Apple plays mass market game with Leap iPhone

When Apple launched the iPhone 4S last year, it intensified its shift away from exclusivity, and towards the mass market. The 4S greatly expanded its distribution, especially in the US, where the handset had retained some elite status. Since last fall, the iPhone has appeared at tier two carriers, and now in its first US prepaid plan, at Leap Wireless.

Apple is effectively creating a two-tiered iPhone offering - or will do when it debuts the next model, which will support LTE and is expected to be a far bigger upgrade than the previous two iPhones. It may well signal a return to a more elitist approach, offering the product as a premium item with a limited number of carriers, while the 4S will bring in the market share numbers, especially in emerging economies. Some analysts believe Apple will actually continue to upgrade the 4S on a parallel track aimed at mass market users - others just that it will ensure last year's models get increasingly affordable.

A hint of that strategy may well be seen in the deal with Leap, and a reported agreement to sell a prepaid iPhone via Sprint's Boost Mobile brand. Of course, in other countries the iPhone already lost its elite status and has been offered with pay-as-you-go deals by many operators. Indeed, success in markets like India, which are almost entirely prepaid, would be impossible without that shift of focus. But in the US, prepaid remains a less common option than in most other areas, despite a sharp increase in its usage during the recession, and the iPhone has retained its high end cachet to a greater extent than elsewhere.

Leap will offer the 16Gbytes iPhone 4S for $499.99 and the 8Gbytes model for $399.99, which is definitely at the high end of the prepaid segment. The handsets will go on sale in late June, and according to TechnoBuffalo, they will arrive at Boost Mobile in September. Sprint made a major commitment to iPhone sales last year, but it is not clear whether Boost units would fall within that deal. If so, it would at least offset some of the hefty subsidies Sprint pays for the contract iPhones, which have been heavily criticized. A Boost launch would tie into Sprint's plan to start moving the prepaid users off its iDEN network, which it is shutting down over the next year, and onto CDMA.

Today's flurry of prepaid iPhone news takes the iPhone, once the province of the tech elite on a single carrier, to new proletariat levels that began when Apple began offering the iPhone 4S on three carriers, not just its former monolith of AT&T.

It will be important for Apple to get back the 'cool factor' when it launches iPhone 5. That is clearly lost for the 4S, and Apple's cachet relies on the iPad. That will increase the tendency of carriers to resist Apple's high prices and subsidies, and make a high impact - and more selectively distributed - iPhone 4 an essential to maintain brand power. As Roger Chen of CNet writes: "There are real implications for the carriers. What was a boon to AT&T as an exclusive has become a heavy financial burden for nearly all of the carriers. The iPhone is no longer a way for a carrier to stand out; it's become an expensive must-have. The iPhone also benefited over the past few years because there were few comparably cool products on the market. That's changing ... All of those phones, which feature fresh designs and colors, will turn some heads. Can you still say the same about the iPhone any more? Probably not."

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