iPhone price, contract may deter buyers, survey says

The price of Apple Inc.'s iPhone and the cost of switching to AT&T Inc.'s wireless service may suppress demand for the device, according to a survey by research firm IDC.

While about 60 percent of those surveyed were interested in the iPhone, a combination mobile phone and iPod music player, only 10 percent said they may buy one at full price when it goes on sale June 29, according to a survey of 456 people by IDC.

Apple Chief Executive Officer Steve Jobs has said the iPhone will become Apple's third major business, along with the Macintosh computer and iPod. Two versions of the device, costing $499 and $599, will be offered exclusively for use on AT&T's network under a two-year contract.

"While the allure of owning the next 'cool' device will undoubtedly have early adopters — and die-hard Apple fans — queuing up to get the iPhone regardless of the price, the associated costs of ownership will persuade many others into a 'wait and see' position," Shiv Bakhshi, an IDC researcher, said in a report issued Tuesday.

About 18 percent of respondents said they would buy the iPhone if it were priced under $299, and 17 percent said they would buy one if it were offered by their current mobile service provider, IDC said.

Shares of Apple fell $1.43, or 1.1 percent, to $123.66 at 4 p.m. New York time in Nasdaq Stock Market trading. The stock has gained 46 percent this year.

When he first announced the product in January, Apple's Jobs, 52, said the company plans to sell 10 million iPhones in 2008, grabbing 1 percent of the worldwide market for mobile phones.

The AT&T network that the iPhone will connect to may also affect the product's success, according to IDC analyst Chris Hazelton. The iPhone will be capable of connecting to AT&T's Edge network, which doesn't carry data as fast as so-called third- generation systems.

"It will not be the fastest that's available," Hazelton said in a telephone interview. "The initial success is close to given. But the 2008 goal? This market is very complicated."

In a speech Tuesday in Chicago, AT&T CEO Randall Stephenson said 40 percent of the more than 1 million people who requested information on the iPhone weren't current AT&T mobile subscribers. San Antonio-based AT&T could lure customers away from Verizon Wireless and Sprint Nextel Corp., according to analysts such as Michael McCormack of Bear Stearns Cos.

Hazelton said the IDC survey is a good indicator of interest in the device because it was conducted through a Web site used by consumers who are shopping for handsets with advanced features.

"We're looking forward to shipping iPhone on June 29," Apple spokeswoman Natalie Kerris said in an interview. "We can't wait until customers get their hands on it and experience what a revolutionary product it is."