iPhoneAre you ready for a $199 iPhone? And not the old version, but the new (faster) model set for release this summer? Yep, just $199. Fortune reports that AT&T is preparing to offer a $200 “subsidy” for buyers of the next-generation iPhone, which is expected to start a base price of $399. So, after the AT&T subsidy, your price is just $199.

In what would appear to be a shift in strategy, Apple and AT&T are trying to put iPhones in everyone’s hands. A lower price would balloon sales of the iPhone, but the profit will be in the service plans. Fortune reported that AT&T has found iPhone owners spend twice as much as the average customer, because they buy various data plans with their phone. AT&T announced these findings to the investment community during an earnings conference call last week.

While the plan seems very solid (hey, I’ll take a $199 iPhone!), there are some interesting caveats. According to Fortune, AT&T will offer the $200 “subsidy” payment for people who buy the phones it AT&T stores—but not for purchases made in Apple stores. Unless Apple follows suit, the lines will be a lot shorter in their stores. And the AT&T stores will be packed. However it is highly doubtful that Apple would allow another entity to sell its products for less than they are willing to sell it. Very un-Apple-like.

And while customers will love this “discount windfall,” nobody is quite sure why AT&T is investing in subsidies. The fact is, you have to pay AT&T to use the iPhone legitimately on its network anyway (AT&T requires a two-year contract). So why would AT&T disrupt what is by all accounts, already a strong economic model? And doesn’t Apple have more incentive to get people into its stores? To start with an iPhone and end up walking out with a sleek, sexy MacBook Pro? What can AT&T upsell you? Space-age ear-bud technology and perhaps a car charger? Cool leather case?

So what’s this really all about? What’s AT&T up to?

Well, there’s plenty of speculation. Some observers suggest that AT&T wants to lower the price of the phone—and raise the price of the data plans. Currently, the unlimited data plan for an iPhone will run you $20 per month, which is less than the $45 per month fee AT&T charges for unlimited BlackBerry plans. AT&T sees the iPhone’s ability to connect to corporate e-mail networks and sees the need to close that gap—they simply cannot justify the higher price for Smartphones. So, AT&T figures they will subsidize the phones and jack up the service rates. Other suggest that AT&T will roll-out its subsidies to folks who purchase an iPhone in an Apple store.

More speculation. Reports have emerged that Apple will begin selling unlocked phones. While you’d expect that Apple would work to make the new version of its iPhone even harder to crack, they are aware that many iPhone owners have successfully unlocked their phones and are utilizing third-party software (widely available on the web) and signing up with the carrier of their choice. That means they don’t get their monthly fee from AT&T. And that means they have no incentive to see the price of an iPhone reduced. In fact, they may even raise the price, to say—$599.

So it looks like your next iPhone will cost you under two hundred bucks. But then again, we haven’t heard from Steve Jobs yet.

Source:
AT&T To Cut the Price of Apple’s New iPhone
The New York Times: $199 iPhone? Something’s Missing from the Picture