Rumors of Prepaid iPhone

[cbn]

I originally found this news on Daily Tech here.

http://www.bloomberg.com/news/2011-...-on-cheaper-more-versatile-iphone-models.html

Smaller, Cheaper

Apple has considered selling the new iPhone for about $200, without obligating users to sign a two-year service contract, said the person who has seen it. Android phones sell for a range of prices at AT&T Inc., Verizon Wireless and other carriers, and typically come with agreements that include a fee for broken contracts. The iPhone 4, sold in the U.S. by AT&T and Verizon Wireless, costs $200 to $300 when subsidized by a contract.

While Apple has aimed to unveil the device near mid-year, the introduction may be delayed or scrapped, the person said. Few Apple employees know the details of the project, the person said. Apple often works on products that don’t get released.

Dual-Mode Phone

Apple is also working on a so-called dual-mode phone, two people said. This device would be able to work with the world’s two main wireless standards -- the global system for mobile communications, used by AT&T and overseas carriers such as Vodafone Group Plc, and code division multiple access, used by Verizon Wireless. It couldn’t be determined whether Apple intended to include this capability in the cheaper iPhone.

Apple is working on a technology called a universal SIM, which would let iPhone users pick from a variety of GSM networks without having to switch the so-called SIM cards that associate a phone with a network, according to one person. Having universal SIM capability built-in would help cut the cost of distributing and managing millions of SIM cards.

The new features could also give Apple an advantage over mobile carriers in influencing customers. The device would be affordable without a carrier subsidy, so buyers wouldn’t need to agree to terms, such as termination fees, that carriers demand in exchange for lowering the cost of the phone.

Global Appeal

A cheaper iPhone would help Apple make deeper inroads in markets such as China and India, where many shoppers opt for lower-priced devices that don’t carry long-term contracts, Wolf said.

Apple has also worked on redesigned iPhone software that would let customers choose a network and configure their device on their own, without relying on a store clerk or representative of a carrier, according to the person.

Apple has gone down-market before. In 2004, when sales of the original $299-plus iPod were still rising, the company introduced the $249 iPod Mini. In 2005, when the iPod Mini was still a bestseller, Jobs discontinued it in favor of the cheaper iPod Nano. Apple began selling the last version of the iPhone, the 3GS, for just $49 in January -- though it required a two- year contract.

Price cuts and the absence of a carrier subsidy may put Apple’s margins under pressure.

Still, Apple is able to get big discounts from suppliers because of the large volume of iPhone sales and by signing long- term contracts. The company said in January that it has executed long-term agreements totaling $3.9 billion in recent months.

Google’s Android operating system also may suffer if Apple makes the iPhone more versatile and affordable. The Google- backed operating system benefited when Apple wasn’t available from Verizon Wireless. Verizon Wireless began selling the iPhone yesterday.

 

[zerocool84]

I think this is something they really need to do. Microsoft coming on fairly strong, Android's everywhere, and now WebOS coming back in the game, competition is getting tougher and Apple needs something other than just "one" device a year. No cheaper devices at all which I think they really need since we know the meat of the money isn't in the top of the line devices. This would put them Apple in places they've never been before. They'd benefit in lower income areas around the world much like Android has. Pliablemoose said that Apple invested a ton of money hoarding all the makers of the most important parts of mobile devices so it probably wouldn't cost them so much since Apple doesn't like to make thin margins on anything.

 

[Pliablemoose]

A 3/4's iPhone has bee rumored for some time, they've instead sold the older generation phone, but with the iP4, the phone is too expensive to sell at a massive discount like they do the 3GS.

 

[postmortemIA]

apple has cheap phone, 3gs sells now for $50 + 2yr contract.

 

[shortylickens]

apple has cheap phone, 3gs sells now for $50 + 2yr contract.

OK, I think you missed the point of the article entirely. The whole idea is to sell an unsubsidized phone without contract.

That 3gs is NOT 50 dollars. Its gonna end up costing you several thousand.

 

[Pliablemoose]

The point of a 3/4's iPhone would be to get more people to buy apps, they could nearly give a device away if the buyers will purchase enough apps.

I expect they'll do something to prime the pump, like give away $10 worth of apps with each phone to get customers trained to buy apps.

 

[postmortemIA]

OK, I think you missed the point of the article entirely. The whole idea is to sell an unsubsidized phone without contract.

That 3gs is NOT 50 dollars. Its gonna end up costing you several thousand.

I hear your point. But mine is that you do want data plan with it. Unless there is carrier that charges $0-$5 for data plan.
Data plans subsidize phone cost - we all know that. Currently all data plans include this cost as part of plan, so if you pay full price on phone and then full price for data plan, you are worse off than buying phone with contract.

 

[Pliablemoose]

I hear your point. But mine is that you do want data plan with it. Unless there is carrier that charges $0-$5 for data plan.
Data plans subsidize phone cost - we all know that. Currently all data plans include this cost as part of plan, so if you pay full price on phone and then full price for data plan, you are worse off than buying phone with contract.

Yep, and that suggests Apple will be working with carriers to come up with a better solution.

They're the only manufacturer with enough clout to change the game.

I suspect the industry is looking at what Virgin Mobile is doing, and a similar type of offering with a 3/4's iPhone. Matter of fact a CDMA iPhone would work with Virgin if they allowed it.

 

[akugami]

OK, I think you missed the point of the article entirely. The whole idea is to sell an unsubsidized phone without contract.

That 3gs is NOT 50 dollars. Its gonna end up costing you several thousand.

Well, I've always felt that eventually Apple was going to have to come out with a cheaper iPhone to compete with the glut of cheap Androids coming out. A lower end, but current, iPhone that sells for $200-300 off contract and is >$50 would make it almost an impulse buy and to be honest, I think it'd kill a lot of those Android sales. A lot of the touted Android devices sold are with data plan but they look more attractive to consumers because of it's $50 or under upfront cost.


A dual mode phone is more than likely. The new Verizon iPhone 4 contains a Qualcomm chip that supports both CDMA and GSM. I don't think it's out of the question for Apple to create a phone that supports CDMA and GSM in the future and that also supports LTE which both AT&T and Verizon will be transitioning to. Not to mention there are a lot of other carriers around the world supporting LTE. Not sure about the whole universal SIM thing though.

 

[shortylickens]

I hear your point. But mine is that you do want data plan with it. Unless there is carrier that charges $0-$5 for data plan.
Data plans subsidize phone cost - we all know that. Currently all data plans include this cost as part of plan, so if you pay full price on phone and then full price for data plan, you are worse off than buying phone with contract.

You can get a data plan with prepaid.
Virgin Mobile has unlimited data for 25 bucks. Though they've never had an iPhone before and if other carriers are an indication they would probably have a special Apple plan.

 

[kaerflog]

Don't know why this is all neccesary.
Apple is making absurd money off their iPhone line.
Apple claims like 1/3 of all mobile phone profits.
They make like $269 per phone while the competitors are making <$50.
http://www.appleinsider.com/articles/11/02/02/apples_iphone_extends_lead_in_mobile_profits.html
iPhones are looked as a premium brand and they should keep it that way.
No reason to change a successful recipe.
With the ecosystem Apple has going, iPhones will sell no matter what.

 

[zerocool84]

Don't know why this is all neccesary.
Apple is making absurd money off their iPhone line.
Apple claims like 1/3 of all mobile phone profits.
They make like $269 per phone while the competitors are making <$50.
http://www.appleinsider.com/articles/11/02/02/apples_iphone_extends_lead_in_mobile_profits.html
iPhones are looked as a premium brand and they should keep it that way.
No reason to change a successful recipe.
With the ecosystem Apple has going, iPhones will sell no matter what.

Their marketshare is shrinking with all these cheap Android phones out. The bulk of the market is with cheaper phones NOT expensive $200 smartphones. They really need to get something cheaper out there since the market is where they make the bulk of their money. They don't want their mobile segment to turn out like their computer segment.

 

[kaerflog]

Stop with the market share BS.
Apple never had the dominant market share and they don't need to.
Android can have the market share all they want.
Apple is making profits where it counts.
iPhones are a premium brand and they should leave it as that.
iPhones have been entrenched in alot of people's mind as the phone to get every year.
I don't see this successful formula ever changing.

And stop comparing the mac vs pc.
Unlike Mac, Apple has an ecosystem that will always be there.

 

[Pliablemoose]

Stop with the market share BS.
Apple never had the dominant market share and they don't need to.
Android can have the market share all they want.
Apple is making profits where it counts.
iPhones are a premium brand and they should leave it as that.
iPhones have been entrenched in alot of people's mind as the phone to get every year.
I don't see this successful formula ever changing.

And stop comparing the mac vs pc.
Unlike Mac, Apple has an ecosystem that will always be there.

I think you may have missed his point, and his response was a bit unclear too, he was referring the the app store (Android calls it the market) not market share, although the sales of the two market share and app store sales are somewhat related...

So you're both right

 

[kaerflog]

I think you may have missed his point, and his response was a bit unclear too, he was referring the the app store (Android calls it the market) not market share, although the sales of the two market share and app store sales are somewhat related...

So you're both right

No I read it clear.
Stating that Apple's market share is shrinking.
I keep hearing this crap over and over yet people don't look at the bottom line.
Apple is making ~$570 per phone while other manufacturers are making an average of ~$20.
iPhones are a premium brand.
Its crazy successful and I don't ever see it changing anytime in the future.
Let these manufacturers duke it out with the cheap phones making very little money.

 

[cbn]

No I read it clear.
Stating that Apple's market share is shrinking.
I keep hearing this crap over and over yet people don't look at the bottom line.
Apple is making ~$570 per phone while other manufacturers are making an average of ~$20.
iPhones are a premium brand.
Its crazy successful and I don't ever see it changing anytime in the future.
Let these manufacturers duke it out with the cheap phones making very little money.

Competition is good for the marketplace.

Plus ARM has released newer and even more efficient hardware for the low end. (Cortex A5 "sparrow" on 40nm, with kingfisher on the way). With these kind of advances affordable doesn't necessarily have to be as weak as you think.

Furthermore, looking at the rate things are going these kind of devices will be personal computers first and phones second. Maybe even Wifi + voice/text will be sufficient for some? So Apple making sure they have the low ground makes a lot of sense for the future.

 

[cbn]

You can get a data plan with prepaid.
Virgin Mobile has unlimited data for 25 bucks. Though they've never had an iPhone before and if other carriers are an indication they would probably have a special Apple plan.

It would be great if Apple could somehow engineer us out of carrier linked phones. (eg, a person walks into the Apple Store and picks up "iPhone mini", but is able to pick any network or plans he wants with it. Prepaid, Postpaid, Data, no data...the customer has the freedom to choose any of them.)

 

[ChAoTiCpInOy]

It would be great if Apple could somehow engineer us out of carrier linked phones. (eg, a person walks into the Apple Store and picks up "iPhone mini", but is able to pick any network or plans he wants with it. Prepaid, Postpaid, Data, no data...the customer has the freedom to choose any of them.)

That's what happens in Europe (minus the data thing).

 

[akugami]

Stop with the market share BS.
Apple never had the dominant market share and they don't need to.
Android can have the market share all they want.
Apple is making profits where it counts.
iPhones are a premium brand and they should leave it as that.
iPhones have been entrenched in alot of people's mind as the phone to get every year.
I don't see this successful formula ever changing.

And stop comparing the mac vs pc.
Unlike Mac, Apple has an ecosystem that will always be there.

I agree pure market share numbers can be misleading. Especially in a market which is growing. Cell phone sales, and especially smart phone sales, grew last year. So disparaging Apple's iPhone because it lost shares is ridiculous considering the growth in iPhone sales.

With that said, Apple's dominance with the iPod is exactly what allowed it to succeed with the iPhone. There is no doubt that Apple would have had an immensely tougher time with the iPhone if it hadn't been for the success of the iPod. Motorola for one would not have attempted the ill fated "iPod phone" that sucked like hell. AT&T would not have given such a lucrative deal to Apple either.

I don't believe that Apple needs to dominate the cell phone market like they did with MP3 players but they do need a certain market share to keep up momentum and to retain developers. But just because they don't need to be the most dominant player doesn't mean it wouldn't make things so much easier if they were.

Apple, for the most part, has branded itself as a premium label. The success of Apple's iPod was due to the fact that it wasn't premium priced. It was priced in line with what others were selling for similarly priced products. Not only that, Apple had products for pretty much the whole price range from low end to high. For Apple to expand its market share and really limit Android (and other smart phone) growth it needs to have a competitive product at all price ranges.

Apple's Apple II was once one of the most successful computers sold. Apple could be said to be a dominant player in the personal computer market back then. Where are they now? And that's why Apple needs to keep up the pressure and do everything to remain as the top or near the top of each market it enters.

Keep in mind that Apple has a vested interest in each iOS device sold beyond just the immediate profits of the devices. There is the iTunes tie in. The more people use iTunes and make purchases from it, the more they are likely to stay within the iTunes ecosphere buying not just more products from iTunes but more iOS devices.

 

[cbn]

Here is an interesting comment I found from this techcrunch article.

Apple needs to offer a cheaper iPhone - this is not about the USA, but about world markets. There's many countries where there are no subsidies on phones. As in here in Thailand an iPhone costs $600. But then we get unlimited 3G, tethering, 300 minutes, text messages and so on for $20/month - no subsidy, and overall it's cheaper.

Android phones sell for less, and sometimes signficantly less than the iPhone - Android phones are usually going anywhere from $300 - $500. The iPhone price is a glass ceiling that NO ONE dares exceed - a device that's not an iPhone, yet more expensive than one would simply not sell.

If Apple comes out with a $200 iPhone nano, it would be a huge market share grab - it would kill Blackberry outright and put a serious damper on Android adoption.

In the USA and some other markets where subsidies are the only way phones are sold, it's hard to see the impact. I pray and hope that Apple has learned their lesson and does NOT try to go against carriers selling their devices - it's a battle they can't win.

The subsidy scam in the west is as follows: You have no choice but to get a subsidized phone. Very simply because the carriers don't offer any subscriptions that don't include paying back the subsidy - so if you bring your own phone, you lose.

 

[OBLAMA2009]

the stupid attempt to tie every device to a two year contract is ridiculous. nobody wants any device for two years and contracts are really hindering sales of devices like tablets. if and when apple decides to go contractless on some iphones that will be the beginning of the end for contracts for most people and carriers will stop the overcharging for noncontract devices as a way of forcing contracts on people.

 

[mammador]

An iphone for 200 dollars? Whoa, Jobs and co are smart! lol..

Whilst in handset terms alone (and not OS, since many devices used Android), the iPhone may be the market leader but I can see sales increasing rapidly if a $200 iPhone was released. IMO, prepaid is the less taxing route to buy a mobile phone, at least you're not tied down to a contract, and don't have to pay a large fee to break it.

 

[cbn]

Keep in mind that Apple has a vested interest in each iOS device sold beyond just the immediate profits of the devices. There is the iTunes tie in. The more people use iTunes and make purchases from it, the more they are likely to stay within the iTunes ecosphere buying not just more products from iTunes but more iOS devices.

Yep, that is a really good point you are making although I don't know how much of Apple's profits come from device vs app store sales.

I have read that Apple does better than Android on app store profits. Which makes me wonder how Apple would proceed with a cheaper "iphone mini/nano"?

Back in 2009 Cortex A5 "Sparrow" was released from ARM. According to this article and others it has great potential.

However, as of today ARM has only announced one company licensing the stock core. I suspect this has to do with the economics of putting a low profit design on 40nm. (Android handset makers don't money from app store sales so I would assume they would avoid low profit designs during this time of intense competition.)

But is there a chance Apple could be using some version of the core, but ARM is not announcing it?

 

[Wonderful Pork]

Here is an interesting comment I found from this techcrunch article.

The only issue I have with not subsidizing phones in the US is the fact that no carriers (other than T-Mo) offer any type of discount if you bring your own phone. It doesn't make sense to not accept any type of subsidy if the cost of service will remain the same.

Now if I could get 300 minutes, unlimited text & data for $40/month (forget $20) then I'd be all over paying full price for the phone.

So, I'm with it in theory (and it should happen for the rest of the world, absolutely) but here in the US all it would do is pad the carriers coffers as opposed to my own.

 

[gsaldivar]

The only issue I have with not subsidizing phones in the US is the fact that no carriers (other than T-Mo) offer any type of discount if you bring your own phone. It doesn't make sense to not accept any type of subsidy if the cost of service will remain the same.

Absolutely correct.

Paying for out-of-contract service on a major carrier, is essentially declining to accept carrier subsidy that can be used to purchase a brand new high-end phone. In other words, you're throwing your money away...

For most people (especially those that pay full retail), it makes no sense at all to decline a low-cost/free subsidized phone for your patronage.