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Cingular: Apple iPhone Deal ‘Unique’

Las Vegas — Apple is calling the distribution shots for its long-awaited iPhone and setting the price points, and the iPod maker developed every aspect of the user interface except for visual voicemail.

That’s according to Cingular Wireless national distribution president Glen Lurie, who spoke during a Q&A session with reporters during International CES.

The phone is “locked and optimized to our network,” he said, but “distribution is owned by Apple.” When launched in June, the phone will be available only through Apple’s 150 company-owned stores, Apple’s web site, 2,100 Cingular-branded stores, Cingular’s web site, and the carrier’s direct-mail operation, Lurie said. After that, it will be up to Apple to expand distribution to major consumer electronics retailers, he continued.

In addition, he said, “it’s an iPod, so Apple sets the price,” and because it’s an iPod, only the Apple name will appear on the iPhone’s case. The Cingular, AT&T or joint Cingular/AT&T brand names, however, will appear on the device’s display when the phone is turned on and perhaps at all times when the phone’s radio is on, he added.

In return, Cingular will add a strong product to its selection of music phones, garner additional subscribers attracted to the iPod experience, and boost data-service revenues and average revenue per customer because the phone “makes SMS, e-mail and Web browsing easy,” he said. “We expect to grow our business.”

Lurie described the distribution deal as “unique” in the cellular industry and stressed that it is not an MVNO (mobile virtual network operator) arrangement in which Apple buys airtime wholesale and sells phones and service to end users, thus owning the customer. Cingular customer service reps will be cross-trained in answering Apple and Cingular questions, but when questions get “too detailed,” customers will be handed off to Apple customer service, “and vice versa,” he noted.

The distribution/product deal is a “multiyear exclusive” for any future iPhone models and for any U.S. carrier. Apple, however, is free to strike distribution deals with carriers outside the United States, he said.

The phone’s $499 price for a 4GB version and $599 for the 8GB version are with a two-year contract. Existing Cingular subscribers would have to extend their contract by two years to get the phone, Lurie said without revealing whether the prices are subsidized by the carrier. Some amount of subsidization seems likely, however, given that Cingular’s highest priced phone with two-year contract is the recently unveiled Palm Treo 750 at $399.

Despite the high end-user prices, Lurie said he’s not concerned that the prices are too high. The iPhone will combine three devices that many people already carry: a cellular phone, an e-mail-oriented smartphone, and an MP3 player. A 4GB iPod Nano is $199, he pointed out, and a smartphone with capabilities less than the iPhone sell for $150-$200, so $499 for a 4GB iPhone is “absolutely priced right,” he said.

At launch, the phone will be equipped with Wi-Fi and high-speed EDGE cellular data service, but the phone will not access the iTunes music store to download songs or video over the air. That capability, however, is technically feasible, Lurie noted.