The Lowly 3G iPhone

  • Posted: 21 June 2009 03:14 PM

    Now that the 3G S has vaulted onto the news screen following its release on Friday, we’re not seeing much attention paid to what is now the lowly 3G iPhone, available for $99. Aside from the obvious (the new features on the 3G S, reports of faster data speeds and the difference in price between the 3G S and the 3G iPhone models), continued strong sales of the 3G iPhone will impact app store sales and Apple’s revenue generation as much as the newer model.

    We’re seeing all kinds of sales estimates on the sales performance of the 3G S in its first few days of release. I’m wondering if 3G iPhones have held their own due to the drop in price and the heavy iPhone sales traffic over the weekend.

    What do you think?

         
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    Posted: 21 June 2009 07:14 PM #1

    DawnTreader - 21 June 2009 06:14 PM

    Now that the 3G S has vaulted onto the news screen following its release on Friday, we’re not seeing much attention paid to what is now the lowly 3G iPhone, available for $99. Aside from the obvious (the new features on the 3G S, reports of faster data speeds and the difference in price between the 3G S and the 3G iPhone models), continued strong sales of the 3G iPhone will impact app store sales and Apple’s revenue generation as much as the newer model.

    We’re seeing all kinds of sales estimates on the sales performance of the 3G S in its first few days of release. I’m wondering if 3G iPhones have held their own due to the drop in price and the heavy iPhone sales traffic over the weekend.

    What do you think?

    You need to watch the unsubsidized markets to get the real story on the $99 3G what price are they selling for in the BRIC countries?  I haven’t done the research yet, but with Iphone 3.0 software, the cheaper phone becomes very interesting in markets that don’t subsidize.

         
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    Posted: 21 June 2009 07:16 PM #2

    2 yr cost of iPhone 3G $2140   3GS $2240,  Who in their right mind wouldn’t choose the new, more advanced iPhone 3GS?  I just don’t see 3G sales holding up well at all.

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  • Posted: 21 June 2009 07:31 PM #3

    macglenn - 21 June 2009 10:16 PM

    2 yr cost of iPhone 3G $2140   3GS $2240,  Who in their right mind wouldn’t choose the new, more advanced iPhone 3GS?  I just don’t see 3G sales holding up well at all.

    Speaking for me with so many household members on a family plan, the $100 savings upfront times three or four units adds up quickly. Further, under the family plan my cost per line over the two years of each contract is significantly less than the costs you quote for a single-user plan.

    My nominal costs for each additional iPhone line for two years works out to about to about $960 for the two-year contract term so the $100 saved per unit works out to about 10% of the total iphone cost per additional iPhone line.

         
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    Posted: 21 June 2009 08:46 PM #4

    Everyone has a very US centric view of the IPhone.  The pocket computer IMO is for the whole world.  The only issue is marketing.  Why would Apple use their engineering resources to add all those languages if it was not intending to challenge internationally.  The global handset market is huge, but many of the handset owners have yet to purchase a computer.  Apple’s goal is to deliver that computer via the handset.    Everyone looks at subsidized pricing, but we all know the 3G was $600 and is now $500.  If they can get the initial sale Apple knows they have good stickiness.  Only time may tell if the price is low enough to open the floodgates.

         
  • Posted: 21 June 2009 08:53 PM #5

    pats - 21 June 2009 11:46 PM

    Everyone has a very US centric view of the IPhone.  The pocket computer IMO is for the whole world.  The only issue is marketing.  Why would Apple use their engineering resources to add all those languages if it was not intending to challenge internationally.  The global handset market is huge, but many of the handset owners have yet to purchase a computer.  Apple’s goal is to deliver that computer via the handset.    Everyone looks at subsidized pricing, but we all know the 3G was $600 and is now $500.  If they can get the initial sale Apple knows they have good stickiness.  Only time may tell if the price is low enough to open the floodgates.

    I think public statements by an AT&T exec last year indicated the company thought the $99 subsidized price point was a watershed price point for iPhone adoption by a significant percentage of the phone-buying population in the States. We’ll see. But the percentage of smart phones of all phones purchased is rising by the minute and the $99 price point is an attractive point of entry for those who desire a smart phone but for whatever reason couldn’t justify a higher price.

         
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    Posted: 21 June 2009 09:13 PM #6

    DawnTreader - 21 June 2009 11:53 PM

    But the percentage of smart phones of all phones purchased is rising by the minute and the $99 price point is an attractive point of entry for those who desire a smart phone but for whatever reason couldn’t justify a higher price.

    Mentally it is a very attractive price. And yet again, Apple has perfected the art of pricing. The $99 iPhone brings you in. Then you see all of the additional benefits that can be had with the $199 phone and then recognize that for only $100 more you can get twice the storage. Suddenly the person has talked themselves into buying the 32G iPhone 3GS.

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    Posted: 21 June 2009 09:45 PM #7

    The problem is the monthly service fee is almost as costly as the device.  I look at the teen demographic since I have two.  I would buy them an iphone in an instant if I could avoid the 30 data charge.  I could care less if they have mobile internet.  They just grab my phone anyway in the car.  That said they love the apps and on wifi it’s the cat’s meow.  Why not a touch, because I have to buy them a cell phone anyway.  So if ATT can price a plan for teens then Apple sells many more Iphones.  What would this plan entail phone and text kids use wifi or tether off the master family plan.

         
  • Posted: 21 June 2009 09:54 PM #8

    pats - 22 June 2009 12:45 AM

    The problem is the monthly service fee is almost as costly as the device.  I look at the teen demographic since I have two.  I would buy them an iphone in an instant if I could avoid the 30 data charge.  I could care less if they have mobile internet.  They just grab my phone anyway in the car.  That said they love the apps and on wifi it’s the cat’s meow.  Why not a touch, because I have to buy them a cell phone anyway.  So if ATT can price a plan for teens then Apple sells many more Iphones.  What would this plan entail phone and text kids use wifi or tether off the master family plan.

    Yeah, teens!  LOL

    You have a point. It’s one of the reasons I’m keeping my original iPhone for now. The data plan charge is less per month. However, AT&T recoups the costs of the subsidy (which is substantial) over the two years of the contract. The higher the subsidy, the higher the rates.

         
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    Posted: 21 June 2009 10:58 PM #9

    The thing is you want your kids to innovate.  I spent my life in the world of gadgets as an EE.  I would say without reservation that Apple has produced a series of gadgets which are above the rest from both a technical and a physical view.    I have spent many a day refining a technical project so it was understandable to the masses.  Apple has the secret formula, but had to share it with ATT to reach the masses.  I just hope that ATT does not knock the train off the track.  The great thing is that all around the world people respect great design and Apple has proved time and again that they can deliver.

         
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    Posted: 22 June 2009 12:59 AM #10

    I like Apple’s decision to make the iPhone 3G its own version of the “Razr V3” or whatever used to be the shining example of last year’s snazziest phone with a lower price.  I mean hey, the iPhone 3G remains a capable phone. 

    Most people though, including myself, will find a way to save up the extra dough to step up to the 3G S though if they qualify for the $199/299 pricing—with data plans and monthly costs being identical, it’s awe-inspiring how much faster and more capable the 3G S is.  3G video “filtered” through YouTube is amazingly crisp, and you can easily tell, even through YouTube video, that responsiveness is on a whole different level from the iPhone 3G, which is a little less smooth and responsive in places now due to the added complexity of iPhone 3.0.  (On the other hand, is it just me or is Zippo Lighter really taking advantage of iPhone 3.0?  raspberry)  I just keep telling myself to hold on for the June 2010 edition of the iPhone, but I don’t exactly have supreme confidence in my ability to wait that long even with the lack of full upgrade pricing…

    That’s the other thing that may have some impact on iPhone 3G’s additive effect on sales.  Are the “carryover” iPhone 3Gs exactly the same, or are they slightly optimized (like the 2G iPod touch apparently is) to better handle iPhone 3.0?  Will new users notice the “slowness” that appears in iPhone 3G/3.0 phones the same way existing users do? 

    Of course bringing the iPhone 3G to this price strata is a very smart move.  I just don’t know if people will find the phone to be ever-so-slightly overwhelmed by the new OS, which hopefully has some room for optimization.

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  • Posted: 22 June 2009 01:01 AM #11

    pats - 22 June 2009 01:58 AM

    The thing is you want your kids to innovate.  I spent my life in the world of gadgets as an EE.  I would say without reservation that Apple has produced a series of gadgets which are above the rest from both a technical and a physical view.    I have spent many a day refining a technical project so it was understandable to the masses.  Apple has the secret formula, but had to share it with ATT to reach the masses.  I just hope that ATT does not knock the train off the track.  The great thing is that all around the world people respect great design and Apple has proved time and again that they can deliver.

    The exclusive arrangement won’t last forever. It’s up to AT&T to make the most of the opportunity provided. I’m pretty much carrier agnostic now that I’m with AT&T. I had been with Verizon since the days it was Airtouch Cellular, but moved to AT&T when I acquired an iPhone. I may eventually switch as the exclusive arrangement ends to whatever carrier provides the best deal on service and price when the iPhone is opened to multiple carriers in the States. We’ll see what happens as the five-year deal with AT&T comes to an end. I can’t imagine Apple would renew the contract and AT&T (after a couple of encounters with what I’ll describe as less-than-straightforward AT&T personnel) will lose my business unless something dramatic occurs. It’s their business to lose and the current data rates are high IMHO for the services provided.

    However, I don’t think any of the major cell service providers in the States are providing what I consider superior service.

         
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    Posted: 22 June 2009 01:32 AM #12

    AT&T has a quickly closing window of time to get things right and cement the gains it’s making thanks to iPhone.  Before too long, Apple will alter its strategy towards volume in the US, because without exclusivity it can more than double its addressable market.  Aside from iPhone there is precious little reason to stay with AT&T, though that’s not to say that any one carrier is necessarily far superior.  Competition is good, and Apple has set itself up to win even bigger once its “experiment” with AT&T is done.  The sooner AT&T realizes it should learn as much from Apple as much as Apple is learning from AT&T, the better off it’ll be when the iPhone floodgates open.

    [ Edited: 22 June 2009 02:42 AM by Mav ]

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  • Posted: 22 June 2009 01:40 PM #13

    I think a part of the reason for keeping the 3G available is simply to be able to end production smoothly, use up all the parts and sell out carrier inventory, and keep demand and supplies going in countries which don’t yet have 3GS. An iPod style overnight model transition is simply too difficult with the iPhone distribution model. If the price point generates a lot of extra demand, we’ll probably see it replaced by an 8G 3GS.

         
  • Posted: 22 June 2009 01:51 PM #14

    Plus in parts of the country (and the world) that lack 3G coverage, the 8G 3G serves the market for the original iPhone ? capable of unlocking and using on other networks. ATT cancellation fees probably make it equivalent of buying a Touch, so it’s not a cheaper way to get one of those.

         
  • Posted: 22 June 2009 03:10 PM #15

    sleepytoo - 22 June 2009 04:40 PM

    I think a part of the reason for keeping the 3G available is simply to be able to end production smoothly, use up all the parts and sell out carrier inventory, and keep demand and supplies going in countries which don’t yet have 3GS. An iPod style overnight model transition is simply too difficult with the iPhone distribution model. If the price point generates a lot of extra demand, we’ll probably see it replaced by an 8G 3GS.

    Agreed.  grin

    If AT&T really wants to win at this game a $99 3G S in the market for Christmas would be an impressive product. It depends as much on carrier subsidy support as it does Apple. The time window on the exclusive deal will soon begin to close (albeit slowly), but it’s in AT&T’s best interest to cement its leadership in the smart phone market in the States as quickly and for as long as possible.