Editor's Corner

There's a lot of hoopla surrounding the price of the iPhone and whether the $500/$600 price tag will have a major impact on the mobile-phone market. A couple of surveys have come out with some interesting and mixed conclusions about this very topic.

Online consumer research company Compete, which surveyed iPod shoppers in December and followed up with them after Apple's iPhone announcement to find out if their willingness to buy an iPhone, found the game changer to be between $200 and $300 (sub. req.). About 59 percent of those aware of the impending launch of the iPhone would switch carriers to buy the device if it was between $200 and $300. At more than $500, just 1 percent said they'd buy the device.

Another survey from Morgan Stanley found that more people are interested in purchasing an iPhone than the combined number of people who already own or are planning to purchase a similar high-end device. Nineteen percent of survey respondents either currently own or plan to purchase a high-end device in the next year, and that number compares with 23 percent of respondents who said they are either extremely or somewhat interested in purchasing an iPhone in the 12 months following its release.

AT&T CFO Rick Lindner, speaking at a conference in New York, said that the company's analysis shows that as much as 75 percent of U.S. iPhone buyers will be first-time customers. "The majority of those customers, two-thirds to three-fourths, will be coming from outside of our current wireless customer base and that's a good thing," he said.

iPhone certainly is a game-changer for the industry--especially as Apple broadens the iPhone portfolio like it has done with the iPod--but will it meet Apple's initial lofty projections of 10 million devices in 2008 at a $500 price point? John Jackson, vice president with m:metrics, notes that there is no historical precedent for a device this expensive moving in significant volumes. The RAZR was once at that price point but didn't hit meaningful volume inflection points until it was subsidized and globally distributed, he notes. Motorola sold 12 million RAZR phones in 2006. Apple didn't sell 10 million or more iPods in a year until 2005, four years after its introduction. Of course now it has an iconic following.

Apple COO Timothy Cook thinks a "whole bunch" of people are going to pay that much for the iPhone because it has tremendous value, ie the touchscreen and rich browsing experience that no one else is offering. He also took the time to bash the handsets that are out in the market. "A lot of people pay zero for their cell phone. Guess why? That's what it's worth," he said at a recent conference. Actually consumers paid about an average of $63 for a new mobile phone throughout last year, excluding December, according to research firm NPD Group. They paid more for smart phones, but only about $200.

Could Apple be the one to get customers out of the subsidy mindset? Maybe if we could actually touch and use the iPhone, we'd all understand. At least by announcing it six months in advance, potential customers have time to save up. -Lynnette