NEWS ANALYSIS: Smartphone shoppers who are looking for a deal on the iPhone 5 and can live without 4G LTE can turn to regional mobile carriers, which are starting to get the iPhone 5 and are offering it at a lower price.
Regional carrier nTelos, which serves Virginia’s Shenandoah Valley and some portions of Central Virginia near Charlottesville and Richmond, started selling Apple’s iPhone 5 on Sept. 28, just a week after the three major U.S. carriers started selling it.
But there are a couple of important differences: the nTelos iPhone 5 costs $50 dollars less than it does from the national carriers, and it doesn’t have speedy 4G LTE (Long Term Evolution) network service.
But since nTelos hasn’t launched its LTE network, and won’t be launching it for a while yet, its customers don’t need LTE. Furthermore, because nobody has LTE roaming agreements in the U.S. yet, you also can’t roam on another carrier’s network, so paying for LTE would be pointless. For voice and 3G data, nTelos customers roam on Sprint’s network where it’s available and on other carriers’ CDMA networks when Sprint’s not available.
According to nTelos spokesman Mike Minnis, the difference between the iPhone 5 that his company sells and the iPhone 5 that Sprint or Verizon sells is that the nTelos version is missing the LTE nano-SIM. He told eWEEK that the company would offer upgrades (meaning the SIM cards) for LTE when nTelos starts rolling out LTE service. However, the LTE radios are already in those iPhone 5 devices, so upgrading will be a simple matter of installing the nano-SIM.
Beyond that, the iPhone 5 phones themselves are the same as those used by other CDMA carriers in the U.S. And because nTelos has roaming agreements with the other CDMA carriers, customers should be able to use their phones anywhere in the country. Minnis also said that the nTelos iPhones are fully capable of roaming internationally and are unlocked so that users can buy a nano-SIM card when they travel.
Given that the only carrier to have LTE rolled out nationwide in the U.S. is Verizon Wireless, users that don’t need LTE (perhaps because they don’t stream video) may never notice the difference. But they’re likely to notice the fact that you can buy an nTelos iPhone 5 for $149.00, and pay a monthly unlimited anything contract at a lower cost than Sprint.</p>
Other regional carriers are also selling the iPhone 5 at a similar price. Apple provides a complete list of carriers, most, but not all of which are carrying the iPhone 5. We found out about the nTelos offering because they sent a press release, which was confirmed by my daughter who is a contractor for the company. This, as expected, was combined with a hopeful wish that Dad would buy her an iPhone.
This isn’t the first time that Apple has let carriers sell iPhones at a reduced price. Apple enabled nTelos and several other regional carriers to sell the iPhone 4S at a $50 discount. Apple is offering other regional carriers a similar deal and most of them have the same pricing. But this kind of pricing structure may go beyond just the regional carriers and the iPhone 5. This deal could give a hint as to Apple’s global strategy.
It’s no secret that the iPhone 5 is expensive. Without a carrier subsidy the iPhone would cost something around $650.00. We’ll see iPhone 5 devices at those prices when the unlocked version of the iPhone 5 ships later in October. Those phones will be LTE-capable GSM phones similar to what is being sold throughout the world.
But most of the world doesn’t have LTE. You can find that in Western Europe, Japan and some other nations in Asia and in Australia. Elsewhere, an LTE phone does you no good. But GSM and HSPA+ are widespread and phones that can work with those can be used in a much broader area. But in many of those same nations the cost of an iPhone is prohibitive.
But suppose you were to offer the iPhone 5 at a reduced price and without an LTE SIM? That would certainly make the iPhone more affordable. Likewise, iPhone 4S and iPhone 4 devices at a lower cost would also be affordable in more places. While the earlier iPhones don’t have LTE, the fact is that Apple has more flexibility with pricing with phones that aren’t the flagship model.
These pricing changes, like many that have happened since Tim Cook took over as CEO of Apple, mean that iPhones can be bought by more people in more places than they could have been with the policies that Steve Jobs had in place that basically held the line on any discounts for the iPhone. This new practice was clear when Apple started partnering with prepaid carriers–something else that Jobs would never allow.
While I’m sure that there are plenty of Steve Jobs fans who would decry this new pricing flexibility at Apple. The fact is that Apple needs to do this if it’s to emerge from its place as an elite niche product in most of the world. While the iPhone has been reasonably affordable because of carrier subsidies in the U.S., the same is not true in the rest of the world.
Outside of the U.S. and Western Europe, only the very rich could afford an iPhone. This new pricing means that Apple has set its sights on wider goals and on competing globally, which is great news for smartphone buyers, but bad news for rival smartphone makers.