T-Mobile’s new $99.99 Apple Inc. (NASDAQ: AAPL) iPhone promotion may help the near-dead cellular company survive. However, the extremely low price the carrier has set on the iPhone to draw customers will be a drag on the value of the iPhone brand. It is yet another headache for Apple in what has become a long string.
The price plan for the 16 GB version of the iPhone involves the standard 24-month subscription, but even the cost of this is low by industry standards — $20 a month. While the T-Mobile brand has itself been hurt by poor customer service and the aggressive expansion of its larger rivals — AT&T Inc. (NYSE: T), Verizon Wireless and even Sprint Nextel Corp. (NYSE: S) — some set of consumers are bound to take such an attractive deal. AT&T charges $199.99 for the same iPhone 5.
Apple’s reputation as the high-price, high-quality provider of smartphones has been hurt already, primarily by rival Samsung, which will launch its new Galaxy S4 before the new iPhone 5S is in the market. The iPhone’s reputation already has been hit by trouble, largely based on the weakness of its iOS map product. And the press and buzz that always surrounded iPhone launches has been drained off to some extent by Samsung announcements, and even the recent launch of the widely lauded HTC One — in the minds of some experts another “iPhone killer.”
Pricing usually walks a thin line, whatever the industry. Apple’s product quality and innovation allowed it to charge more for the iPhone than competitors could charge for their flagship models. The lofty iPhone prices were a badge of honor. Consumers were willing to pay a premium price for what was perceived as a smartphone without equal.
A $99.99 price point makes the iPhone no better than a commodity product, at least based on what the consumer has to pay. And ordinary is the direction Apple has been heading for months. T-Mobile, no matter how clever its plan is, has done Apple a disservice.
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