The iPhone Monopoly Is Over. Now Bring on the Smartphone Price War Already!

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As a Techland timeline shows, there have been rumors that Verizon would begin selling the iPhone since, well, since there was any iPhone to sell. Now that the possibility of an iPhone without AT&T is finally confirmed, the question on the minds of consumers who love smartphones but wish they didn’t cost so darn much is this: Will iPhones—and even more importantly, wireless plans—be getting cheaper? And when?

AT&T was the lowest rated U.S. carrier in a recent Consumers Reports survey. Verizon Wireless, on the other hand, received top ratings. What with all the complaints about dropped calls and plain old aggravating slowness from AT&T customers, it’s no wonder many consumers are eager for Verizon to roll out its iPhone. Pre-orders of Verizon’s iPhone 4 can be placed online starting February 3, and Verizon stores will begin selling them a week later.

Now for the big question: So what does it cost?

For now, the phone itself costs the same if you buy it with a two-year plan from Verizon or AT&T: $199.99 for a 16GB iPhone and $299.99 for a 32GB model. (The older model, the iPhone 3, btw, recently began selling for $49, though only with AT&T service.)

There are other costs, of course. Probably the most annoying costs will be incurred by consumers who already own an iPhone but can’t wait to drop AT&T—even if that means getting hit with a hefty early termination fee.

Another Techland post explains how to make the switch from an AT&T iPhone to a Verizon iPhone. Here are some of the complications and costs:

AT&T customers who signed up before June 1, 2010 are all subject to a $175 early termination fee, with an additional $5 off for each full month of service you’ve completed. Those who signed up after June 1 agreed to a $325 early termination fee when they signed, though the cost depreciates $10 for every month you’re with the network. So, all AT&T iPhone 4 users who signed two-year agreements on June 23 (when the phone was released), would still be required to pay a $255 fee seven months into their contract.

Interesting that AT&T just upped that ETF last summer. Could they have intentionally been trying to lock in as many customers as possible to two-year deals? Could they have been doing so because a Verizon iPhone was on the horizon, and because new Android phones were coming out left and right?

Another cost AT&T iPhone users will encounter while making the switch is that they can’t simply switch service. They’ll have to be entirely new phones because the technologies don’t match up. So get ready to pony up $200 or $300 for a new iPhone that looks eerily like the one you already own, and get that old iPhone ready for eBay or the recycling bin.

As for what a Verizon iPhone customer will pay in monthly bills, that’s still up in the air. Verizon hasn’t announced the cost of data plans, though it is expected that Verizon will offer an unlimited option, which AT&T no longer does. Here’s another interesting difference, reported by the WSJ’s Digits blog:

Verizon did announce a mobile hotspot capability within the phone, meaning you’ll be able to connect other devices to the Internet with the phone, for a price that we don’t know yet. You can’t do that with AT&T, though you can tether the AT&T iPhone to a single computer with a Bluetooth connection.

Since Verizon hasn’t revealed all of its numbers and plan options yet, it’s impossible to figure out exactly what a customer will pay each month to use its iPhone. Based on what we do know, however, thus far it looks like an iPhone will cost about the same each month no matter if you’re going with Verizon or AT&T.

So where’s the damn price war?

Well, some patience will be required if you want prices to drop. The new iPhone has been eagerly awaited for years, so Verizon doesn’t have much reason to undercut AT&T, at least not now. There should be more than enough demand if Verizon merely matches its competitor’s prices.

Like with most early adopter scenarios, though, after the initial launch entices purchases out of the most gotta-have-it consumers, prices are sure to drop—for iPhones from both Verizon and AT&T. Who knows: AT&T may even sneak in a price drop in the next couple of weeks, just to try to steal some of Verizon’s thunder. By the time Verizon offers the iPhone on its faster new 4G network, you can be assured that either Verizon or AT&T or both of the providers will have cut prices on the iPhones we’re talking about right now.

So while we may not have an aggressive price war yet, there’s no doubt we do have a war of some sort. The LA Times cites an expert who estimates:

Verizon stands to “cannibalize” the sales of 6.5 million iPhones that might have been sold by AT&T.

Nice to see that the wireless giants will try eating each other, rather than their customers, for a change.

That’s what competition does, and finally, there’s competition for iPhone users. And what with all of the other smartphones flooding the market, consumers have more options than ever. Hopefully, these options will include paying less—up front and every month down the line.

Why the $49 iPhone Still Costs Too Much
Now Here’s What a Smartphone Really Costs You
Why You Don’t Have To Be Locked into an Annoying Two-Year Cell-Phone Contract
Cell Phones: You’re Probably Paying Too Much for a Plan You Don’t Need