Analyst: 3G iPhone Discount Would Supercharge Sales

Sacconaghi cited the previous experience with Motorola (NYSE: MOT) . "Motorola's experience with the Razr in 2005 suggests that price elasticity in the mobile handset market is very high," he wrote. "We have long held that the iPhone's high price has been the biggest limiting factor on its sales." He noted that when Motorola reduced the price of the Razr from $500 to $150, sales doubled. When the price dropped to $100, the sales doubled again.

Fat Monthly Take

He also noted that AT&T has some room to increase the data plan cost since RIM (Research In Motion) charges quite a bit more, and iPhone users are known for intensive use of the data component. That would increase revenues. One downside to the subsidy would be the cannibalization of iPod touch sales (which Apple has been depending on to carry the iPod flag into the future as a mobile Internet device.) Even so, the iPhone is more profitable, according to Sacconaghi, and that would make up the difference.

Want It Unlocked?

Finally, Sacconaghi noted that offering subsidies would pave the way for unlocked phones, and said, "the availability of factory-unlocked iPhones would further stimulate overall iPhone sales."

However, The iPod Observer notes that Apple's contract with AT&T might need to be amended to allow that. In any case, the opportunities for Apple to increase iPhone sales appear to be coming in waves. Recently, the Commercial Times in China estimated that the iPhone 3G could sell 25 million units in its lifetime -- which may not be that long considering the pace of technology.