Apple's iPhone 4S is swell, but pricing is the real killer app

Apple's iPhone 4S has some killer features, but the real neutron bomb on the industry is the price points for the latest device, iPhone 4 and iPhone 3GS.
Written by Larry Dignan, Contributor

Apple launched its iPhone 4S with availability on Oct. 14 and preorders a week earlier. In short, the iPhone 4S is impressive and its killer app may be voice integration throughout the device. The neutron bomb against the competition boils down to pricing.

Here's the rundown:

  • The iPhone 4S starts at $199 for a 16GB device.
  • The iPhone 4 moves to $99.
  • And the iPhone 3GS is now free.

In other words, Apple hit every price point to appeal to emerging markets as well as mainstream cost-conscious folks and early adopters.

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That pricing is going to add up to a lot of volume. In fact, AT&T has been able to fend off Verizon with the iPhone 3GS at $49. Rest assured a price such as "free" will keep those low-end devices moving.

For other folks---including a few of those who didn't want to give up the iPhone 4 in the first place---the $99 version of the device may ramp volume more than today.

Now the big question here is whether the iPhone 4S is worth the upgrade. The reality may be that it doesn't matter what consumers and tech pun
dits think. Apple will generate more than enough volume from the iPhone 4 and iPhone 3GS to offset any hiccup.

In many respects, Apple has set it up so families can buy into the ecosystem. Maybe IT manager dad gets iPhone 4S, his wife gets iPhone 4 and the kids get the iPhone 3GS. Apple obviously sees the potential in family plans---it has a Friends and Family app that can keep tabs on relatives.

The impact on the competition will be notable here. The iPhone 4S isn't 4G, but consumers may not care. Why? With a starting price of $199, the iPhone 4S already undercuts more expensive LTE devices such as the Droid Bionic. The iPhone 4 largely matches feature phones. And the iPhone 3GS is now a prepaid customer's dream.

Bottom line: Apple announced a good bit today, but the pricing is what's going to have the largest impact.


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