iPhone 3G questions unanswered: AT&T subsidy, 3G data price, no video?

June 9, 2008 | MG Siegler

Everyone at the WWDC conference is extremely excited about the new iPhone 3G — and that’s an understatement. However, there are a few questions that Apple’s chief executive left unanswered:

Is the $199 price a result of an AT&T subsidy or is Apple eating the cost?

What about the data price plans from AT&T, will those get more expensive with the faster 3G data?

And finally, will the device offer any video capabilities?

One would have to assume the iPhone 3G will be significantly more expensive to produce than the original iPhone with the new 3G and GPS components. Is Apple simply willing to make less money per device in order to ensure its device dominates the market? That could very well be the case.

Interestingly enough, Apple’s stock is down over four percent in post-keynote trading.

You better believe we will be on the case for these unanswered questions before the device launches on July 11th.

update: Many sleuths in our FriendFeed room dug deeper and found that the $199 price requires a new 2-year contract with AT&T (the information is in a footnote on Apple’s website). One might assume this means it is AT&T that subsidizing it, but remember, the original iPhone that came in at $599 also required a 2-year contract with AT&T so that deal is still a bit vague.

Also remember that Apple is keeping 30% of the revenue from applications sold through the iTunes App store. That takes the sting out of cutting the iPhone price quite a bit.

update 2: AT&T’s site appears to be down, but there is talk that the 3G data plan will be $30 a month.

Another commenter notes that the mobile live video streaming site Qik told him that an app for the 3G iPhone would be out soon — which of course indicates video, but last we heard the company was evaluating the new device and will make a determination how to proceed on it.

update 3: A number of readers have pointed to an Apple SEC filing that seems to indicate that it will no longer be taking money from the majority of contracts that are signed. Instead, the company will make money on the initial iPhone sales and of course, on those new application sales. Interesting.

Also of note, just as we reported last month, you will be able to get the new iPhone for $199 even if you have a current iPhone with an AT&T plan that isn’t yet over (which none are as the iPhone is a year old and the contracts were for two years).

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About the Author, MG Siegler

MG Siegler writes about technology trends and new media for VentureBeat, with a focus on mobile topics, social elements and key news stories. Before that, MG wrote about technology on his blog, ParisLemon. Originally from Ohio, MG attended the University of Michigan where he studied film. He's previously lived in Los Angeles where he worked in Hollywood and in San Diego where he did web development. He now lives in San Francisco.

  • it may be interesting that the stock is not down MORE (but there's still 50 minutes left..). They effectively announced "New phone VERY cool and cheaper, BUT not selling any phones for one month. kthxbai"
  • Yeah, down about 2% now, nothing major. I think it could soar though on revised sales estimates forth coming from analysts...
  • AT&T's plan for 3G laptop cards maxes out at 5GB/month, fwiw -- I believe it's $59.99

    for what it's worth ;-)

    Enough about what everyone else has built for Apple.... what can Apple do for me.... (can't shoot video? cut/paste? is this a joke?)
  • Yeah they showed of click to save images but no cut/paste, I have to assume this is coming. I want to believe!
  • Andy
    Several factor to consider - Apples drop in stock:

    - lehman bros announced big losses
    - gas prices
    - fed is telling investors to be cautious that risk are still out there
    - tech in general is struggling

    Probably a product of mkt struggling as whole weighing marktet down.
  • Yeah seems more of an overall market thing, not down too much anymore.
  • kevin
    It looks like a plan price increase?

    CrunchGear has an AT&T press release that looks like data will be $30, phone will be another $39.99, and I'm not sure what if any texting is included in that.

    Kind of sucks compared to the old iPhone pricing that was $59.99 for unlimited data, 450 minutes and 200 texts.

    AT&T is doing network maintenance right now. Might have the answers soon. But it doesn't look good. At least $10 more per month, probably more. The price cut is pretty pointless then.
  • Yeah will probably be about $10 more it seems.
  • The $199 price is because of AT&T's subsidy. See the disclaimer on www.apple.com (footer)
  • Seems that way, but see my update up top...
  • The $199 and $299 prices are UN-subsidized. However, I just listened to the AT&T Investor Call on this topic and it sheds some light on the topic. Apple and AT&T have restructured the original revenue sharing deal. Going forward with the 3G iPhone, AT&T is retaining all voice and data revenues. That traditional method will allow them to subsidize the iPhone even further. http://www.jkontherun.com/2008/06/heres-why-you...
  • I did a pretty similar post with more questions:
    http://www.treyp.com/archives/reflections/iphon...
  • Thom
    Surprising that with all these new features, something as basic as synchronizing Notes is still missing.
  • Yes, I can confirm the ATT release. Basically, at the end of two years, you end up paying more than before.
  • With the benefit of time, the original deal (rev share) AT&T deal just might come to be seen as the 'second greatest unintentional head-fake in tech history' since by setting the bar so high for what a mobile phone could be, and extracting such rich financial terms from AT&T, Apple seriously baited the hook for carriers desperate to get into the excuse-free mobile Internet game, but waiting for a vendor with more traditional economics (i.e., a heavily subsidized phone but no revenue sharing).

    Prediction: carriers will sign up en masse, customers will see $199 as a relatively easy impulse buy, and once a couple 'have to have' iPhone apps start flooding into the market, Apple is going to do some crazy volume.

    Check out the post I wrote on the topic, if interested:

    Jobs and iPhone: The (second) greatest unintentional head-fake in tech history?
    http://thenetworkgarden.com/weblog/2008/06/jobs...

    Cheers,

    Mark