Apple polishes image with low-cost iPhone

No one can tell for sure what Apple is up to these days, but this much is certain: These are great times to be in the market for a cellphone and a data plan.

No one can tell for sure what Apple is up to these days, but this much is certain: These are great times to be in the market for a cellphone and a data plan.

Apple this week announced steep price cuts in the wildly successful iPhone — cutting the entry-level price to the magic US$99 at last — and announced other models that for $199 to $299 will take video and are twice as peppy as the old ones. Remember, the first iPhone was $599 just two years ago.

Apple had to do something about its pricing after the Palm Pre and the BlackBerry Storm and even the Samsung Omnia offered more features for less. (Before you write me even more letters, I said features, not “coolness.”)

On June 19, the Apple faithful will get the 3GS, extend their contracts and move on up. The flaw in Apple’s recipe remains being tied to AT&T (some people don’t want to change carriers, some have a beef with AT&T, some live where AT&T has lousy coverage, etc.) Until Apple gets deals with other carriers, some sales are going to be lost.

But, Apple is not exactly hurting. Apple claims it has sold 40 million iPhones since launch — not bad for a computer company. It sold that many because the iPhones are cool, they work and they offer lots of innovation.

This price will bring more new buyers to the counter. What some won’t realize is they also have to buy a phone data package, so the total cost of owning an iPhone, or any other smartphone, is high.

Analysts say a $99 iPhone will push sales to 80 million units in a year or two. That’s probably right, especially given the brilliant ad campaign on TV. “Want to straighten a shelf? There’s an app for that . . .” Turns out 80 per cent of people will use their smartphones as phones and text-devices, but no matter: They fall right into the hype.

The timing of Apple’s announcement is not a surprise. The original iPhone buyers, who ponied up the big bucks two years ago, are coming up on their contract renewals and Apple did not want defection to other models or the next great thing (like the new Pre).

I love the phone, though for business reasons I don’t carry one personally. As with my iPod and my PowerBook, the hardware is elegant and perfectly designed.

Even today, it is just catching up to other devices, like with the ability to take video or “tether,” to be used as a modem for my laptop.

But Apple has a winner with the iPhone, for sure, and a price drop in this economy has to be good news for Apple, for AT&T and for consumers.

The real cost is in the service. Like the Barbie doll concept of old — give away the doll, charge $15 for the clothes — the real money is in the applications Apple sells for the phone and in the service that AT&T charges.

So choose wisely on both.

James Derk, tech columnist for the Scripps Howard News Service, owns the computer service company CyberDads. Contact him at jim@cyberdads.com

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