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Update: Analysts predict higher prices for Verizon iPhone

Size of hike depends on whether the smartphone supports Verizon's LTE network

January 10, 2011 05:37 PM ET

Computerworld - Analysts say Verizon may sell its long-anticipated iPhone at a higher price than customers are used to paying for Apple's iconic smartphone, but split on how much more one could cost.

Verizon is expected to announce Tuesday morning that it will soon start selling an iPhone that runs on its network.

On Monday, analysts couldn't agree on whether the announcement will be accompanied by a price hike.

"I wouldn't be surprised if the iPhone [on Verizon] doesn't cost $50 more," said Brian Marshall, an analyst with Gleacher & Co., referring to the $199 entry-level price that U.S. customers now pay for a subsidized iPhone 4.

But Francis Sideco, a principal analyst in the wireless group at iSuppli, an El Segundo, Calif.-based research firm that specializes in calculating hardware "bill of materials" (BOM) costs, disagreed with Marshall.

"I don't perceive any material differences in BOM, IP [intellectual property] costs, or the retail price of an iPhone on Verizon if it's a CDMA-only device," said Sideco, taking the side of the $199 argument.

Unlike other analysts, Marshall said that the iPhone for Verizon will support only CDMA (code division multiples access) -- the wireless standard across the carrier's network -- rather than function in both CDMA and the faster next-generation LTE (long term evolution) network that Verizon launched in 38 markets last month.

He attributed the higher price of a CDMA-only iPhone to a bigger patent licensing bill. "There's more patent expense with a CDMA iPhone," said Marshall, "particularly with all the Qualcomm patents."

Technology from San Diego, Calif.-based Qualcomm is the foundation of the CDMA standards that Verizon supports on its network.

Marshall said the customer price of a CDMA-only iPhone could be as high as $250. Additional patent licensing fees will raise Apple's costs by a "low single digit" amount, he claimed, but the end user hike would be higher.

Sideco dismissed the idea of a price increase, saying that Apple's already paying patent fees to Qualcomm. "There's no way that with the volume that the iPhone has put up, that Qualcomm would not have asserted their IP rights, even though we haven't heard of that publicly," said Sideco.

The current iPhone operates on W-CDMA (wideband code division multiples access) networks, which are typically marketed as UMTS (universal mobile telecommunications system). AT&T's 3G network, for instance, relies on W-CDMA/UMTS.

Qualcomm also has a large patent W-CDMA portfolio, Sideco noted.

Sideco would not bet on either option -- CDMA-only or dual mode -- because credible arguments could be made for both. His take: a 50-50 chance for each.

"A CDMA-only iPhone would go against Apple's mantra to be the premier producer of smartphones," Sideco point out. "LTE is the thing that people are talking about this year."

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