Do AT&T rivals need an iPhone killer anymore?

Another smartphone dubbed an iPhone killer launched this weekend. This time it's Sprint Nextel's Palm Pre, and by some accounts it is the strongest rival to the iPhone to date.

Sprint is smartly staying away from any iPhone comparisons this time around. A year ago it launched the Samsung Instinct, hyping the device as an iPhone killer. The operator made the comparison a major part of its push for the device, mentioning the iPhone 3G in its ad campaign and even adding a link on the official Instinct website that explained why the Instinct was better than the iPhone 3G. While the iPhone 3G continues to do well, the Instinct never made the top five.

Fast forward to June 2009 and it's clear that smartphones of all kinds are fueling growth across all operators--with more growth to come, given the fact that smartphones still represent a minority of devices in the market. That trend wasn't so clear a year ago. To me, the trend takes the pressure off carriers a bit to find an iPhone killer. Granted, the iPhone continues to generate tremendous financial metrics for AT&T, and competitors like Verizon Wireless would love to get their hands on the iPhone, but the market is so young and there's so much opportunity for both operators and device makers now that the wireless consumer understands the power of the smartphone.

Tero Kuittinen, telecom analyst with Avian Securities, recently noted that as 3G networks become widespread and device price points drop, the uptake of smartphones is likely to grow dramatically. But he also noted that smartphones have to address different niches. "We can't continue to have a $500 smartphone trend and still drive sales." Even the iPhone at a single price point would eventually have its limit.

Of course, Apple could give the mobile industry another headache today if rumors are correct in predicting that the company is introducing an iPhone priced at either $99 or $149, down from the current low end of $199. AT&T would continue to subsidize the smartphone when subscribers sign a two-year service contract.--Lynnette