iPhone to change AT&T’s pricing plans?

Every Apple fan on this planet has probably already dwelled over the price of an iPhone. And as we’re drawing closer to June, chances are that they’ve made up their mind about it as well: Is $499 justified for a phone? Is the additional 4GB of flash memory worth the extra $100? The Apple fanatics among us already know the answer of course; and most likely it’s a big fat YES!!!

However, the much more interesting question in this game will be about AT&T’s pricing plans. Yes, a lot of people might be willing to spend however much Apple wants to charge for their iPhone, but what use would it be, if they had to pay $1 per minute (I’m exaggerating) to use it?

For that reason, many potential iPhone customers secretly hope that the recent Cingular takeover by AT&T, in combination with the looming iPhone in June, will cause wireless pricing plans to plummet over the next several months.

Is their hope justified? Realistically, the last wireless price war occurred in 2001/2002, when T-Mobile first entered the U.S. market and suddenly offered, an unheard of, 1000 free minutes package for just $29.99 a month. (Which was later raised to its current price point at $39.99.) Ever since, the prices have pretty much stagnated and another round of juicy price drops might be just around the corner.

So let’s have a look where we’re at right now, and analyze the pricing strategies of the four major wireless providers: Verizon, Cingular The New AT&T, Sprint, and T-Mobile. (For simplicity I will focus on Individual Plans only.)

As you can see from the above table, AT&T, Verizon, and Sprint all provide the exact same minute packages, at equal price points. The one and only breakaway player in the U.S. market is T-Mobile, which differentiates itself by providing distinctive minute packages at more affordable prices. Verizon & Co actually do offer cheaper per-minute prices for their smallest and largest package, however, T-Mobile beats them by far in all the packages in between.

What does all of this have to do with the iPhone? Now that AT&T has almost finished its transition from the Cingular brand, it might want to draw some enormous media attention to itself by not only offering the iPhone exclusively in the U.S, but also attacking its competitors with a very attractive pricing strategy.

The numbers speak for themselves: At the end of Q1 2007, there were about 170 million postpaid wireless subscribers in the U.S., with Verizon the largest carrier (56 million), AT&T at #2 with about 51 million, followed by Sprint (41 million), and T-Mobile bringing up the rear at 22 million. The time might be right for AT&T to attack and leap to the top.

Of course, some might argue, that the iPhone itself will be incentive enough to draw customers away from AT&T’s competitors. Let’s take a look at that: Even if Apple can reach 1% market share with the iPhone by 2008, and assuming that all of those customers will be new AT&T subscribers (which is unlikely) that 1% would only translate into 1.2 million additional customers for AT&T. Definitely not enough to take the #1 spot from Verizon.

Therefore, AT&T might want to utilize the media frenzy, that it will undoubtedly receive through the iPhone, and bring a price war upon the U.S. wireless industry like never seen before. And what better time to announce this all-new pricing strategy, while Apple already provides its all mighty halo effect?

But then again, all of this might be just the wishful thinking from all the potential iPhone customers that will be submited to AT&T’s pricing strategy for the next two years to come. Only time will tell….

What’s your opinion on AT&T’s pricing strategy in regards to the iPhone?

Edit 05-28-2007: In an interview with the Oregonian Glenn Lurie, AT&T’s top executive, and in charge of the iPhone revealed the following information today:

Q. What are you guys going to be charging?

A. Service pricing we’re not talking about. But I would say that the pricing is going to be similar to what you see today (from AT&T).

Does that mean that AT&T won’t be changing its pricing in the wake of the iPhone? Unfortunately it looks like it. However, maybe AT&T did learn something from Apple: Deny a rumor until the day of the release.