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Reuters reports that AT&T will shoulder part of the price of the 3G iPhone, from $200 to $500 per phone, according to analyst estimates. With current versions of the iPhone, the carrier pays Apple a percentage of monthly subscriber revenues, a practice that's ending.

"With dilution running at levels we never fathomed, we believe AT&T is assuming more risk than the previous arrangement," says JPMorgan analyst Michael McCormack. "We question whether a handset exclusivity agreement should warrant such a dramatic financial impact while other successful carriers have not found it necessary."

AT&T said the subsidy, aimed at boosting volume sales, will cut earnings per share by 10¢ to 12¢ in 2008 and 2009.

Apple, on the other hand, is expected to see its earnings dip only about 3¢ a share this year, according to some estimates, as it forsakes the percentage of recurring monthly service revenue it got from AT&T's iPhone users.

Editor's note: Previously, over 50% of iPhone buyers have been customers new to AT&T. Moreover, the iPhone recently lost market share to RIM and Palm, due to more aggressive pricing and marketing.

If AT&T and Apple want to keep this gravy train rolling, then they've obviously made the right moves. How much all of this costs each player in relative terms is a pointless endeavor at this point...

What's your take?

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Reader Comments

$70 a month for a phone? thats the minimum plan? seriously? $70 a month for a phone? Posted by Guest Poster #1 on 06/11/08 9:40 PM At least the old AT&T monopoly was regulated. My AT&T DSL rate has doubled. Posted by Guest Poster #2 on 06/11/08 9:42 PM When it was a monopoly, long-distance was painfully expensive and we had the same black phone on the wall for 30 years. Sucks vs sucks? M Posted by M Sharp on 06/12/08 12:07 AM ATT isn't taking a risk at all. They subsidize the initial cost of the phone then charge you an extra $10/mo for 24 months of your contract. I don't know what JP Morgan analysts are talking about. That $240 more per user than the original iPhone which means with the $200 subsidy they're making an extra $40. Posted by Guest Poster #4 on 06/12/08 10:43 AM ATT charges 30/month for 3G service to ANY smart phone, not just the iPhone. Now that iPhone is 3G, you have to pay 30/month instead of 20. This is not a price increase to "make up" for the lower price of the phone. Posted by Guest Poster #5 on 06/12/08 10:55 AM The only risk is to the end consumer because no matter what the plan details are at any point in time, AT&T and Apple will not end up paying for their losses - YOU WILL. Risk? What risk? Posted by Razz on 06/12/08 11:07 AM People wanted a cheaper iPhone... Done. People wanted 3G... Done. But now people want to complain about 3G being $30 (which has been the normal price for some time now) 3G costs more that Edge. Just like DSL cost more than dial up. Like filet mignon cost more than ground beef. What exactly is the problem? Posted by neonart on 06/12/08 11:15 AM I couldn't agree with neonart more! Well said! iphone Posted by Guest Poster #8 on 06/12/08 11:39 AM I think part of the difference (playing devil's advocate to your comment about DSL versus dialup), Neonart, is that I can choose DSL over dialup or vice versa; I can't choose EDGE over 3G if I buy a new iPhone... right? Posted by Guest Poster #9 on 06/13/08 8:27 AM To Guest poster #9,. Thats right you cant have edge over 3G, but you cant call up your Cable internet provider (comcast, Cox) and tell them you want them to provide you with dial-up as well as Cable because they arent giving you an option. If you dont want the faster speed you look elsewhere. If you dont want to pay for the service dont get en iphone. Posted by Guest Poster #10 on 06/13/08 8:34 AM That's right. If you want a BMW, it will need premium gas. If you don't want to use premium gas, don't get a BMW. The 3G iPhone uses 3G, and 3G is more expensive. If you want to use EDGE, get a refurbished 1st Gen iPhone. They work just fine. Posted by neonart on 06/13/08 10:15 AM Can i get the new iphone when it comes out at the subsidized price even if im not a customer of att currently. i am willing to sign a contract with att, if i could get the new iphone at the subsidized price. iPhone Contract Posted by nbalife on 06/22/08 11:51 PM Buying at the subsidized price means you agree to a two-year contract. M Posted by M Sharp on 06/22/08 11:55 PM how much does the new iphone cost for a current att customer do i get it at the subsidized price?? new iphone Posted by Guest Poster #14 on 06/30/08 1:30 PM I think it costs $199 plus a new two-year contract. Posted by Guest Poster #15 on 06/30/08 5:56 PM You gotta be eligible for an up grade or else you are stuck paying full retail price for the phone even if u are willing to sign up for 2 more years. FUCK AT&T Iphone3g Posted by Guest Poster #16 on 07/08/08 5:58 PM

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