Has Apple killed the grey iPhone market?

Steve Jobs has promised global price parity for the iPhone 2.0, but will it stop cheap US iPhones flooding the world? It depends on whether or not Telstra sticks to its knitting.
His Jobs-ness has promised the iPhone 2.0 will be roughly the same price everywhere in the world. Talking about the iPhone 2.0 at Apple's WWDC , Jobs only revealed the US pricing - $US199 for the 8G model and $US299 for the 16G model. A two-year contract with AT&T will be required.

I have to admit that in all the pre-iPhone 2.0 speculation, I didn't consider the possibility of a price drop AND global pricing parity. It makes sense though, as the greenback is so weak right now that buying gear online from the US can save you a bundle, but put a serious dint in local sales. Just because it make senses doesn't mean you'd expect Apple to actually do it, as Australians have become accustomed to paying outrageous markups on Apple gear sold locally compared to the US price tag.

One thing is for sure, the price drop will kill the secondhand iPhone 1.0 market stone dead. It's estimated Australia has roughly 60,000 imported iPhones and I was interested to see what happened when the bulk of them hit eBay after the iPhone 2.0 was released. I don't think iPhone 1.0 owners will bother selling them secondhand now. Australian iPhone 1.0 owners paid at least $AU430 for their US 8GB iPhone, but probably a lot more - especially if they bought it when the iPhone was first released. If Jobs sticks to his global pricing parity promise, the 8GB iPhone 2.0 will sell for around $AU220 in Australia. At that kind of bargain basement price for the iPhone 2.0, you'd be lucky to get $AU100 for your old iPhone on eBay. Most people would rather keep their iPhone 1.0 as an iPod touch, or hand it down to a friend, than sell it for a mere $100.

So what about the grey market? Is there any reason why you'd still import an iPhone 2.0 from the US? If you recently spent $AU400+ importing an iPhone 1.0 from the US, did you just shoot yourself in the foot?
Whether or not the grey market in iPhones continues depends on the outright price local telcos charge for the iPhone 2.0.

Yes, I know Jobs talked about global pricing parity, but that's $US199 for an 8GB iPhone 2.0 on a two year contract with AT&T. It might translate to $AU220, but that's almost certainly dependent on you taking out a two year contract with your local telco. Optus and Vodafone recently announced they'd be selling the iPhone 2.0 in Australia, but we're still waiting on them to confirm the pricing.

There's no word yet as to how much a US iPhone 2.0 will cost if you want to own it outright rather pay it off on a plan. Jobs didn't say anything about pricing parity for buying an iPhone outright. We don't even know if you will be able to buy them outright in the US, or in Australia.

There are plenty of reasons why Australians would want to buy an iPhone outright rather than tie themselves down to a two year plan. The biggest reason would that so far Telstra has stuck to its knitting and refrained from announcing an Australian iPhone. So all those Next G customers out there who want to get a slice of iPhone goodness will be forced to break their Telstra contracts, pay out the contract to Telstra and then sign up for a new contract with Vodafone or Optus - neither of which can match Next G's coverage footprint.

If you've got 12 months to run on a Next G contract, breaking free will probably cost you at least $AU600. You'd be crazy to do this if you could buy an iPhone 2.0 outright for a good price and then start using it with your Next G SIM card. If buying an iPhone outright from the US is cheaper than buying one outright in Australia, Next G customers will ensure the grey market for iPhones continues. If Telstra doesn't add the iPhone 2.0 to its offerings soon, it might find its customers have already bought them outright elsewhere.

If it turns out you can't buy the second-gen iPhones outright, Next G customers would probably be better off grabbing themselves a cheap iPhone 1.0 and unlocking it to work on Next G. At least you'll get EDGE data speeds. This should tide you over until your Next G contract runs out. By this time Telstra might offer the iPhone 2.0 and hopefully market pressures will have forced the telco to offer a decent data bundle to go with it. If Telstra doesn't offer the iPhone 2.0 by the time your contract expires, you can consider changing providers without penalty. By then Apple might have started selling the iPhone 2.0 outright, or you might even be able to pick up a secondhand iPhone 2.0.

So if you're locked into a long phone contract and you recently spent $AU400+ importing an iPhone 1.0 from the US, you haven't made an expensive blunder. Sit back and enjoy your first-gen iPhone while the dust settles and then evaluate your options when your contract runs out.

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