June 27, 2007 4:00 AM PDT
Switching carriers for the iPhone
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Specifically, Sprint has been pushing its music service, which allows songs to be downloaded over the air for 99 cents each. And it has recently announced several new phones specifically designed for music, including the Samsung UpStage, LG's Fusic and the new LG Muziq. These phones all sell for less than $100. By contrast, the iPhone costs $500 for a 4GB version and $600 for an 8GB version. Of course, the iPhone is more than a music phone. It's a full smart phone with e-mail and mobile Web browsing functionality. To compete here, Sprint offers the HTC Mogul, a Windows Mobile device.
"We really feel like a rising tide will lift all boats," said Aaron Radelet, a spokesman for Sprint. "When customers are able to compare services and phones side by side and they look at pricing, we are confident they will see the value in Sprint."
But some of Sprint's customers say that even at $500 and $600, the iPhone simply offers them more for the money. San Diego resident Omar Bazigran is a Sprint customer who let his contract run out in anticipation of switching to AT&T for the new iPhone. Even though Sprint offered him a new updated handset and a 10 percent reduction on his phone bill, he still says he will likely buy the iPhone because he thinks it is a better value.
"I figure an 8GB iPod Nano would cost me $250," he said. "Then, a smart phone would be a couple few hundred dollars, and then an extra $50 to $100 to have the two products fused into one isn't such a bad deal for the person who was thinking of buying those two things separately anyway."
And AT&T's newly announced pricing for the iPhone data plan makes it seem even more attractive. For $60 a month, users get 450 minutes of talk time. For $80 a month, they get 900 minutes of talk time. And for $100 a month, they can talk for 1,350 minutes. All plans include unlimited e-mail and mobile Web surfing and 200 text messages a month.
Verizon Wireless has taken a similar philosophy that iPhone could actually help it sell its data services. Like Sprint, Verizon offers an over-the-air music download service. And executives at the company believe customers will see the value of its services as a differentiating factor.
"The iPhone will add excitement and stimulation to the market," Verizon CEO Ivan Seidenberg said at a conference last week. "If we have done our job, then we will be a beneficiary. I hope it does reasonably well."
But analysts say that Verizon is already in a much better position than Sprint. The company has consistently added more subscribers than its competitors every quarter and it also tends to lose fewer customers than any of its competitors with a churn rate that hovers around 1.1 percent.
"It would take a lot to damage Verizon Wireless," said Patrick Comack, an equities analyst with Zachary Investment Research. "But Sprint is already struggling. Taking away any subscribers from them now is like kicking them in the ribs when they're already down on the ground."Need for speed
The one thing that both Sprint and Verizon have going for them is their 3G networks. The initial iPhone will work only on AT&T's 2.5G network. This means that while 3G phones from Verizon and Sprint will be able to download files and surf the mobile Internet at speeds between 400 and 700 kilobits per second, the iPhone will surf at speeds more like 200kbps.
The lack of 3G is one reason that at least one Sprint user said he will wait for a new version of the iPhone before he makes the switch to AT&T. Paul Tunison, of Modesto, Calif., said he is a faithful Apple customer, but he isn't sure he could stomach the slower speeds.
"If the iPhone was 3G capable today, it would be a nonissue for me," he said. "I'd likely go ahead and buy one, but I just don't see the value if it doesn't have 3G."
Comack of Zachary Research said he thinks some Verizon and Sprint customers are going to be annoyed when they realize see how slow AT&T's EDGE network is compared with the 3G networks.
"The difference between EDGE and 3G is night and day," he said. "Customers are going to assume that they can get the same speeds they get on Verizon and Sprint and they can't. And if they roll out a 3G version of the phone in six months, I think they're going to have a lot of pissed off customers."
While it's clear that the iPhone has been hyped, some analysts wonder if people will actually follow through on the excitement and take the plunge.
"Most people subscribe to a cell phone service because of the network coverage or the price of the service," said Iain Gillott, founder of iGillottResearch. "So will the iPhone be different enough and cool enough to get people to switch service just for the phone? It will be interesting to see what happens."
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