AT&T to cut iPhone service $10 per month

AT&T is reportedly going to drop the price of the iPhone service plan by $10 per month when Apple releases a new version of the iPhone sometime this summer.

The basic AT&T iPhone plan starts at $69 per month now, but will drop to $59 per month, according to Cote Collaborative analyst Michael Cote.

The popular touchscreen smartphone now costs $200 when purchased with a two-year AT&T service agreement, although some potential customers have not been pleased with the cost of the data plans AT&T has offered. 

For example, excluding activation fees and taxes, consumers who purchase the iPhone and the cheapest iPhone voice and data plan end up paying $1,856 over the two years of the contract.  The ability to knock $240 off that total price could be enough to help persuade more consumers to purchase the iPhone.

This price cut by AT&T is likely in response to reports that Verizon Wireless, AT&T’s main competitor, is interested in offering the popular iPhone to its subscribers.  It’ll be interesting to see if the cut really happens, as there has been some speculation that AT&T may not actually be able to afford a $10 reduction.

"There’s no easy answer to this question, without knowing AT&T’s profit margin," according to a blog entry posted on the Washington Post web site.  "But using some basic back-of-the napkin estimates, it’s easy to assume that yes it can afford it?however, not without trimming margins by around 14 percent. Here’s the math: a two-year contract costs a minimum of $1,656. After the $10 cut, the contract would be worth $1,416, or 14 percent less. Still, at those prices, it likely far exceeds how much AT&T pays for each phone (of course, it also has to pay for the network)."