RBC Capital Markets analyst Mike Abramsky wrote in a recent report that he believes Apple will debut a $99 iPhone and an iPhone 3G with updated performance for $199 and $299 sometime in June or July.
I'm sure some are getting excited at the very thought of a $99 iPhone, but I think we should all wake up and realize that for that $100 savings (assuming the new iPhone 3G will be offered at $199 and $299, like Abramsky says), we're getting a sub-par phone.
And although there will be a difference in data plan pricing, once again, it's not that great. Abramsky believes the low-end iPhone model will have a $15-per-month data plan, compared with the iPhone 3G's expected data plan price of $30 per month.
Assuming that's true, we would save just $19 to $23 per month by owning the low-end model if we amortize the initial cost savings and the data plan costs over two years and one year, respectively. Would that really make someone want the cheaper iPhone? Not me.
Remember when the first iPhone was released? There were two versions available: the 4GB model and the 8GB model. After just two months on store shelves, Steve Jobs told those on-hand at one of his Stevenotes that the company was dropping the price of the 8GB model $200 and discontinuing the 4GB version due to intense consumer demand for the high-end model. The 4GB iPhone simply wasn't appealing to enough consumers.
What makes anyone think that this would be any different? The price savings is the same--$100--and in this case, the feature differences are even greater, making the $99 iPhone an even less attractive device.
According to Abramsky, the $99 iPhone would support EDGE and Wi-Fi, feature no GPS, have less than a 2-megapixel built-in camera with no video, and offer 8GB of flash memory.
Compare that to Abramsky's prediction for the iPhone 3G, which would sport 3G connectivity with Wi-Fi, GPS support, a 2-megapixel (or better) camera with video, and 16GB or 32GB of memory. I think it's clear that for an additional $100 at checkout and an extra $15 per month, the iPhone 3G is the only logical choice.
I realize we're in an economic recession and offering products at a discount can be a smart move in today's environment, but when we look at the $99 iPhone with some long-term perspective, I'm not convinced it's a deal.
Sure, if I bought it, I'd be able to save $100 immediately and $15 each month on data, but when that cost is amortized over a year or two, the savings is just $19 to $23 per month. That's two trips to Starbucks. Should I really buy such an underwhelming device that I would use everyday just so I can get two extra cups of coffee each month? I don't think so.
In the end, I guess it's incumbent upon us all to consider value before we buy any gadget. Is the iPhone worth $99? You bet. But is the iPhone 3G with twice the memory, video recording capability, a faster network, and GPS worth an additional $100 and $15 per month?