Report: AT&T Will Cut iPhone Price "By As Much As $200" (AAPL, T)

Peter Kafka | April 29, 2008 5:44 PM

We've previously predicted that Apple (AAPL) would cut the price of its original iPhone by $100, to $299, when it rolls out the new 3G version this spring. Now Fortune says that we were being too cautious: It says AT&T (T) will subsidize the price of the phones by "as much as $200". Fortune:

AT&T is preparing to subsidize $200 of the cost of a new iPhone, bringing the price down to $199 for customers who sign two-year contracts, the source says. Apple is expected to have two versions of the new iPhone, an 8-gigabit-memory and a 16-gigabit-memory model with price tags widely expected to be $399 and $499.

AT&T and Apple declined to comment.

At $200, the iPhone would be within reach of a much wider consumer market and give AT&T a strong magnet to pull lucrative customers away from rivals like Verizon Wireless (VZ), Sprint (S) and T-Mobile (DT). The $200 rebate or subsidy would be limited to AT&T customers and not available through Apple’s stores. The new iPhone sold by AT&T will likely be locked or programmed so buyers can’t take the cheaper iPhone to another phone service...

The new iPhone is expected to be released on the one-year anniversary of the original iPhone debut June 27 or thereabouts. A few weeks prior to that launch, Apple is planning to stop supplies of the older model iPhone, according to the source. This will help clear out inventory and stir up demand for the new device. It will also attempt to avoid the public relations pratfall Apple made when it cut the price of the iPhone without warning last year. To soothe the ire among people who bought the iPhone just before the sudden markdown, Apple issued store credits.

A few details about the new iPhone have also been confirmed by the source. The new iPhone will be 2.5 mm thinner than the 11.7 mm original. The iPhone will also have a GPS chip for navigation and other location-based services.

What's not spelled out in the report: Whether the price cut applies to the original iPhone (which would make sense) or the new 3G model (which wouldn't). We've now read the piece a couple times, and Scott Moritz seems to be saying that Apple intends to dump the old model altogether, and that AT&T will subsidize the 3G model -- a decision we find awfully puzzling.

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35 Comments

Timothy Sykes (URL) said:

Apr. 29, 5:52 PM

Awww damn, my Jewishness might make me give into this deal

Janine said:

Apr. 29, 6:00 PM

Beware of AT&T. I currently switched when I purchased my iPhone...and routinely experience at least 2 dropped calls per day. The service sucks!!!!!!!

Peter Kafka said:

Apr. 29, 6:02 PM

Hesitate to say this out loud, but our household just swapped a Verizon phone for an iPhone and have had zero problems. We will be very bummed that we shelled out an extra $200, though.

anontexan said:

Apr. 29, 6:23 PM

I would happily pay full-freight for an iPhone that didn't shackle me to AT&T. Though the iPhone is a sexy bit of technology, there's just no way that I can overcome my abstract (NSA wiretapping) or personal (insane billing screwups years ago that lead to me forever walking away from them) beefs with AT&T. I know I'm a voice of only one against millions of ostensibly happy AT&T customers, but I can only hope the switch to carrier-subsidization means that an unlocked from the factory variant will be available at full MSRP.

ProfessionalGun said:

Apr. 29, 6:43 PM

Gigabit?

Madame Defarge said:

Apr. 29, 6:47 PM

anontexan - I'm in total agreement about AT&T, so much so that I won't buy an iPhone until and unless I get can one that is unlocked or with another carrier. The fact that AT&T is discounting iPhones bought through them, seems like a good sign that an unlocked version will eventually be a available.

Nate said:

Apr. 29, 7:05 PM

I'd love a great phone like an iPhone, but I'm never going to get a contract with AT&T unless the NSA situation gets truly resolved, so I also hope for a full retail version I can take to a carrier of my choice.

Unless either of those things happens, I'll probably be waiting until next year to buy a phone.

Cieran said:

Apr. 29, 7:06 PM

It's a disgrace that a great progressive like Steve Jobs would sell out to AT&T, who were the most accommodating of all the telecoms towards the NSA and Bush's illegal spying program on Americans (most likely to put together blackmail databases on Democrats, like Nixon).

I'll only buy an iPhone once Apple comes to it's senses and allows me to use it on the only major telecom in America that said NO to the illegal spying program, Qwest.

Christopher Buttner (URL) said:

Apr. 29, 7:18 PM

First off, I really want to love the iPhone, but I can't. I received it on April 5, and today is April 24, and I hate it more than the Treo 650 and 700’s I’ve dealt with over the past three years.

The iPhone is a poorly designed, incredibly buggy device that technologically is a major failure on many fronts. The hardware and software DO NOT LIVE up to the hype. I always wait at least a year or more to purchase new products from Apple, but with the iPhone I should have waited three or more years.

From the lack of tactile keys that is supposed to be the best interface ever designed for a smart phone, yet results in 40% keystroke entry mistakes to the distortion that the iPhone feeds out to every audio and video device on the planet, it’s the worst communications device I have ever experienced.

The iPhone distorts my computer screen, the car audio system to all loudspeakers, either active or passive, including high-end shielded near-field studio monitors, from my Apple iSticks on my computer, high-end surround sound stereo system in my living room to the frigging clock radio.

The static this iPhone kicks out to loudspeakers in my home is HOUSE WIDE, and I am in a 1400 square foot home. If the iPhone is on my kitchen table 15 feet away from my livingroom stereo system, I will still have iPhone distortion come out through the loudspeakers HOUSE WIDE. This is supposed to be an audiophile device and all it does is dump static onto every loudspeaker I stand next to, in every environment.

I have a CRT monitor and I know I am going to get an SMS, email or phone call to the iPhone, because several seconds before the message is received, the entire 17-inch computer screen distorts for as long as 5 seconds, throwing it completely out of focus.

Why the heck does this iPhone not have a pop-up keyboard find function in the database? I have 6300 names in my contact database and it can take 90-seconds or more to find a name through scrolling!

Why doesn’t the iPhone have the same pop-up keyboard feature as in the SMS or Safari function so I can start typing a name and have the contact app bring up the name as I type the letters, as similar to the contact find feature on the Treo? C'mon - how the heck do you not have that common-sense feature? What about a voice find feature OR VOICE ACTIVATED DIALING for the contact database?

Now this really makes me nuts - Safari goes buggy every five days, it crashes more and more frequently and then I need to reset the phone and then I loose all my presets! This is the worst part of the phone. Additionally, regardless web searching is PAINFULLY SLOW! Five minutes to bring up www.huffingtonpost.com or www.rawstory.com, only to have it crash when I try to enlarge an article… argh.

Why on earth does it take SMS up to 10 or more seconds to start and present my message string? Ten seconds for this app to start - gimme a break!

No video function? I can't capture video? Not even a few seconds? Argh.

I can't send a picture through SMS? Good lord.

What the heck is the deal with the recessed headphone plug that makes it impossible to use a standard 3.5mm stereo plug? Now I have to purchase a third-part adapter to use other head phones on a plane or the cassette car adapter? C’mon.

Clearly, the iPhone is the Emperor’s New Clothes. It’s a perfect example if you throw enough advertising, PR and marketing dollars at something, millions of people will eat dirt and call it fillet mignon.

Christopher B.

Seth said:

Apr. 29, 7:19 PM

Outside of ideology and whether NSA actions are undemocratic etc....are people really worried about the NSA monitoring their phone calls? Are you freakin' kidding?

Madame Defarge said:

Apr. 29, 7:55 PM

Christopher B. - The lack of a pop up keyboard, plus the fact that their is no voice dialing capability was a deal killer for me, too.

A usual Apple came up with some great eye candy. Only this time, their much vaunted user interface and functionality superiority, didn't come into play in the way that they should have,

Apple can and should do better.

orlando said:

Apr. 29, 8:33 PM

sprint has the instinct coming out in june CTIA Wireless rate it best in show go to http://nowisgood.com

eta said:

Apr. 29, 8:37 PM

I LOVE EVERYTHING ABOUT THE IPHONE EXCEPT THE PHONE!!!! AT&T SUCKS, THE SPEAKER PHONE IS HORRIBLE. APPLE, PLEASE GET YOUR ACT TOGETHER AND DUMP AT&T. I'M READY TO GO BACK TO NOKIA AND TMOBILE. SO SAD BECAUSE I'M AN APPLE LOVER. THIS COLLABORATION HAS NOT BEEN GOOD FOR THE BRAND.

eta said:

Apr. 29, 8:38 PM

Molly said:

Apr. 29, 8:50 PM

who fucking cares? people are idiots who buy those things anyway! but, i guess they have to "keep up with the jones's". Yep!

Tantrum said:

Apr. 29, 9:16 PM

2 versions - 4 SKUs.

8GB and 16GB - versions without slide keyboard - 3G with minor changes like
-Video
-Photo and video capture/record button on right-hand side. - volume button may be zoom button in camera mode.
-Definitely no plastic. The phone will be metal (brushed anodized aluminum/magnesium and glass. Apple's commitment to environmentally friendly materials will not include dumping 25 million plastic cases on the public.
-GPS but speaker-phone STILL not good enough.
-Apple iPhone 2.0 software.
-Dual SIM capability passive
-No removable battery but better power management.
-Recessed headphones may STILL be in place but standard iPod headphones will fit.
-No second camera for video on the front
-Not much thicker than current iPod Touch, no change in screen size.
-Possible AT&T subsidy to $200 on 8GB model - no Apple subsidy in Apple store. 8GB will fall away when 32GB launched
-Copy paste is still a question mark

16GB and 32GB Premium/Enterprise (BlackBerry switcher) version

-The whole rumor on the thick versus thinner stems from this; thick versus thin = sliding landscape keyboard add-on versus none on base model.Nothing to do with GPS making it thicker.
-Phone itself will be 3mm thinner and a 3mm sliding keypad add-on will make it appear slightly thicker, maybe 1mm thicker than current phone. - For a clear e.g. of how it may look, see Samsung U940 SKUs
-When keyboard is extended, additional battery may be clipped on.
-GPS but speaker-phone STILL not good enough.
-Camera can be disabled by Admin on config
-Same screen size (basically, identical front to base model)
-Recessed headphones may STILL be in place but standard iPod headphones will fit.
-Dual SIM capability active
-Photo/video record/ capture button on right-hand side.
-Not subsidized by AT&T.
-Metal & Glass
-Apple iPhone 2.0 software
-No removable battery
-This is the business version and it will cost (much) more.
-Copy-paste is still a question mark.

If the upgrade doesn't come out like this, this is pretty much the roadmap, The first 2 SKUs will definitely emerge in June.

Probe sources further. Look for SDK code on keyboard and extra battery power management.

Apple will take RIMM head-on in the Enterprise.

Anton said:

Apr. 29, 10:40 PM

Will I be able to send pix attached to SMS (MMS)?

rizchamps said:

Apr. 30, 3:34 AM

So what happened here? The almighty APPL that never believed in cutting price to get market share, how can it allow ATT to impose such a disgraceful price-cut on the blue-blooded iPhone?

This is a turning point here.

AAPL has never caved into price pressure, it was even willing to destroy unloved product rather than lower the price, until now, until iPhone. AAPL chose to enter the US wireless market where carriers dictate the terms and handset makers compete both on price and functionality. AAPL believed that its design could turn a commodity into a differentiated product, and it failed. From this point onward, it is the slippery slope of pricing competition. That is an insult to those who paid the premium for to get the iPhone when it came out, and also a validation for those who do not want an iPhone, for good reasons.

Lalo (URL) said:

Apr. 30, 8:04 AM

http://tech-exposed.com/

Now what should I do??
I was looking to purchase the phone this week. Should we wait for the price reduction or bite the bullet and get it now?

Chris said:

Apr. 30, 10:37 AM

AT&T has the worst service in the world. You will drop at least one in three calls if you are lucky, it is more likely that you will drop half of them. The phone itself is nice but does crash every few months and will freeze occasionally. Just know more than anything else when you sign with AT&T you are signing up for the worst service provider I would argue they are not a service provider at all, rather they take your money and leave you to pray for a decent phone call. Remember how bad Sprint used to be when all they had was cool phones? AT&T is 10 times worse than that!

Tevian said:

May. 01, 10:34 AM

As much as I admire my ATT LG CU515 and my little Verizon Juke for their own capabilities (and sure, their style), I rely a whole lot more on my iPhone to help me out during a typical day. I use my iPhone all the time for a selection of my music, videos including news podcasts, movies, photos, address book and calendar. I love how it has adapted to my klutzy typing skills and invariably decodes my "vemeru" into "celery" on the shopping list.

But, since the advent of the iPod touch, and given the fact that I live in a dead zone and primarily use only the WiFi or USB connectivity of the iPhone anyway, I am wondering how much appeal an upgraded iPhone would actually hold for me. I do have an iPod touch and have noticed that my only resentment of it is the lack of an external speaker...

Anyway imho the whole thing of a new iPhone being discounted by ATT might be a hoax and merely a disincentive ploy, floated by a competitor of either Apple or ATT. It's not beyond imagination considering the way megacorporations and their marketers behave these days.

I shed cable TV a year ago, based on my assessment that TV content is shoddy, the commercials intolerable and a la carte cable options apparently not forthcoming until the next American Revolution. I do not miss television at all.

So now... I am starting to think harder now about my cell plans. My service is beyond shoddy, it's nonexistent and yet I have been stupid enough to pay for it anyway. Why is that? Because I like the GADGETS? Because I've successfully made 8 minutes of calls on my iPhone in 10 months and something like 2 hours lifetime on my Verizon plans over five or six years? It can't be because I want to be cool. I live in a part of the sticks where cool is something you get if you open the windows early on a summer morning.

I think I will just keep my iPod touch, find some microspeakers I can live with and be done with all the cell carriers until some city friend with a cellphone visits me someday, flips on her phone in my kitchen and sees four bars on the device.

As I said, I love my iPhone and so I wish Apple well, but I think I'll skip an upgraded iPhone, and it has absolutely nothing to do with the iPhone. It has to do with the disgraceful state of the cellular infrastructure in the United States of America. I'm saving up for my early termination fees instead of a new phone this time around!

joe said:

Jun. 22, 2:41 PM

umm well the gov can tap any phone on any service they want with no permission even home phones so for people who obey the law i dont see why this would be a proble......you guys have to much free time on your hand......ATT helps spy for the gov who cares if you arent doing something illeagal then why does it matter.....

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