Are you excited about Apple 3G iPhone and its drastic price cut? Hold your breath and you may end up paying more in long term.

Apple 3G iPhone’s price reduction may be a tempting offer but beneath of this entire buzz lays a great marketing strategy. Benefits of this price cut may not pass on to the end consumer. Apple is in negotiation with wireless service provider like AT&T, Verizon etc to sell their iPhone to consumer. Steve Jobs offers discount as large as $199 to Telecom companies per hand set.  Tel-cos on the other hand deal with end consumer and offer a subsidize price. A first look may reveal generous corporate at work. Are they philanthropic?

Apple offers low price to Telecom service providers because they want to increase their iPhone sales. The biggest barrier for iPhone low market share is its high cost.  iPhone still not the largest selling Smartphone in US. Research in Motion’s BlackBerry still leads the PDA pack with 44.5% market share in the first quarter of 2008 compared to iPhone’s 19.2%, as per the IDC Mobile Technology and Trends report.

Telecom services providers are also not generaous.They offer a low price but costlier services. You buy cheap iPhone and pay more to use it. According to report, in UK you have to pay GBP 3 for each MB data download in your iPhone. Simple arithmetic will reveal that watching the average BBC iPlayer programme, which is about 300Mb in size, would cost £900.

Therefore the end beneficiaries are Apple Inc, AT &T and other TELCOs .iPhone is a technological marvel and Telecom companies have their marketing strategy in place and end losers are consumers like you and me, as expected!