Is Apple the Big Loser in AT&T's Price War?
AT&T turned heads over the weekend by slashing the price of its shared data family plan, but a new wrinkle in the offering could be bad news for Apple .
AT&T's new pricing offers families unlimited minutes, unlimited texting, and 10 gigabytes of data to share among their devices starting at $130 for two smartphones. That may not seem like much of a bargain, but each additional line only sets families back just $15 per handset. In other words, a family of four would pay only $160 a month. That's a 20% discount to its previous offering.
There's no free lunch here, though. A big difference in this new plan is that AT&T won't be subsidizing new phone purchases. You won't be getting the iPhone 5s for $199 the way you would through the three major carriers. You would have to pay the full off-contract price of $650 or go with AT&T's Next plan and pay $25 a month for the next 26 months. This is the model similar to what T-Mobile has been using with a great deal of success. AT&T's mobile subscriber counts have barely moved higher over the past year as T-Mobile's accounts have grown 10% to 46.7 million.
As you can probably imagine, this won't be good news for handset makers that were banking on wireless carrier customers upgrading to new devices every two years. This plan will encourage owners to hold on to their older phones longer. It will also encourage customers to seek out the growing number of pre-owned phones available at healthy discounts. In short, that two-year upgrade cycle is toast.
However, the lack of phone subsidies is going to hurt Apple the most. Outside of Japan -- the lone country where iOS smartphones are more popular than their Android counterparts -- and the United States, the world tends to gravitate to cheaper Android devices. It's not a coincidence that the iPhone is a hard sell in countries where wireless carriers refuse to take hits of several hundred dollars to shave the end-user price on a new device. The high-end Android devices are comparable in price to the iPhone, but there are plenty of devices selling at bigger discounts than $199 to the iPhone in the off-contract world.
T-Mobile's success at a time when the three larger wireless carriers are growing slower isn't a fluke. You can expect more plans to sprout where customers pay less for bringing their own devices that are compatible with the carrier's network. It won't be what Apple wants, and now it will be up to Apple to decide if it really wants to put out a true entry-level smartphone on the market.
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Rick Munarriz has no position in any stocks mentioned. The Motley Fool recommends and owns shares of Apple. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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