Will a $9 iPhone 3 Undercut Sales of Apple's iPhone 5?

AT&T (T) is now offering an $9 iPhone. Granted, that price is for a refurbished 3 G3S-8G. But the handset provides the same essential functions as a brand new $199 iPhone 4-16GB. It can download the great majority of the 500,000-plus apps from the Apple (AAPL) App Store. It has a basic camera. And perhaps most important, it runs on AT&T's 3G network. None of the iPhones the carrier offers operate on its super-fast new 4G network -- an issue that many analysts think will hold back iPhone sales.

Analysts expect the iPhone 5 -- which will probably be launched after Labor Day -- will cause serious price cuts on all earlier model -- Apple's standard method of clearing old inventory to give to the newest gadget less competition from older models.
The iPhone 4 may drop as low as $50, according to tech website GizmoCrunch.

This technique has been successful in the past, but it may not be in the future. Apple needs the iPhone 5 to be a huge success. The company sold 18.65 million iPhones in the last quarter, a 113% improvement over a year earlier. That makes the iPhone Apple's most important product in terms of revenue contribution -- well ahead of its Mac computers and laptops, iPods, and even iPads for now.

But a $9 iPhone 3 and low-priced iPhone 4s may undermine demand for the newest handset. The iPhone 5 is expected to bring to the table a new, faster processor, access to Apple's new iCloud features which allow people to store songs and e-mail on remote servers, and more touchscreen features. The handset will sell for between $199 and $299 with a two-year subscriber plan, if the past is any indication.

The challenge that Apple faces is that the iPhone 5's new feature set may not be adequate to draw customers away from the cheaper, older models. Of particular concern is its inability to use 4G technology. Several smartphone companies, among them Asian giant HTC (HTCXF), already have lines of handsets that run on the super-fast networks, which make it possible to watch streaming video without stutters and surf the web at a pace which is close to that of a cable modem. Some customers may chose to wait until next year to see if the iPhone 6 will be 4G compatible.

For the time being, it's possible many consumers may decide that older versions of the iPhone are adequate for most of their needs. And if those $9 iPhones do too well, the iPhone 5 will not.



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Mutterwolf

AT&T's 3G network is oversold and overloaded. I have a 3GS and typically have to use the Edge network settings for reasonable service. Verison doesn't let you talk and browse at the same time on their iPhones. 3G is slower due to load, so they are also increasing price for data. Add to the fact that none actually have 4G (as hottieboy says, it's 3G+)

July 19 2011 at 12:50 PM Report abuse rate up rate down Reply
Hottieboy

>> None of the iPhones the carrier offers operate on its super-fast new 4G network <<
>> Of particular concern is its inability to use 4G technology. <<
>> Some customers may chose to wait until next year to see if the iPhone 6 will be 4G compatible. <<

I'm absolutely appalled by this terribly article you wrote. You need to check your facts. As of this date - There is not a single company in the USA selling *4G*. The companies that are claiming to be selling you 4G are selling a *BRAND NAME* called 4G. The 3g/4g standard is maintained by the ITU, and the ITU alone. This means - NOT the cellphone companies. However - Companies like Verizon, and Sprint, etc... have found a unique way around having *actual* 4g. What they've done is made their 3g a little faster, (which is actually 3GLTE, 3GLTEAdvanced, among many other technologies) and then *BRANDED THESE TECHNOLOGIES IN BRAND NAME ONLY* as 4g. It's total horseshit, and I think there needs to be a federal anti-trust case or false advertising suit brought against every last one of them. AT&T is one of the few companies that refuses to LIE TO THEIR CUSTOMERS about what they are getting. Honestly I am quite shocked that you claim to be so "in the know" about the telecommunications industry (It's implied that when you write an article about *ANYTHING* that you've supposedly done your research) YET - You don't know about this???? -- *LIGHTBULB MOMENT* -- How about you write a big exposè on the scandal and make up for it?

I have to wonder what kind of humiliation an automotive company would go through if they *BRANDED(NAMED)* an engine as a V8 5.7L, but it was really only a 4 cylinder. Of course this would be absolutely an unacceptable practice by the automotive industry, but this is 100% Precisely what the American Cell-Phone companies have done. It's a pity that the standard american electronics consumer is so bereft of technical knowledge that either nobody knows, nobody would understand if you explained it to them - OR it's simply that people don't really care, they just like the name 4G. Not to mention nobody's talking about it anyway, so who cares?

Very disappointed in your misleading article. I hope it was simply a (correctable) mistake.

July 19 2011 at 6:36 AM Report abuse rate up rate down Reply
olgadrive

I'm gonna wait for the iphone 6...

July 18 2011 at 5:51 PM Report abuse rate up rate down Reply
g5user1usa

The analysts honestly think that Apple not having a 4G smartphone will hold sales back. These analysts are complete idiots. 4G smartphones will only account for a very small fraction of smartphone users due to data costs and decrease of battery life. These analysts continue to think that Android is leading the smartphone industry when in fact it is not. Android smartphone vendors put out a relatively small number of any one model and they're constantly introducting new smartphones. Apple, on the other hand, puts out close to 20 million of basically the same phone every quarter. They can't afford to err on by jumping the gun which I clearly think Android smartphones are doing when it comes to 4G usage.

July 18 2011 at 5:46 PM Report abuse rate up rate down Reply
Dnsbayer

AT&T Sucks!!!!!!!!!!!!!!

July 18 2011 at 5:10 PM Report abuse rate up rate down Reply
quantumleap1666

yeah. the better with which to track you.

July 18 2011 at 4:52 PM Report abuse rate up rate down Reply
randallalbin

we're just asking for an affordable phone...

July 18 2011 at 4:31 PM Report abuse +1 rate up rate down Reply
Jason

I'll wait for the 4G iPhone...

July 18 2011 at 1:05 PM Report abuse rate up rate down Reply
moyerv

wher does on find that $9 I phone? Does At&t carry it now or in the future?

July 18 2011 at 11:17 AM Report abuse rate up rate down Reply
anarock

I agree. Strategically, they just let it sit a while for consumers not intoduced a new product with more bell and whistle after the previous product after so many months. Too many choices can be a good and bad thing.

July 18 2011 at 11:12 AM Report abuse rate up rate down Reply