updated 03:55 pm EDT, Tue June 16, 2009
Nielsen on 99 iPhone 3G
The iPhone 3G's price drop to $99 is a large enough move that it could overhaul the entire cellphone industry, according to research by Nielsen. Analyst Roger Entner believes the cut "completely changes" the worth of every phone already on offer and won't just hurt smartphones, where the comparisons are more evident, but any limited "feature" phone that nears the price point. Any cellphone over $49 is "kneecapped" and will look like either it costs too much to make or that the carrier is asking too high a price, Entner says.
The researcher expects Apple's simple change to force changes in pricing. To more closely equal the 8GB iPhone's pricing, device makers are likely to further cut their profit margins; carriers could alternately bear some of the cost by more heavily subsidizing phones. A chance exists that carriers may recoup the costs of this by increasing the monthly fees, though Entner warns that customers may balk at having to pay more each month.
Reductions in monthly rates are deemed unlikely to help, however. Even an AT&T move would likely be seen as "scorched earth" policy as it would encourage other carriers to cut prices and give customers little reason to switch networks but still hurt revenues.
Critics already anticipate that the company most likely to be affected by the cut is Palm, whose Pre while well received costs roughly twice as much and so far claims a faster processor and multitasking as its main advantages.