More carriers for iPhone does not equal lower price (BlackBerry comparison)

Discussion in 'iPhone' started by sg.hill, May 21, 2009.

  1. sg.hill macrumors member

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    #1
    I did a quick search for this topic and can't find anything. I'm very interested in saving money while retaining internet connectivity everywhere these days, so I thought I'd share my findings.

    When I think of a competitor to the iPhone, the G1 and BlackBerry line are the first things that cross my mind. Since the BlackBerry lineup is not restricted to just one carrier, and in nearly every iPhone thread I see posts about how Apple needs to open up the iPhone to more carriers (Verizon) for the price to drop, I decided to take a look at the BlackBerry options across carriers.

    **Note 1: I'm fully aware this isn't a bulletproof comparison as email has to travel through proprietary BlackBerry servers and that is not the case for the iPhone. It's also true perfect competition only exists for theoretical economists and theorist (economics) professors. In the real world we compare substitutes that fulfill the same need.

    **Note 2: I'm not arguing the iPhone should be relegated to one carrier. I'm simply saying it only makes academic sense to claim more carriers will lower the price. The real world indicates smaller players will offer more features for the same price, while the two big players will offer the same price and allow their network-wide differences to win people over (rollover minutes vs friends & family)

    It makes sense that if releasing the iPhone to multiple carriers would lower the price, the already-mature BlackBerry would have varying prices on different networks. In my search to save money, I found this to be false. I don't use many minutes, so I took the lowest monthly voice plan for each carrier and added a BlackBerry data plan to it, trying to be as consistent as possible.

    • AT&T offers 450 min/month for $39.99 + $30.00 for BlackBerry Data with no SMS
    • Verizon offers 450 min/month for $39.99 + $29.99 for BlackBerry Data with no SMS
    • T-Mobile offers 300 min/month for $29.99 + $24.99 for BlackBerry Data and 400 SMS
    • Sprint offers 400 min/month for $40.00 + $29.99 for BlackBerry Data with unlimited SMS (as a $69.99 bundle)

    When posters are asking for other carriers, they typical seem to want Verizon. That's understandable, the others have sketchy coverage and reputations at best. My question to the "pro-Verizon-for-lower-prices" crowd, who definitely have a valid theoretical argument, is why exactly is this going to lower the price when AT&T and Verizon are both content to sell you an identical BlackBerry plan for just $0.01 different? Simply because the iPhone is a hot "gotta-have-it" item?

    I imagine the argument here is that AT&T will lower the price to avoid subscribers jumping the proverbial AT&T ship to get on board with Verizon...who will then lower the price to gain more subscribers, and the price-lowering war will continue just like we learned from that middle school/high school/college econ textbook. The first problem I see with this is the market has already decided $30 is not high for a data plan...clearly, it's roughly the same amount of money wherever you go. The second problem is, and this cannot be extrapolated to the entire population, I don't know anyone who is going to change carriers over $2 or even $5 a month that wouldn't change for free. This is to say that the people I know wanting to get on board with Verizon would do so at a premium -- and why not? Usually they're getting awful service. I get the feeling Verizon knows this, as they do have some of the highest rates in the industry and the cockiest sales people I've ever interacted with.

    I also think it's pretty obvious that more iPhones would be sold if they were available to Verizon because of the enormous fan base. I just don't see why it would be any cheaper...especially considering Apple would have to stick a different chip in there and start up another assembly, but let's not get into that.

    As an aside, I think I figured out if T-Mobile ever gets a 3G BlackBerry or an Android-powered phone comes out more to my liking, I'll be headed to T-Mobile to at least kick the wheels. Way better prices, and I get coverage!

    So...why would the iPhone going to multiple carriers be the game-changer for pricing plans that the BlackBerry was not?
     
  2. DiSFLyLaTiNa macrumors regular

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    #2
    i think it would be cheapest if it went to T-Mobile, any other carrier would be the same price. T-Mobile has good service where I live, that's the carrier I use (no iPhone makes me sad!).
     
  3. CanadianMac2008 macrumors member

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    Apr 11, 2009
    #3
    Two carriers gives the consumer more power with their existing provider don't forget that - ie if you want a better deal from your provider you can tell then that you will switch. They will likely offer you a better deal just to keep you. That's been my experience in Canada.


     
  4. Revelation78 macrumors 68000

    Revelation78

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    #4
    Great post, the only difference you would see in pricing is the initial price of the phone itself. That's where the pricing war would take place, as it does today, not in their monthly rates.
     
  5. AiralynRose macrumors 6502a

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    #5
    I think Apple would still control the price, so it wouldn't matter. they control their prices with everything no matter where it is sold.
     
  6. fratboy macrumors regular

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    #6
    ummm you guys are forgetting that att IS going to lower rate plans so iphone plans WILL be cheaper
     
  7. sg.hill thread starter macrumors member

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    #7
    Probably true, as that holds with the BlackBerry comparison as well. It still doesn't justify the point of view that Verizon as a carrier lowers prices.

    This has been true to an extent with cable companies in my experience. Maybe one would offer some sort of percentage discount on a case-by-case basis, but even then it isn't savings for the masses.

    Perhaps we'd see accessories thrown in for free? This is the only real way Circuit City was able to offer "discounts" when I worked there.

    I don't see how this fits into this argument. AT&T discussing potentially lowering the price is not the same thing as AT&T lowering the price, nor is it a result of the iPhone being expanded to multiple carriers. With rumors of the cheaper Palm Pre having a massive shortage and the general dislike of Sprint that exists among the people I know, I'm not so sure AT&T will cut the price. What makes you so certain?
     
  8. Michael CM1 macrumors 603

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    #8
    Aww, now the people who know no more about economics than "competition is good" will be bored on here.

    So true that all of these economic theories work great in, well, theory, but sometimes they lack it in reality. Pure capitalism and socialism are easy examples. Pure capitalism means everyone would do what's right for the consumer to maximize profit and retain business. But take a look at the #@%*hole of a mess over the past few years (hull, Bernie Madoff) to figure out how that's wrong. Pure socialism should work to equal out everything and make sure nobody gets left behind, but guess what happens when fragile humans make those determinations? A whole lotta people get left behind.

    If you think the whole competition thing is that easy, just look at the cell phone market. Do you really believe that there's no demand for something in between the prepaid plans and the $40/month minimum contract plans? I would LOVE to dish out about $25/month for maybe 200 minutes with rollover and then pay about another $20/month for 1GB of data. That's about all I actually use. But no, AT&T and all the other carriers will tell you how much better a deal the $40/month for 450 minutes and $30/month for "unlimited" data is. It's kind of like the push by every company toward you buying a 10-ounce steak when the recommended meat intake is 8 ounces IN A DAY.
     
  9. anjinha macrumors 604

    anjinha

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    #9
    Since no one here have stated the obvious yet...

    1 - You're comparing one iPhone model to all the Blackberries? How does that make sense? No Blackberry model is available in all the carriers, the Storm is on Verizon, the Bold on AT&T... If you want to do a comparison do a fair one.

    2- People who say the iPhone would be cheaper if it were available in other carriers are right. But it's not the plan prices the get cheaper, it's the initial price that would get cheaper.

    Even if Apple does control their prices if the iPhone were available in different carriers it means more people would have access to it and Apple could afford to sell it cheaper while keeping their high profits.
     
  10. CrzyCanuck72 macrumors 6502a

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    #10
    The Curve 83xx and Pearl 81xx are on basically every carrier. Besides, Blackberry plans don't vary depending on the model, so even if carriers don't have the exact same lineup of BBs, you can still compare their plans.
     
  11. Revelation78 macrumors 68000

    Revelation78

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    #11

    Actually the Curve is was avialable on multiple carries including T-Mobile. The only difference in price, was the price of the unit! T-mobile has slight lower rates because they are the low-cost carrier. AT&T and Verizon are almost identical in cost, they battle over the price of the unit sold.

    Carriers aren't stupid, they make their money via your monthly fees, not off the sale of the phone you use. The only way you will see a true reduction in the cost of your monthly cell phone bill is when a competing alternate comes in to play, i.e. Skype!

    *IF* federal regulators, at least here in the US, require Carriers to operate their data services as if they were an ISP it would open the door for Skype to turn the cell phone market upside down. Carriers would have to change the way the do business today to keep making money. That's why carriers around the world are trying to prevent skype from working on their phones, it will kill their business model and they don't want to change.


    Another poster said that Apple controls it's pricing on the iPhone and Apple wouldn't let it sell for cheaper. WRONG! Once Apple opened the door for carrier subsidies, Apple no longer can determine the sale price of the iPhone. Nor would Apple want to, the cheaper the iPhone is sold by each carrier, the more iPhones will be sold. Also take a look, you can buy the iPhone for less than $199/299 today!

    Take a look at the Curves. they initially went for $249 with a two year contract. Within 2 months they were sold for $49 or free with a two year contract. The iPhone is in such high demand they don't have to sell it cheaper, it will stay that way for sometime to come, i.e. a device that truely competes with the iPhone on a hardware and software level.
     
  12. sg.hill thread starter macrumors member

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    #12
    :D

    Wow! Perhaps it is because of the typical responses I hear to questions about economic justifications ("Oh I hate economics/All I know is theory x is bad"), but I'm delighted to hear this response. It's a shame we can't get the general public to delve deeper into this topic.

    I'd be after this plan too, provided it retained night & weekend minutes. I communicate way more via email, SMS, and instant messages than phone, and yet I'm forced into paying more for the phone end.

    I'd like to build off the excellent posts by CrzyCanuck72 and Revelation78 in response to this by asking if you did any comparison shopping before getting your iPhone? I omitted in the original post that I was actually comparing it to the Curve (8900 on T-Mobile). See their posts for why it makes sense (plan cost), the similar BlackBerry models available across carriers; ergo, it is as fair of a comparison as this marketplace currently yields.

    Clearly I cannot speak for everyone, and the iPhone has obviously brought many people into the smartphone market who would have otherwise not paid the premium, but the inital cost was never my hurdle to adoption. I'm under the impression that most people in the market for a smartphone are like me and looking at the total cost of the contract. Granted this is my own stubborn, ideological view of the world.

    My hunch is it is not the one-time $199 cost of the iPhone, but the committment of signing a contract to shovel out $80+ every month that continues to prevent potential customers from signing up. It looks as though the Sprint/Pre team are thinking the same way as they have an (effectively) equal initial cost, but a considerably lower monthly cost. It's a difficult decision to allocate about $1,000 to mobile communication per year for most people in any economy, let alone one with this much uncertainty.

    I think you may have thought the rationale to why more carriers will lower initial price was implied, but I'd like it stated anyway. My thoughts are at this point the iPhone has been out almost 23 months. Considering that majority of contracts are 2 years long, nearly everyone who was impartial to a service provider and wanted the iPhone has had the opportunity to let their contract expire and switch to AT&T. It's arguable at this point there are only two categories of people waiting for the iPhone to show up on another service provider:
    1. Those who are sticking with one service provider for reasons of coverage, loyalty, customer service, or whatever
    2. Those who have had lousy service with AT&T

    In both cases, these people are motivated to have an iPhone and wanting to pay a particular company for the privilege. For that reason, I think it's unlikely we would see Verizon offering a lower initial price than AT&T. If you're in either of these categories, I think you're just as likely to pay $249 or more for the iPhone as you are likely to pay $199.

    Emphasis added by me. Since it is not clarified, I'll make the assumption you're saying the larger scale of production will bring the per-unit costs down. We'll also make the assumption this is for a LTE-generation iPhone, so that Apple wouldn't need to start another production line to accomodate the different components of the different networks.

    I think you're missing a crucial piece of understanding the market here. Companies don't price their products or services where they can afford to while retaining "high" profits, whatever a "high profit" is. Prices are determined by profit maximization, which occurs at the point where the price a producer is willing to sell at intersects the price a consumer is willing to pay for a given product (each curve adjusted for taxes and subsidies, of course). Considering Apple has shareholders to please, their main interest should be and is in maximizing profit; not maintaining a relative and arbitrary definition of "high profits."

    As an example, AT&T can certainly afford to charge less than $0.05 for a text message when you go over the plan's limit. The 1500 SMS plan prices texts at $0.01 each, and I have a hard time believing sending 160 bytes of plaintext over their network cost them anywhere near $0.01 per message.

    I'm in agreement here. Although I don't want to have to pay for SkypeIn or SkypeOut on my phone, I'd rather do that than buy some allocation of minutes every month. I think it's somewhat ironic for this discussion that you can get a BlackBerry with data only.

    I'd also add that it needs to compete in marketing. Many companies make great products. Apple makes some great products and seizes the spotlight.
     
  13. RyanG macrumors 6502

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    #13
    Well the first thing I noticed is safari is snappier!!
     
  14. anjinha macrumors 604

    anjinha

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    #14
    I'm not from the U.S. and the plans and carriers work differently here. Most people buy contract-free phones and get pay-as-you-go plans. So basically you pay for service what you want/can afford to pay.

    I think that makes total sense but specially from reading these forums I've seen that most people actually think that 199 and 299 it's all that they're paying for the iPhone.

    The only thing I meant is that I don't think it's fair to compare the one model of the iPhone to a whole line of Blackberries. Specially since the most current Blackberrys are not available in more than one carrier.

    Maybe I didn't word myself right, but english is not my first language and I don't know the correct terms for what I'm trying to explain. When I said afford I didn't mean that apple could lower the price and still be somewhat profitable. That's the opposite of what I meant. I meant that as more people buy the iPhone apple can actually lower the prices and be MORE profitable than before.

    The iPod is cheaper now than when it originally came out but apple now profits much more from it. Why? Because even though they lowered their prices the costumer base grew exponentially. The same with the original iPhone: they lowered the price by $200 but so many more people started buying the iPhone that they profited much more from it than when the price was higher.

    I'm not even debating whether having the iPhone in more carriers would be better. It won't affect me because where I live the iPhone is already available in 2 carriers. I just think this is what people mean when they said that doing that would make the iPhone cheaper.
     
  15. sg.hill thread starter macrumors member

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    #15
    Sounds like a MUCH better system.

    Not to beat a dead horse here, but roughly the same thing is available on every carrier with the Curve. If I'm after a BlackBerry curve, the 8320 vs 8310 comparison isn't really enough to sway me to one service provider.

    I think your English is fine. What you're suggesting is plausible, but Apple has to walk a very fine line here. Apple publicly stated their first sales target, and has stated they will adjust prices accordingly to fill it. They're still adding subscribers every month.

    More carriers still won't necessarily drive the price of the phone down. I'm sure the last thing any company wants is to get into a Motorola Razr situation; where the market is flooded, the price deteriorates to nothing, and they're forced to sell astronomical numbers to make any profit. There are only so many customers for a product that costs $80+ a month...which brings us closer to the question behind my original question: how does the dataplan come down? It almost seems like subscribers have to completely level off at the current rates for major providers to lower it, especially when you consider T-Mobile and Sprint aren't luring many people away from the big two with a much better price.

    Thank you for voicing the perspective; I do appreciate it. Interestingly enough, you have the potential to present some interesting data. As stated at the top of your post, your cell phone market is nothing like the US. Still, if you don't mind, I'd like to know what it costs upfront and monthly from the providers you get to pick from.
     

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