Apple cuts iphone price: a lesson to early adopters

Apple announced that it has cut the price of the iphone by $200, bringing down the price to $399 from the hefty $599 (a 33% price drop in under two months). This is by far one of the hardest lessons learned to early adopters of the Iphone. That is quite a price to pay to be first in line.

While the exact reasons were not discussed, it is probably save to assume that Apple wants to meet the one million target it gave the Street by the end of this month. Missing this target would appear far worse than upsetting the loyal customers that waited in line to buy the Iphone in the first few weeks of its release.

Investors, however, did not take the news lightly. They brought down the stock by 5% in trading today closing at $136.76. This will be of little concern if Apple succeeds at beating the target 1M mark before the end of the month. At $399, the phone now competes directly with most other carrier’s smart phones.

Let this be a great example to the rule of buying new technology before it has had a chance to mature. In almost any product line, if you can wait to the next version you will usually get a better performing and lower priced product.

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According to survey supplied by Isuppli (see story), Apple’s Iphone powered by AT&T has out sold all smartphones in the US and is equal in sales to the popular Chocolate by LG.

Even with the hefty price tag, the long term contract and invoice mistakes with AT&T, the sales still accounted for 1.8 percent of all handsets in the U.S. Where is Verizon’s response?

In a article published by USA Today before the release of the Iphone, Denny Strigl - Verizon’s chief operating officer commended Verizon’s decision to pass on the Apple Iphone deal citing hefty demands by apple did not make sense and that ATT’s inferior network coverage would keep customers on Verizon. Later in his statement he also mentions that Verizon will be working on an answer to the Iphone with an un-disclosed manufacturer later this summer.

Hmm, later this summer? I have not seen anything, in fact there has been very little in the way of new phones or superior developments. Look at Verizon’s major campaign right now, red hot deals for the summer, basically selling inventory of all their old phones.

Take a look at the HTC xv6800. It was suppose to come out early this year and then delayed to July. Not only has July passed with no sign of Verizon’s xv-6800, but Sprint has released theirs. The new rumors have Verizon HTC xv-6800 release hitting stores in time for the holidays (October-November is what I have been told from Verizon reps). How many people switched to Sprint’s version of the HTC xv-6800 or bought an Iphone?

It seems Verizon can’t get a phone to market to satisfy their technology consuming customers or business customers. With AT&T and Verizon both claiming to be the number 1 cell phone provider in the US, Verizon is going to have to change its tactics to truly leap ahead. I wonder if Denny Strigl still stands by his decision to turn down the Apple Iphone deal? If AT&T’s network is so inferior how do they remain in a close neck race with Verizon? I know I would be concerned if 1/4 of all new Iphones came from customers not currently on AT&T and I was tied for first with no “admitted” new product in the pipeline.

What do you think?

I have been looking for a great example to demonstrate how chronic Telecom invoicing has become from large Telecom companies. If you have ever had to deal with AT&T, Verizon, or Sprint on a wholesale basis you know the degree at which the typical invoice is either to complicated to understand or riddled with errors. You would also know that there are many companies that do nothing but audit Telecom invoices of which they work solely on commission and do very well.

It is amazing that there is a whole industry that thrives on the errors large Telecom companies make on invoices to their customers and yet the average consumer is more comfortable keeping slightly higher cost Telecom services with AT&T, Verizon, or Sprint than going with smaller nimble companies (when the option exists) that audit their customer invoices and use better billing practices.

I refer to a story in the NY Times - AT&T’s Overstuffed iphone Bills Annoy Customers. The story goes on to refer to the notoriously large invoices AT&T sent out to customers of Apple’s iphone. Someone in AT&T billing thought it would be great to itemize every data transaction. I am sure you want to know every date stamp of every data bit you sent while using your iphone so that you can audit the 60+ double sided pages with your records. Ms. Ezarik, was so impressed by the level of detail she posted this video.

This error from AT&T only resulted in large invoices to the customer, but one must think of the cost to AT&T to produce and mail out these invoices along with the customer impression left. How can quality control let invoices be mailed to more then a few hundred thousand people? With one invoice costing up to $7 in postage along with printing, packaging, and paper, this seems to be a very expensive error internally for AT&T. One must wonder, if they can’t audit their own internal systems to save themselves money and control customer retention, what makes you think your invoice is correct and properly audited?

To understand why these companies have such horrible billing systems you have to look at how they were formed. Most of the significant growth came from acquiring smaller companies. Along with each acquisition came new billing systems, different customer rate plans, and different data collection methods. To integrate all these systems is impossible, they have done a good job patching systems together, but the systems are still prone to many errors.

So what should you do?

-Audit your phone bill like you audit you credit card bill. If you see errors, strange fees, or sudden increases dispute them.

-Always choose a rate plan that is clear what the costs are for each service you may use. You don’t want to choose a plan that does not have international rates posted anywhere and then come to find out that a call to the UK costs $5 per minute.

-Watch out for rate plans that can change by posts to a web-site.

-Anytime you change plans, check to see that your changes made it in the system.

-If you do find errors and dispute them and the Telecom company denies or refuses to help, file a complaint with your local public utilities company.

Good news is that AT&T will stop the large invoices by the end of September, but the damage has been done. Perhaps another good thing will come of this. Apple is a company focused on delivering quality and simplicity to their customers. With an error like this and AT&T as the sole carrier to the iphone, perhaps Apple will pressure AT&T to improve their billing systems.

Update: 9-19-07

I am sorry to say I don’t have much to report.  I must admit, I am a bit surprised that no new dates for the Verizon xv-6800 have been leaked.  That seemed to be the pattern each month.  A new date, a new picture, and another failed estimate.  It was kind of fun watching all the rumors each month.  Holiday season is rapidly approaching and I think we can make a safe bet that it will be released then.   

Update: 8-24-07

I have seen some rumors of new pictures and product road-maps for the htc XV-6800, but I can not confirm any of the information as reliable. Many of the sources had targeted 8/15, but that date has gone and nothing to report. I stand by my estimate that I discussed with a Verizon rep as the target release to be sometime in the holiday season. This makes sense, with delays coming from product bugs and corporate disputes, holding the release to the holiday season puts a little extra push into the marketing. Sprint has their product out and I would not be surprised if Verizon is watching the feedback and response to see if anything can be changed for their product.

I also did check with my PR contact at Verizon again to deny or confirm the rumors. He did not sway either way, so for now we wait.

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Curious about all the comments that I have been reading about the anticipated Verizon XV6800 release, I decided to track down the Verizon press contact to see if I could get any further information. He was very nice and here is what he said:

“I haven’t heard of any launch date for this particular phone. We rarely pre-announce a new cell phone months in advance of its launch date — usually only within days of its commercial availability. We’d rather not raise expectations about the launch of our phones or our services and so just announce them when we are absolutely certain that they are ready to be sold in our stores.”

It looks like we will have to wait and see. As noted before and inline with other posts I have reviewed, it seems there may be some last minute bug fixes that keep pushing the release out for this phone. I did find an excellent post from rogerd’s notebook that has some good estimates and very good user comments for the Verizon xv6800. The rumors range from 8/15 to the end of this year. My guess is the end of the year to take advantage of holiday upswings and time for the xv6700 to sell out.

If you do want the xv6700, Verizon is currently running a $100 discount on the phone.

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Many of the rumors had the Verizon XV-6800 coming to stores by the end of July. I currently use a palm device powered by Sprint but want to switch to this phone when Verizon lets the public have it so I have been following the news. This phone originally was ready back in December and probably not released due to the age of the HTC 6700 that Sprint currently offers. Luther.com has great info on the details about the legal dispute between Qualcomm and Broadcom. With that resolved and the age of the 6700 no longer an issue, it is a mystery why Verizon has not released the phone to the public. With Sprint releasing its version “The Mogul” and ATT with the Iphone, Verizon seems to be missing the boat.

I recently asked a Verizon rep. and their response was the phone still has some bugs and has gone back for testing (which also is similar to the response found in Luther.com’s follow up post). “Now that it is so late in the year we should expect a holiday release” is what I was told. That is quite a long wait and many customers to lose to Sprint and ATT. No value here, just a good way for Verizon to upset their loyal customers.