$69.99 AT&T Offering Could Boost Smartphone Adoptions

A $69.99 deal for a Pantech Crossover smartphone from AT&T with a two-year contract and data plan could encourage U.S. feature-phone users to move to smartphones. While AT&T is targeting first-time buyers, it also may hope to attract consumers from low-cost T-Mobile. That could ease AT&T's purchase of T-Mobile -- or make AT&T more competitive.

AT&T Relevant Products/Services said Tuesday it will launch a new Android-based smartphone Relevant Products/Services on June 5 that will be priced at $69.95 when buyers sign up for a two-year service Relevant Products/Services contract and a minimum monthly data Relevant Products/Services plan. The new Pantech Crossover's surprisingly low price suggests the U.S. mobile Relevant Products/Services market may be on the verge of a major sea change.

According to Gartner Relevant Products/Services, global Relevant Products/Services smartphone shipments accounted for 23.6 percent of mobile handset sales overall in the first quarter -- an increase of 85 percent year on year. The U.S. market, however, may already be approaching the tipping point at which smartphones become the majority device Relevant Products/Services segment, just like laptops eventually did with desktop Relevant Products/Services PCs.

"In the U.S., I expect that [either] 2011 or 2012 will be the year that smartphones outsell feature phones," said Lisa Pierce, an independent analyst at the Strategic Networks Group. "As for the installed base, [it] will take until 2013-2014 for smartphones to [become] the majority of phones used."

Attracting First-Time Buyers

The Crossover sports a slide-out keyboard, a 3.1-inch touchscreen, a 600-MHz processor, and a three-megapixel camera with camcorder. Based on the Android 2.2 platform, the smartphone has access Relevant Products/Services to the latest social-networking apps Relevant Products/Services, games and other software Relevant Products/Services from the Android Market, and also ships with the AllSport GPS app as well as mobile hot-spot support Relevant Products/Services.

Subscribers who sign up for an AT&T tethering plan will be able to connect Relevant Products/Services as many as five Wi-Fi-enabled devices to the new smartphone. What's more, Crossover users with qualifying data plans will gain unlimited access to AT&T's Wi-Fi hot-spot network Relevant Products/Services, the company said.

AT&T is clearly pitching the Crossover at price-conscious first-time buyers who have been waiting for smartphone offerings to become more affordable. For this marketing tactic to work, however, carriers still need to encourage families to share Relevant Products/Services data plans as they currently share voice plans, with small add-ons for each family member, Pierce observed.

"I don't think a surge in smartphone purchases necessarily means that 3G/4G usage will climb in lockstep," Pierce said. "Many parents limit the range of applications available to their children -- and thus also limit their usage of mobile data services."

A Strategic Move

The Crossover's low introductory price suggests AT&T is subsidizing the new smartphone for a strategic reason. Pierce speculates the wireless Relevant Products/Services carrier's goal may be to attract consumers who would naturally gravitate toward T-Mobile. If successful, she said, this could help AT&T accomplish two things.

"On a superficial level, it could appear to take some of the wind out of the sails of merger opponents who say AT&T will kill off -- versus continue to sell -- low-price offers," Pierce explained. "If the merger doesn't go through, AT&T has acquired more share," she said, with T-Mobile emerging as a weaker player with "an even smaller share" of the U.S. mobile market.

In the global market, low-cost cell-phone shipments are expected to remain the dominant force for years to come -- especially in emerging markets where standard mobile phones with basic texting capabilities are available in the $20 to $25 price range.

"For a variety of reasons, U.S. smartphone/mobile data-usage trends play out in just a few countries," Pierce said. "Most countries won't be emulating these trends anytime soon."