and T-Mobile aren't catering to the majority of smartphone customers, he believes their ‘lower prices will likely help them participate more in this secular trend and cause AT&T and Verizon to also lower prices in response.’”

Did it really take an analyst and dedicated research to come to this conclusion? By the way, let’s not forget, that Apple plays its part in this game as well. AT&T has to recover a few hundred dollars from every iPhone, as it sells the device for a subsidized price of $199 (8GB version).

The iPhone is a great phone, don’t get me wrong, but Apple and AT&T have made it about as painful as possible for consumers to actually own and use such a device.

I recently decided to ditch my Blackberry Pearl, arguably the worst smartphone ever made, and remove the dust from my Gen-1 iPhone (which I had only bought for the purpose of a review). [Note: Gruener was so outraged by iPhone's contract pricing that he had discussed with TG Daily's editor the possibility of creating our very own Will it Blend? series, beginning with that device. -Editor]

Even if the battery life is terrible, I figured it would be a nice transitional device until a reasonable smartphone would show itself from my main provider, T-Mobile. So, I walked into an AT&T store with the intention to re-activate the iPhone on a basic voice plan. I learned, however, that AT&T would rather turn me down as a customer than agreeing to just a voice plan. I would have to subscribe to a data plan, I was told. Hello?!? I own the phone. I paid $650 for it and they are now telling me I cannot get just a voice plan for it. It is this kind of greedy business practice which gives me such a bad taste for Apple's iPhone, an otherwise great device.

In addition, I also learned that I normally would get a local discount, since my wife works for a large local company that has some deal in place with AT&T. But since it was an iPhone, these discounts do not apply. To AT&T’s defense, the sales person recommended that I should jailbreak the iPhone and use it with T-Mobile. [Note: TG Daily does not advise doing this as it is illegal and violates your iPhone warranty. -Editor]

And, after all of these personal dealings I now find in my inbox an analyst who says there's something wrong with iPhone's service plan pricing, and that rivals may be able to take advantage of this scenario. Gee, who would have thought that?!?

While I am calming myself down again, I believe AT&T royally screwed itself over with its overconfident pricing, which was most likely inspired by Apple's Jobs as he personally went around to Verizon first, and then other major carriers trying to negotiate the best deal.

Imagine now that there would have been a $50 flat fee plan. Sure, the lines may have been even longer in the beginning, but there would be no issue keeping the growth of the iPhone going. Rivals may have caught up at some point, but in the end, it would have been a good strategy both for consumers who forgot to consider all those costs the iPhone will accumulate, as well as AT&T, not to mention the rest of the industry that would've had to revamp its pricing strategy to compete with that additional attraction of the $50 service plan iPhone. Even with AT&T's shoddy EDGE network for the original iPhone, and the problems with the iPhone 3G and how it aligned itself with AT&T’s 3G network, the reality is a $50 iPhone would've been huge.


As it is today, AT&T's service quality and features seem to be well out of line with the price being charged for the service. Every company may run its business in whatever way it wants, charging for its products whatever it can get -- and that is, of course, fine. But I rarely have seen such a discrepancy between actual value and price as in this case with current smartphone service plans. And that discrepancy does not only refer to AT&T, but it seems that all carriers seem to think that they can sell all those fancy new smartphones with ancient service contract ideas. And in the case of the iPhone, it seems the actual phone is years ahead of the ideas at AT&T.

Source : http://www.tgdaily.com/