On the day Verizon
Wireless launched the Motorola Droid, its best shot at an
iPhone killer, rumors emerged of plans between Apple and AT&T to launch
a $99 iPhone 3G S in time for the holidays.
The source of the rumors was the Boy
Genius Report, which said it heard the news, which was “definitely not
confirmed,” from two sources.
“I could potentially see a scenario in which AT&T does reduce the pricing
on the iPhone 3G S to $99 as a response to the Droid and other handset
offerings from Verizon and others,” said Ken Hyers, an analyst with Technology
Business Research, in response to the rumor.
The Droid, which
BillShrink.com showed to be priced identically to the iPhone, may be the
most direct about wanting to entice away potential Apple customers, but Sprint
and T-Mobile have additionally launched new touch-screen-based smartphones this
holiday season and have hopes of attracting customers to sign two-year
contracts with them—instead of with AT&T. Among these devices are the Motorola
Cliq, the Samsung Behold II, the T-Mobile Tap and myTouch 3G Fender Limited
Edition, all from T-Mobile, as well as the
Samsung Moment from Sprint. In addition to the Droid, Verizon has armed
itself with the HTC Droid Eris and the
BlackBerry Storm 2.
“Another driver for price reductions would be anticipation of an end to
AT&T’s exclusive iPhone relationship, likely in 2010,” said Hyers.
“Since the [fourth-quarter] holiday shopping season is traditionally the
busiest quarter for adding new subscribers, AT&T might see this as their
last chance to get a substantial number of new iPhone customers and lock them
into two-year contracts, and so would push it aggressively.” he said. “If they
do drop the price of the iPhone to $99, that would certainly lend credence to
the idea that the exclusive relationship would be ending soon.”
Apple currently offers its 8GB iPhone 3G for $99, and so offering a $99 8GB
iPhone 3G S would allow it to stop manufacturing the earlier version—in
addition to mucking up what was surely Verizon’s very intentionally aligned
pricing plan: its 16GB, $199 Droid vs. Apple’s 16GB, $199 iPhone 3G S.
“I can't comment on rumors—and I should remind you that the bulk of Apple
rumors are usually wrong,” said Avi Greengart, an analyst with Current Analysis.
However, he added, “With that said, no one buying a $99 iPhone 3G is going to
turn down a faster $99 iPhone 3G S, but the existing [Apple] lineup at
$99/$199/$299 is already competitive.”
Whether or not the Apple rumor proves true, with it comes the idea that, iPhone
killer or not, the Droid, and similar offerings, may finally be innovative and
compelling enough to truly give consumers pause before signing a contract this
holiday season.
“By the way,” TBR’s Hyers told eWEEK in an e-mail, “I’ve been using the Droid
for a while now—it’s a really sweet device and I think that it and the Android
platform is a formidable threat to the iPhone and other smartphone [operating
systems].”
Not good news for Cupertino—even
through the grapevine.
EDITOR'S NOTE: Avi Greengart is an analyst with Current Analysis, not Strategy Analytics.
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