On Monday, Steve Jobs announced that – among other things – Apple will begin selling a new model of the iPhone on July 11, barely a year after it launched the first version. The new iPhone is a big improvement over the original, featuring the broadband 3G network, GPS, push e-mail, and a proximity friend-locating program. All this just three months after Apple announced its new iPhone 2.0 software bundle. Most importantly, however, Apple sliced the price of the new iPhone to only $199 for the 8GB model (which began at $599).
Such a drop in price ($400 and 67%) is simply incredible – especially for a new phone with a host of new features that users demanded. Such a move would be unthinkable in any old economy industry (which may explain why the Consumer Price Index doesn’t account for technological improvements in its calculation of inflation). Will the FTC, stuck in its old ways of thinking, investigate Apple next for “anti-competitive” behavior – that is, selling phones that are too good for too cheap? After all, the last time Apple dropped its iPhone prices, customers complained of unfair pricing.
Apple’s move may not have been possible without its bundling deal with AT&T. CNN reports that lowering the upfront cost of the iPhone so drastically required AT&T to provide a heftier subsidy to iPhone buyers. This may be a great deal for those customers that are willing to commit to a service provider for two years in exchange for a fantastic, cheap new phone. Come July 11, I’m trading in my unsubsidized piece of junk for a new iPhone. Regulators better not get in my way.