Analyst: AT&T Not Likely to Subsidize iPhone

"There's no need to upgrade the device's capabilities and lower its cost at the same time," Entner said. "AT&T Mobility first will have to see the effect that a 3G iPhone will have on its HSDPA network . Right now, that HSDPA service is robust, with only a few million laptops riding on it. Add a few million iPhone users, who are heavy users of the Internet, and it could be like shaking a skyscraper. AT&T Mobility is not just selling a device, it's selling a service. AT&T Mobility doesn't want complaints about its service. That would spell out no abrupt price subsidy for the device."

Network Management

On the other hand, Entner suggested that if a subsidy were contemplated, it might be "a secret weapon for Christmas" if necessary to meet Apple's goal of 10 million iPhones sold in 2008.

"If either party needs to step on the accelerator, they can create a great stocking stuffer with a non-premium-priced iPhone," Entner added.

Value Subtraction

Another problem with a subsidy would be damage to the iPhone's major contribution to the industry, that is, its value proposition.

Other vendors are now equally profiting from the rising tide of smartphones priced at US$400 to $500.

The story in RCR Wireless News added that Infineon Technologies, the expected to be the supplier of the 3G chip in the new iPhone, has recently posted a Q2 profit warning based on lower than expected volumes of "certain wireless platforms projects" leading analyst Gareth Jenkins at UBS to suggest that there may be a delay in deliveries of the new iPhone.