Analyst: Apple Should Lower Price, Add New Features for 4th Gen iPhone


Okay, that headline about how an analyst thinks Apple should lower the price and add new features next June/July when they release the 4th generation iPhone (not iPhone 4G, that's a couple years and an LTE network away) is only semi-facetious. Apple has lowered up-front costs and increased features on every generation of iPhone, after all. Last year the iPhone 3G dropped to $99 and the iPhone 3GS added video recording, hardware encryption, voice control, and a host of other things -- never mind iPhone 3.0. According to AppleInsider, however, Katy Huberty of Morgan Stanley has two things more specific in mind.

"We expect Apple to launch new iPhones in June that offer both a lower total cost of ownership and new functionality, potentially including gesture-based technology."

We'll leave the part about gestures alone; just file it under "reads the same patent applications we do" and move right along. Total Cost of Ownership (TCO), however, is interesting because in 2008, even as the iPhone 3G was offered at $199, the cost of the AT&T data plan rose to $30/m making the overall TCO (over the course of the 2-year contract) higher.

Now, if Apple wants the iPhone to battle it out with Nokia in emerging markets, TCO is vitally important. But Apple hasn't historically chosen to battle it out in the low-end PC space, and their answer to netbooks wasn't cheaper MacBooks but the iPad. Makes it tough to see them doing it with discount iPhones.

In the US, big, colorful charts show how much you can save in terms of TCO on other networks and devices. With the iPad coming, and tiered AT&T data plans coming with it, maybe it's not unreasonable to think a reduction in TCO is in order -- not just "everything unlimited" but "overall less expensive". Then again, AT&T isn't hurting for subscribers or iPhone sales, so where this downward pressure would come from, if not Apple or our simply wishing it so, is unclear.

What do you think? Any chance Apple will pull "magical new plans" out of AT&T for the 4th generation iPhone?

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Rene Ritchie

EiC of iMore, EP of Mobile Nations, Apple analyst, co-host of Debug, Iterate, Vector, Review, and MacBreak Weekly podcasts. Cook, grappler, photon wrangler. Follow him on Twitter and Google+.

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Reader comments

Analyst: Apple Should Lower Price, Add New Features for 4th Gen iPhone


One of the new features also needs to be wallpaper, the black background is depressing. We at least should have been able to change it to another color blue, green, purple, something.

Uhm... honestly I think the price is right where it needs to be. There's a supreme difference from the pricing now and what the pricing for the 1st Gen was... which was just $400 or $500 period and you had to activate it yourself without any in-store help (just saying).
But people can now have access to a phone with great features, a beautiful streamlined look and pretty much one of the most advanced pieces of technology you can hold in your hands!
As far as the data plans go, from what I understand and someone can correct me if I'm wrong, there's not a supreme difference. I was in the Verizon store a few days ago to check out the Droid finally and there data plan is $29.99, same as iPhone. I think "Crack-berries" have a data plan that runs about $19.99 so where talking a difference of $10.
If people want something bad enough, they'll find a way to get it. I think our recent "economic meltdown" proved that point well...

I'd like to see AT&T offer an iPad like limited data plan for $15 a month, or even no data plan. Both would obviously reduce the amount of subsidy they pay, but would bring in more customers who can't afford the $30 a month plan.

Well, the big colorful chart is now outdated, ATT and VZW have both made unlimited voice $69.99 instead of $99.99, so the TCO has undergone a massive downshift already. Think about saving $30/month over 24 months ($720 for the sleepy/math-haters). This still leaves a Pre on Sprint $530 cheaper for unlimited over the course of two years, but it certainly beats it being $1250 cheaper.

Does Morgan Stanley have access to Apple's financials? If not then I see their assessment to be more valid than some random college student's who's never done one before.
This analyst also doesn't seem to be analyzing that the cellular cost is far greater than the phone cost and changing the phone cost is an extremely minor change. They could cut the yearly cost $15 per month, keep the price the same, add no new features and sell even more models at the current price and get more benefits than this suggestion provides.

You took the words right out of my mouth Cardfan. Really it doesn't matter lowering the price because people that are still under contract are going to break contracts for the new phone and have to pay that higher price range. What they should do is add 5 or maybe 10 dollars more to the data price for people on ATT with an iPhone already because another 30 is ridiculous. The new features are a major issue. Do people realize we haven't had a major update for damn near a year? This once a year is crazy. I understand new phone every year but people are going to buy a new phone with or without OS updated. A better newer phone speaks for itself.

Well first and foremost ATT needs to introduce a lower price datat plan with unlimited text for somewhere around 30/month for 3G Text
anyone with me that these data prices with testing are rediculous because texts are almost nothing to send and receive for networks since every cmoany has unlmt txting with almost ever smartphone data plan

The price is fine, at least in the US. Do they expect Apple to give a free phone with contract? $99 for a 3g is a great deal

What I would like to see most is AT&T offer unlimited txting as a part of the $30 unlimited data. Just bunch it in and save people that extra $20 a month and BOOM. New "feature" and lower TCO.

You people bitch to much the pricing on the plans isn't that much at all compared to most other cell phone providers the iPhones are cheap compared to most smartphones go to sprint and try to buy an htc touch pro 2 for 99 dollars honestly if you have to bitch about price than maybe you shouldn't own it.

Apple needs to add a few new features to maintain the same lead over improving competitors. They do not need to lower costs or pressure AT&T into lowering theirs.

The iPhone price is fine. AT&T just needs a couple of plans lower than 450 minutes (with 20 or so texts thrown in).

Wifi only iPhone with no 3g is what we will see. They will completely own the market if they do that. $300 wifi only iPhone which is subsidized by the carriers with a 2 year contract. Perphaps will be sold for $50 with a contract. They will pull the carpet from under all the "feature" phone.

I think there's a lot more pressure on Apple now to really wow people with their next gen. iPhone. I'm really looking forward to seeing what they come out with.

The $99 price is just right...they should not go below that I mean common! I would love to see cheaper data plans. And Apple needs to add some basic features like wallpaper change at least to discourage a few from jailbreaking. I jailbroken the first time cause I wanted personalized wallpaper. Now that I know about all the cool stuff you can do when jailbroken i don't want to go back but had I been able to change the wallpaper maybe I would no have jailbroken.

I don't think the price is really bad at all. You can get the iPhone 3G for $100 if you really want the iPhone. Most good phones are between $50-100 now. Only real issue is the data plan price, many people are put off by that.

The hardware cost is ok for me although it would be nice to have cheaper limited plans as my wife and I barely use 350 mins a month together and yet the cheapest plan we can get has 750 mins.
What I would really like to see though is another data plan option. On top of the current $30 'unlimited' but iPhone only data I would jump at the chance to switch to a 3-5gb a month plan for $30 but which let me tether and use the data however I like. I hardly use 250mb per month on my iPhone alone but it would be nice to have a cheap backup for the rare occassion when my cable Internet goes down since I work from home.
As for new features, I think we're lucky to get what we have so far. Before Apple came along most phone companies were very lazy in adding new features to old phones and would rather have peole buy new models to get even new software only features. At least Apple is still giving updates (of any kind) to iPhone 2G owners and that phone is nearly 3 years old now. In my Nokia owning days I found you were lucky to get bug fixes more than about 6 months after launch and that's if your operator released their tweaked firmware if you bought it on contract. And boy did those Nokias need bugs fixed. My last (a 6680) locked up requiring battery removal if a Bluetooth device looked at it the wrong way and both native Opera and Opera Mini regularly crashed the whole phone. I don't ever recall a Nokia firmware update adding major new features.

Phone(ANY) pricing means nothing when you spread the costs over the life of a 2 year contract. $30 for data is a bit pricey compared to a few carriers but not outrageous. $20 for unlimited SMS however is ridiculous. They need new plans that bundle SMS with Talk (ala sprint) or at least cut the pricing. Even $5 a month makes a difference. Especially if you stay in contract for more than 2 years.

I wouldn't expect the iPhone 4G to be sold at a diminished price, but I hope that 3GS gets discounted down to 99 USD come June; it's only fair. As far as new features go, I'd like a flash-enabled camera, a better Youtube app, longer battery life, 64 GB memory capacity, free turn-by-turn GPS, and Google Voice.

3g data only iPhone w/ Skype calling- no monthly minute allotment, just pay for the data even if it's at an increased rate- like maybe $40.

The price was good if we were in 2007. Now the table has changed, theres not only the iphone. Theres also the nexus one to compete with with a lot of customizable features along others. If they keep the os as closed and uncustomized sooner or later its success will decrease.

I don't see from where in the market this downward pressure would come. The last few product releases, like the Nexus One, Droid, Palm Pre, etc. have pretty much demonstrated that Apple can continue to do what it has been doing with the pricing and functioning of the iPhone. As far as AT&T goes, the only incentive to lower the cost of its iPhone plans would come from Apple insisting on them in exchange for continued iPhone exclusivity. But I've not seen any solid evidence that Apple would feel the need to take that side in things, or even that any kind of re-negotiation between Apple and AT&T over continued iPhone exclusivity actually took place.

The iPhone pricing is fine. Surely people don't expect something as good as that to be a low price? It has to compete with the Nexus one but it will always be on top.

@BBYM I'd rather be able to do it without having to jailbreak, my phone felt slower last time it was jailbroken, even after I reinstalled to the original software it never regained its pep

they need at least one more form factor - 4" to 5" screen. put that on verizon and be done with it already. it's only a matter of time before android gets it act together to pose a serious challenge. right now winmo is nothing more than vapor - but it looks impressive. if they can pull it off, it will be a huge challenge to the iphone.
with all the talk about ATT increasing their 3g coverage, i still get plenty of drops on edge (SF Bay Area). i only do 3g when i know I'm going to be somewhere for a little while. really, att is a joke and if they don't release a cdma version in june I will def be looking to switch back to verizon in the fall. really want the hd2 style phone. that thing is sweet.

I think the current pricing of the iPhones is just fine. The build quality is good, and I would hate to see that change.