Now That Rumors Have Subsided: Is a $99 iPhone Good or Bad?

Now that recent rumors of a $99 iPhone seem to have been settled — Wal-Mart will sell the 8GB model for $197 — we can get back to the broader discussion of just what an eventual $99 iPhone could mean to Apple.

I believe the answer to the question depends on just what a $99 iPhone is. Prior to the latest rumors, it was usually discussed as some sort of “iPhone nano.” Maybe a flip phone, and generally acknowledged to be much more limited than the current iPhone. I’m sure these rumors will creep up again soon. 

An iPhone nano

I think an iPhone nano is a bad idea:

  • Would it have touch? Surely there is some point at which the smaller screen this device demands would render the iPhone interface useless. 
  • Even if it has touch, it’d be limited. The buttons may be similar for taking and answering calls, but most of the iPhone interface just wouldn’t work well.
  • Will a smaller phone like this have the thermal envelope necessary for a processor required to run Mobile OS X adequately? If not, then it either has no touch, or something very different than the current iPhone, and this difference is my biggest problem with it. 
  • There’s not a lot of profit in these things. The analysts are all about market share, blithely ignoring the market share lessons Apple has taught them the last 20+ years. Apple doesn’t need huge market share figures to have an extremely successful, profitable, and growing business. Apple refused to build the low-ball $700 laptop everyone wanted, and now people expect them to do the same with phones? 

A phone of this type might have better than average build quality, and maybe some touch or unique features, but it would really be little more than Apple’s Razr. 

The biggest problem with an iPhone nano is that, while the iPhone is a platform, the iPhone nano is not. That is primarily why Apple shouldn’t go there. All the marketing and buzz about the App Store, the full internet, etc., fade into the background when Apple has to start footnoting everything to exclude the baby of the family. 

I think the confusion in different iPhone hardware models would hinder the app market. Many apps would not run on the nano. In my opinion, Apple should be very careful about fragmenting the “iPhone” name in terms of varying models with different app and feature capabilities. They should keep the platform in tact. 

Finally, I do believe Apple could do something “cool” with a smaller phone while keeping what’s great about the current iPhone. There is plenty of room for innovation there and I suspect Apple will provide it. But such a device would not be the low-cost phone analysts are screaming for right now.

Which brings us to the “other” $99 iPhone discussed in the latest rumors…

An existing iPhone 3G

The Wal-Mart rumors circle around not a new iPhone, but rather another model of the existing iPhone 3G. The original rumor was of a 4GB iPhone at the lower price, but my point isn’t about how much storage it has, but rather that a low-cost phone based on the existing design would be a good thing no matter how Apple pulls it off.

I’ve seen some comments that pan the idea; but I disagree with the arguments I’ve seen against it: 

  • It cheapens the iPhone brand. How? Did the price reduction on the 8GB model over a year ago “cheapen” the brand? Does the 8GB model now “cheapen” the 16GB? Not at all, it opened it up to a wider audience, just as a $99 price will do.
  • No one wants a “cheap” phone; remember the iPhone launch? Yes I do. When you’re spending $500 for a device it’s not a stretch to spend $100 more for additional memory. It was 20 percent more money for 100 percent more storage. The landscape has changed since then. The iPhone is already much more affordable (at least, it’s perceived that way), and to get in at $99 is a good thing. 
  • Selling at [insert retailer here] ruins the Apple buying experience. As far as I’m concerned, unless you’re online or at an Apple Store there is no Apple buying experience (until you get it home). All the major chains that have ever sold Apple products couldn’t care less about them. They push the house brand more than anything else. I’m not sure how any retailer you choose could be any worse. This isn’t praise for other retailers so much as my opinion of your average electronics outlet may be lower than most. 

Meanwhile, I make these arguments for the device:

  • With the $99 price point Apple reaches a different audience.
  • Instead of abandoning the iPhone platform, it enhances it. This is big.
  • These things still require $70+/month data plans. This new audience is one with money to spend, and likely to buy apps, accessories, etc., which is more than anyone should expect of an iPhone nano’s audience. 

Conclusion

Apple, I’m sure, has their own reasons for not going the $99 route at this time. They may not want another SKU in the iPhone lineup yet (possibly because of new devices they’re working on). It may be as simple as just waiting a bit longer and dropping the 8GB model’s price. Heck, for all I know AT&T is begging Apple not to put millions more users on their 3G network until they (AT&T) get their network fecal matter collected. 

Still, potential roadblocks aside, it seems to me if Apple wants to play the low-cost iPhone game, something that keeps the existing platform’s primary characteristics (no matter how they do it) is much more desirable than any “iPhone nano” they could produce. Leave the Razr market to Motorola, for all the good it’s doing them.

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