$99 iPhone 3G “kneecaps” Mobile Industry

There’s a fascinating piece of analysis regarding the iPhone 3G that was published by Nielsen about a week ago. The Impact Of The iPhone 3G Price Cut outlines how Apple’s reduced pricing on its second generation iPhone completely redefines the economics of the global mobile industry:

It is hard to overestimate the impact that a $99 iPhone has on the wireless carriers and handset manufacturers in the US. The new $99 price point for the iPhone 3G completely changes the value proposition of every handset at every carrier in the US. Some observers have commented that the $99 price point “kneecaps the Palm Pre,” but the kneecapping does not stop there.

The information in the piece is particularly acute for Canadian telcos and gives Rogers an incredible edge over its competitors, Bell and Telus. (Though, it’s worth noting, the $99 price is Canada requires a 3-year contract, compared to a 2-year with AT&T.)

Rogers.com - iPhone Devices

Compare that to a competing (and vastly inferior – like, no WiFi?) unit on Bell’s network, the Blackberry Storm, which goes for 50% more.

BlackBerry Storm 9530 3G Phones from Bell Mobility

With Bell at the $99 price point, you’d get stiffed with the laughable Treo Pro.

It’s a no-brainer to pick up an iPhone – even an older generation one – over any unit in the Bell stable, particularly when you consider the fact that most of those current Bell units will only run on the end-of-life CDMA network and have a limited lifetime. And this pricing will no doubt force down the prices on other units from RIM, Samsun, HTC and others.

Because, I think that Nielsen is bang-on when they say that,

…voice has been commoditized and has become table stakes. Defendable differentiation will come from devices and data.

This is near-gospel truth. The “smartphone” category will become the de facto standard mobile device ongoing, and the average consumer will use it more for tasks that involve internet, texting, and IM, over traditional voice calls.

This trend, along with Apple’s rock-bottom pricing of the iPhone 3G, will force a realignment in the business model between device makers and network operators. In general, we consumers should see an overall drop in device pricing and, assuming mobile carriers keep the pace, a reduction in price for data plans.

The iPhone revolution continues.

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