The cheaper, faster version of the iPhone will put a $99 price ceiling on entry-level smart phones while putting downward pressure on handsets now selling for between $149 and $199. That includes models such as Motorola's Q9, Pantech's Duo and T-Mobile's HTC Shadow.
"With a 3G/WiFi/8GB iPhone starting at just $199, touchscreen feature phones from Samsung and LG (and old-fashioned feature phones) are now starting to look badly overpriced," wrote Avi Greengart, research director for mobile devices at Current Analysis, in a report advising wireless competitors how to take on the new Apple device due out July 11.
It looks like the much-hyped iPhone 3G is already having an impact. Sprint's answer to the iPhone, the Samsung Instinct, goes on sale today at $130 (with a $100 rebate and a two-year contract) rather than the $200 it announced earlier this month.
Pricing on service will be about the same, with Sprint offering an unlimited data plan starting at $70 and AT&T requiring a $40 voice plan and a minimum $30 monthly data sign-up for the iPhone.
But Greengart warns rivals against unleashing would-be "iPhone-killers" in an effort to sell more smart phones generating higher revenues. "Rather than go head-to-head with Apple, vendors should go where Apple is not," he wrote. "The iPhone is not rugged, it has mediocre imaging capabilities, it lacks a physical keyboard, and it is available at just a single carrier. Change the game."
While all carriers should offer an entertainment-oriented touchscreen phone, "deliberately inviting direct comparisons to the iPhone is stupid," Greengart added. So build a better touchscreen.
Noting that iTunes is Apple's "secret weapon," he also encourages handset makers and others to develop competing software and content assets as Nokia is doing with its Nokia Music Store.
The Current Analysis study also suggests that iPhone competitors try to anticipate Apple's next step rather than play catch-up. For example, if the company's next move may be introducing a low-end iPhone, why not beat it there? After all, $199 is still a lot more than most handsets.
Despite the media and technophile hullabaloo, a majority of online consumers do not plan to purchase an iPhone, according to a separate report data from Experian's PriceGrabber.com.
Los Angeles-based PriceGrabber.com surveyed more than 3,000 online consumers over about three weeks as part of its Consumer Behavior Report, finding that some 54% of respondents said that they did not intend to purchase an iPhone. And price was the most discouraging factor, as 41% of those non-buyers said that the mobile device "costs too much." Others said that AT&T was the barrier--as 22% said that they preferred another service provider.
Given Apple's latest announcement of the lower-priced iPhone 3G, however, PriceGrabber.com analysts said that the personal electronics giant "may see online consumers changing their minds about purchasing an iPhone" in the coming months.
--with Tameka Kee