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Nielsen: $99 iPhone "completely changes" industry

updated 03:55 pm EDT, Tue June 16, 2009

Nielsen on 99 iPhone 3G

The iPhone 3G's price drop to $99 is a large enough move that it could overhaul the entire cellphone industry, according to research by Nielsen. Analyst Roger Entner believes the cut "completely changes" the worth of every phone already on offer and won't just hurt smartphones, where the comparisons are more evident, but any limited "feature" phone that nears the price point. Any cellphone over $49 is "kneecapped" and will look like either it costs too much to make or that the carrier is asking too high a price, Entner says.

The researcher expects Apple's simple change to force changes in pricing. To more closely equal the 8GB iPhone's pricing, device makers are likely to further cut their profit margins; carriers could alternately bear some of the cost by more heavily subsidizing phones. A chance exists that carriers may recoup the costs of this by increasing the monthly fees, though Entner warns that customers may balk at having to pay more each month.

Reductions in monthly rates are deemed unlikely to help, however. Even an AT&T move would likely be seen as "scorched earth" policy as it would encourage other carriers to cut prices and give customers little reason to switch networks but still hurt revenues.

Critics already anticipate that the company most likely to be affected by the cut is Palm, whose Pre while well received costs roughly twice as much and so far claims a faster processor and multitasking as its main advantages.



By Electronista Staff
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  1. snork

    Fresh-Faced Recruit

    Joined: Feb 2008

    +1

    For sure...

    A $99 iPhone3G for sure makes VZW's line of LG touchscreen phones look too expensive. Versa, enV Touch and Dare go for $99, $99, and $129 with 2 yr contracts respectively and none can compete on features. The only saving grace on non-smart phones is that you aren't forced into a monthly data plan.

  1. c4rlob

    Fresh-Faced Recruit

    Joined: May 2009

    -1

    Friday is a big day

    Friday will be big day for Apple not just because of the new iPhone 3GS, but because so many people are going to find out about the $99 iPhone and say to themselves exactly what Entner is saying.

    And how do you look at a $299 Pre and say it's TWICE as much as a $99 iPhone?? Maybe more writers should stick to writing and leave the math to someone who actually learned it?

  1. dagamer34

    Fresh-Faced Recruit

    Joined: Apr 2007

    +4

    It doesn't

    Unless you assume that the general public is stupid, dropping the price of an iPhone by $100 only changes the total cost of ownership by less than 5%. It would be MUCH more worthwhile to drop the price overall price of the voice data plan by $10/month. which would save you $240 over 2 years.

    But then again, people only worry about instant gratification, right?

  1. Fast iBook

    Fresh-Faced Recruit

    Joined: Mar 2003

    -1

    Game changer.

    We are, as of this Friday, living in a touch screen world, and I expect tv, atm, tvm etc to follow suit. I think the much anticipated tablet is within a year and touch control screens on desktops could be as close as the next refresh.

    Sent from my iPhone.

    - A

  1. Constable Odo

    Fresh-Faced Recruit

    Joined: Aug 2007

    -2

    You can't blame Apple

    for the carrier charges, can you? That is something that is set by AT&T. Maybe if AT&T knew how to streamline their networks or something, they could manage to lower their charges. Unless AT&T also wants to keep profit margins high, you'd figure they could try to make it up in subscriber volume, but then again, with more users, the 3G network would again be brought to it's knees. I don't think we're going to see a lowering of data rates until 4G is announced.

    It's not a matter that the public is stupid, it's just that there is some perceived bargain by paying less for a handset up front. I always look at it long term costs and that little amount of doesn't add up to much at all. I suppose most people just don't want to be bothered doing the math.

  1. Tyrade

    Fresh-Faced Recruit

    Joined: Jul 2007

    +1

    little impact

    I have spoken to several friends and some family members for whom the $99 price point is irrelevant so long as they still have to fork over the premium for the data rate. I think if AT&T created a lower-cap data plan, it would sway potential users like my mom. Until then, she's happy to continue with the limited interface of her traditional Samsung slider.

  1. Jonathan-Tanya

    Fresh-Faced Recruit

    Joined: Oct 2004

    +1

    irrelevant for many

    For many people the $99 price point isn't the thing its the cost over time.

    We make such a big deal about how some people don't take into account total costs, that we forget that so many really do just that.

    You have a family with two phones, unlimited texting, enough minutes, and you are talking over $200 bucks a month. $2400 per year.

    Forget about it, there is plenty of room to compete.

    Glad apple is makings its competitive moves, I'm sure it will help them....neverthless lets not go over the top with the analysis.

  1. snork

    Fresh-Faced Recruit

    Joined: Feb 2008

    +1

    You all are too logical

    You all are being too logical;) Let's face it, like dagamer34 said America is all about instant gratification. Their will be a lot of dimwits seeing the $100 price tag and hopping on board.

    The only thing AT&T has going for it in this regard is that you actually have to pass a credit check to get an iPhone plan.

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