benrobb

Apple Turns the Cell Phone Industry Upside-Down?

I read a few articles today that got me thinking. I’ll reference them up front since the ideas I pulled from them are a little intermingled. The first article was How Apple Could Rock Wireless on CNN. The other was on MacRumors called Cingular/Rogers Not Subsidizing iPhone Cost.

I realize it’s unusual to have two articles, but it took both articles to paint the whole picture. Currently, cellular service providers subsidize a large portion (if not all) of the initial cost of a cell phone when their subscribers signs a 1-2 year contract. Cell phone manufacturer’s don’t like this practice because it devalues the phone itself. Rogers will be the sole provider of iPhone service in Canada and reportedly they aren’t allowed to subsidize the cost of the phone.

When Apple announced the $499 and $599 price tags for the iPhone models, many assumed that this was the subsidized price, but given this new news (and the rumors that Cingular is drastically reducing the cost of service) it begins to paint an interesting picture. Apple consumers are typically willing to pay a premium. That being said, if Cingular subsidized hundreds of dollars on the prices on iPhones, it creates an interesting situation where an iPhone and an iPod Nano cost about the same although the devices clearly are not equal.

So what does all this mean? It means that Apple could potentially flip the cell phone industry upside-down. It possibly provides leverage where the cell phone manufacturers can gain a bit more power in the industry and gain a little more control over where things are going. Granted, this is speculative, but the possibility is there. If Apple can convince consumers to pay a premium for their cell phones, then potentially even competitors like Samsung, Sony Ericson, Nokia, LG, and others may even be rooting for the success of the iPhone.