Apple iPhone Can't Ignore Android Price, Market Share Challenge

News Analysis: There are two reasons why Android phones are outselling everything else. They're ubiquitous and they're cheap. There is no reason why Apple can't make and sell a smartphone that's just as cheap.

There's no question that Apple's iPhone has a large and devoted following. Some have said their devotion rises to the level of religious fervor. But the fact is that Apple and the iPhone need more than just a religious following. Apple needs a phone that makes sense to its users if it's going to stem the onslaught of Android phones around the world.

As Nick Kolakowski pointed out in his article making a number of suggestions about how the iPhone can fend off the rapid growth of Android device sales, iPhones cost too much. They appeal to people who need a smartphone and for whom money isn't a significant object. In the United States, you can get a 16GB iPhone 4 for just under $200 with a two-year contract from AT&T or Verizon Wireless. On the other hand, you can get Android smartphones for free from a variety of carriers.

It's pretty hard to beat free if you need a smartphone, and that does a lot to explain why Android phones are spreading faster than iPhones. Another part of the reason is that not everyone in the global economy makes enough money to afford an iPhone regardless of whether they want one. What's equally important is that not every customer with a need for a smartphone has access to a contract that heavily subsidizes their phones. So for comparison, perhaps a better way to look at the true price of a smartphone is to compare the unsubsidized price.

It can also cost either $599 or 699 to buy a 16GB iPhone 4 in the U.S. depending on whom you ask. Apple says that the unsubsidized price for the iPhone is $599, so I'll use that. The other price came from a manager at a local AT&T store. An Android phone can be had in the U.S. for $124.99 for the T-Mobile Comet. With a subsidy it's free. There are also free subsidized phones from other carriers, although the Comet wins the unsubsidized price battle.

Now there's absolutely no question that the Comet is not the same phone as an iPhone 4. It lacks the coolness factor, for one thing. But it is a 3G-capable smartphone that will fulfill many of the same functions for a fraction of the price. It's pretty easy to see why Android phones are eating the iPhone's lunch globally. Remember, a $600 phone might be something that many Americans can afford, but not everyone is an American. Not everyone can afford an iPhone, and not everyone has access to a carrier that provides those great subsidies that have distorted the U.S. wireless market.