So what's the magic number?
You can bet the folks at Sprint Nextel are pondering that question now that Steve Jobs has put a new number out there for the new iPhones. Can you say $199?
Among the many announcements that Apple's Jobs made at his company's developer conference in San Francisco this week, few were more surprising than the new price for the 3G iPhones. Sure, the new applications and the prospects for many new promising arrivals are cool. The Super Monkey Ball game seemed to captivate the crowd. Phones that operate on AT&T's much faster 3G wireless network, at least where it is available, will be a big improvement over the first version, which one reviewer last year called a "really good beta product."
But the real eye poppers were the $199 and $299 price tags that will be attached to the iPhone boxes when they are available starting July 11.
AT&T's Ralph de la Vega said, according to a report by Om Malik, that the price was set to make the new iPhones true mass market products.
“I think this is going to reach people that would otherwise never put $199 into a mobile device,” he said.
Next week, Sprint intends to launch its answer to the iPhone, the Samsung Instinct. How much Sprint customers will have to pay for the potentially iPhone-killing devices is as yet unknown.
Sprint's pricing for the Instinct "has been firmed up for a while now," Michelle Leff Mermelstein, a Sprint spokeswoman, said on the day Jobs announced his new iPhones. Until the Instinct completes "final testing," though, Sprint doesn't want to reveal pricing, she said.
"We know our price is very competitive," she said.
Roger Entner senior vice president for the communications sector at Nielsen IAG, said he would not be surprised to see Sprint consider the new iPhone prices as they prepare to roll out their Instinct phones.
"I am sure it sent quite a few people at Sprint back to the drawing board about where they should price the Instinct," Entner said.
The issue, Entner said, is that American wireless consumers typically are not inclined to pay anywhere near the full cost for the video-playing mini-computers that also happen to be mobile phones.
"Consumers have been trained in this country that mobile devices are not that expensive even though they really are," Entner said. "They have been heavily subsidized by the carriers."
The Instinct is a "very nice device," but the new iPhones are more elegant and "you have the whole allure of the iPhone," Entner said.
Sprint still might have some room to maneuver. Wireless phone prices have been creeping upward. The average purchase price for mobile phones was $101 in 2007, up $9 from six months earlier, according to the latest J.D. Power and Associates analysis.
It "marks the highest average price paid for a wireless device since the study's inception in 2003," the company stated when issuing its 2008 U.S. Wireless Mobile Phone Evaluation Study last month.
J.D. Power attributed the price boost to the surging popularity of smart phones, such as the RIM Blackberry, the Palm Treo and the Apple iPhone. The average purchase price for smart phones was $208 versus the average of $58 for phones that don't offer so many functions.
Fortune's Scott Moritz didn't focus on these pricing trends so much as the impact Steve Jobs' $199 announcement would have on Sprint and other wireless industry competitors.
"Let's face it, the shiny new Apple device with the dramatically lower price has got to be a tantalizing jewel to otherwise loyal Sprint, Verizon and T-Mobile customers," Moritz wrote. "The cool factor combined with a price break will likely send a fair share of big spenders over to Ma Bell."
Sprint leaders have high hopes that the Instinct will bring a much-needed boost to their company. It is getting generally good reviews for how it functions. How much can Sprint charge and still get similarly good reviews – and business – from subscribers?
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