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Cingular/Rogers Not Subsidizing iPhone Cost?

Thursday January 25, 2007 4:18 pm PST by Arnold Kim
Earlier today brought reports that Rogers would be providing the iPhone to Canadian customers. This confirms a word-of-mouth forum post made last week. Of interest, the post provided a little more information about the market dynamics between Apple and Rogers.

Apparently, the [Canadian iPhone] prices won't be much higher than the US versions (just currency conversion I guess) and that they aren't allowed to subsidize the cost of the phone relative to your contract (ie you won't save more by signing a longer contract) as is customary with most phones


When Apple announced the $499 and $599 prices for the 4GB and 8GB iPhone with a 2 year contract, many assumed that this was a subsidized price from Cingular. In the U.S., high end mobile phones are typically discounted several hundreds of dollars by cell phone carriers when customers sign up for 1-2 years of service. An earlier CNN Money article discussed this balance of power and how Apple could disrupt it with their phone:

Device manufacturers reportedly don't like [this discount/subsidy system] in that it devalues their phone, and gives them less control on how to market their phone and accessories. .... Apple's entry into the market could convince consumers to pay a premium for their cell phone.


Indeed, the $499/$599 pricepoints may simply represent full retail prices for the Apple iPhone. If Cingular is not providing these substantial subsidies for the iPhone, it paves the way towards today's rumor that Cingular may be significantly discounting the monthly service for the iPhone. (Cingular denies) Without being permitted to discount the phone itself, Cingular can afford to discount the service as an alternative incentive to attract outside customers.

Assuming all this is true, Apple's incentive to keep iPhone prices high might be the expectation that they will introduce more products based on the same technology (touchscreen iPod). Prices of these standalone devices would be harder to justify if they were compared to discounted/subsidized iPhone prices.
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