Tech Rumor of the Day: Apple

Rumor has it AT&T may drop its entry-level price for iPhone service plans to $59, underscoring intense pressure to sell the smartphones.
Author:
Publish date:

Updated from 6:59 a.m. EDT

AT&T

(T) - Get Report

is considering a $10 price cut for the iPhone's monthly service plan when

Apple

(AAPL) - Get Report

introduces the newest version of the phone next month.

There is a "strong possibility" that AT&T will drop the entry-level price to $59 from $69, says

Cote Collaborative

analyst Michael Cote, an industry pricing strategist. The announcement, he said, will probably accompany the launch of the new iPhone on June 8, during Apple's World Wide Developers Conference.

The price cut would underscore the pressure AT&T and Apple are under to boost iPhone sales.

var config = new Array(); config<BRACKET>"videoId"</BRACKET> = 22420123001; config<BRACKET>"playerTag"</BRACKET> = "TSCM Embedded Video Player"; config<BRACKET>"autoStart"</BRACKET> = false; config<BRACKET>"preloadBackColor"</BRACKET> = "#FFFFFF"; config<BRACKET>"useOverlayMenu"</BRACKET> = "false"; config<BRACKET>"width"</BRACKET> = 265; config<BRACKET>"height"</BRACKET> = 255; config<BRACKET>"playerId"</BRACKET> = 1243645856; createExperience(config, 8);

AT&T needs a way to reach beyond its core iPhone customers to people who might find it too expensive. Meanwhile, Apple may be looking to push iPhone sales

beyond AT&T

and toward other players like

Verizon

(VZ) - Get Report

.

But price cuts have always helped juice Apple iPhone sales, and if AT&T can convert more modest spenders to iPhone owners, both AT&T and Apple would be happy.

The lower-entry $59 price would trim 14% off the existing cost of the service plan, reducing the cost of a two-year contract by $240.

The current price of an iPhone including a two-year AT&T contract is a hefty $1,880.

"This price does not address the whole market," says Cote. And the price barrier has started to be a concern for Apple. For example, says Cote, "Wal-Mart iPhone sales haven't met expectations."

There has been a lot of speculation that Apple would someday introduce a $99 nano-iPhone to target people who can't readily afford the current iPhone. But Cote says he's not expecting a cheaper iPhone anytime soon. He does say that tinkering with the price plans signals that AT&T is eager to make some headway on affordability.

"Apple would first need to address the entry-level price point before introduction of a $99 iPhone," says Cote.

Apple fans will recall last year AT&T

lowered the price

of the iPhone to $199 from $400 by subsidizing a big portion of the sales price. The price cut juiced iPhone sales to 17 million last year, that's well above the 4 million iPhones sold in the last six months of 2007.

The price strategy also highlights efforts to forestall the end of a strong two-year run for the iPhone. Entering its third year, the iPhone

hits a phone fashion milepost

where cool designs start to look a little uncool.

Apple also faces a new smartphone assault from

Research In Motion

(RIMM)

, which seems to be hitting its stride after initial stumbles in the consumer market. And old foe

Palm

(PALM)

has a new touchscreen Pre phone to rival Apple's iPhone coming this summer. And later this year

Nokia

(NOK) - Get Report

promises to

jump into the touchscreen race

with three smartphones.

AT&T may be firing the first shot in the coming price plan war.