Here’s why you’ll see free 3G iPhones, er these low prices (updated)


3giphone_2OK, this is my last iPhone post for the day. I’m listening live to the AT&T Investor Call that explains AT&T’s press release on the 3G iPhone. [You can too as it’s open to all via web streaming]. Bottom line: Apple and AT&T have restructured their revenue agreements with the iPhone platform.

Going forward from July 11th, Apple will receive income on the hardware and no longer receive any income from the AT&T customer plans. All voice and data revenues will go right to AT&T. Why do you care (unless you’re an investor in one or both of the companies… which I am not)? Because this is a very traditional model here in the U.S. and allows AT&T to subsidize the hardware. Typically, that subsidized amount is $200, which just happens to be the price of the new, entry-level 3G iPhone. Of course, AT&T will likely charge you an ETF or Early Termination Fee to recoup the subsidy if you bail on the contract… I’d guess that once demand for $199 and $299 iPhones wane, AT&T will use the subsidy method to spur demand… and revenues for data and voice.

Update: it’s clear that the record heat in the Northeast has fried my brain. These must be the subsidized prices, as several commenters pointed out. So AT&T is giving Apple some amount per phone and betting that they’ll make it up (and more) in voice and data services. I’m going to rest in a tub of ice now.


Kevin C. Tofel

There have been no announcements regarding MMS or video recording for the new iPhone, so at this point, it’s assumed that they won’t be there. Those capabilities aren’t in the original iPhone either. Hope that helps!


Hi was having a discussion with a friend today abouth the new iPhone coming to Australia. He was saying that it doesnt do MMS or record video. This sounds stupid to me and in fact would be a deal breaker for me. Is there any truth to this? Thanks


Yeah I love very high resolutions. Obviously the UI has to scale to fit the size vs resolution, but I for one would love super high res displays for the pure clarity and sharpness of the images and text.

A VGA Pocket PC looks amazing compared to QVGA and is much more restful on the eyes as well because they did scale up icons and everything else by a factor of 4 to get a similarly sized UI but much much sharper. I don’t think 800×480 will be a huge step and make it too small at all but it should be incredible for e-book reading, picture viewing, email reading and even surfing. 800×480 and Opera 9.5 strikes me as a beautiful combination.

But I guess I didn’t spot that about not syncing tasks. I guess the iPhone only has the calendar concept, not the task list? Or am I wrong? That is a bit of a weakness for the Enterprise, I use tasks continuously.

Still, getting an iPhone for $199 will be compelling for many, especially as a non-subsidized Xperia X1 here will be three times that.

Chris K

I have to admit, I found the WinMo bashing to be fairly tasteless. As for the screen resolution issue, I do think that more pixels are always (ALWAYS!) a good thing, but no matter what you have, you have to scale them to your input device. When that input device is a mouse, you can force the user to be exact. When it’s a stylus, you need to be more forgiving. When it’s a thumb, you need to be as forgiving as possible, and that means that even if you crammed a 1280×768 display into the iPhone, the UI elements would have to be the exact same size. Webpage images would have to be automatically scaled to fit on the screen. An 8-point font wouldn’t actually BE 8 points. This is all stuff that Mobile Safari seems to handle just fine as is, along with the rest of the iPhone UI, and that’s what bugs me about the XPERIA, the OQO, and the Nokia tablets. 800×480 is a wonderful resolution in the palm of your hand, but it isn’t usable unless you customize your system appropriately. Text should never be so small that it’s unreadable, and icons should never be so small that you can’t tap on them accurately. That’s not to bash the XPERIA, at least not yet. I want to see that thing in person before passing judgment, but at present, I’m not convinced that WinMo is ready to scale to high-res pocketable displays.

Of course, if it ever *does* catch up to that bit of iPhone technology, or even surpass it, it’s going to change how we all use any number of apps. Imagine a WinMo phone where you can RDP into a server at 1024×768, and zoom/scroll across the screen with just two fingers, or review a PDF with nice, FAST scaling and panning. It’s all about presenting your data, and when WinMo gets that down pat, we’re going to see a lot of people who are more than willing to leave the laptop behind.

Trevor Nelson

Native support for Exchange, syncs with Outlook, but STILL won’t sync TASKS.
Single biggest reason I won’t buy one.
Why is it that Apple can integrate everything they do and still not include tasks or notes sync?


I must admit that it is compelling to consider the iPhone for real now. I live in one of the 22 initial countries they will be adding. However, here we simply haven’t had the contracts option earlier, which I for one have considered a very positive thing; I can use any damn phone I want on any provider I want and switching between either has been easy. Drawback there of course is higher purchasing cost for the phone, but frankly I’ve preferred it still.

Now we will get the iPhone but only with contract. Fortunately I’m already using that provider so in that respect it wouldn’t be a shock, but the iPhone is still missing things I would find hard to give up – a great e-book reader for instance would be crucial for me. I’m also not entirely psyched about the relatively low screen resolution compared to the upcoming Xperia X1 with 800×480… love those pixels.

Oh and was anyone else offended by that stupid dig at Windows Mobile when they were trying to justifiy that they won’t allow any programs to run in the background? Windows Mobile doesn’t need a task manager that shows every darn process, in fact it handles opening and closing apps on its own. Sure, there are drawbacks to that approach too, but at the end of the day it was still a justification… but ah well, it was a Stevenote, so trashing Microsoft is required surely.


I’d be more interested if I could get an iphone on Orange in the UK. As it is I think I’ll be looking at the HTC Diamond Pro or SOny Xperian

Frank McPherson

I wonder then, whether with what they negotiated they decreased the time on the exclusivity deal with AT&T? It would seem that if Apple is not getting a cut on the services there isn’t as much incentive for Apple to stick with just AT&T. They could either sell an unlocked version or sell to other telcos. Since Apple is only going to make money on the hardware, I would think they would want as many ways to sell the device as possible.

A rumor I would look to for confirming this is a CDMA version of the iPhone.

James Kendrick

Apple will be selling the phones themselves for those prices so I don’t see how they can be subsidized in the normal way we see this work.


I’d be willing to be the $199/$299 prices are the subsidized prices. I suspect we will soon be hearing about prices in the $300-$500 range for those under contract and ineligible for an upgrade…


But! What if the new price points are lower because they are already being subsidized by AT&T?


Interesting. And it’s in AT&T’s best interests to do the subsidization if they get to keep the data revenues. All the analysis has shown that iPhone users utilize data traffic 2x or more over other smartphone users. This leads to bigger data plans & revenues for AT&T.

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