Apple's iPhone is quite the success story, and some of that success must be attributed to the AT&T-subsidized price tag. AT&T keeps the cost of the iPhone down at $200 in exchange for a two-year contract that locks consumers to the device (and AT&T). The company is very pleased with this approach.
"The economics for us are terrific," Glenn Lurie, AT&T's president of emerging devices, told investors.com. "We're willing to invest to get a customer."
AT&T is extending this service to netbooks from Acer and Dell, and eventually to "portable videogame machines." The only portable videogame machines we know of, besides mobile phones, are the Nintendo DS and PSP. Presumably, consumers could purchase a DS or PSP at a lower cost in exchange for signing a contract for an AT&T service of some kind.
"It's hard to pass up the siren song of subsidies," says Craig Moffett, an analyst at Bernstein Research. "The iPhone demonstrates nothing if not that American consumers will gladly sign up for higher monthly fees in return for a lower upfront sticker price on the piece of metal that service is connected to."
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