Business Week wrote an article on Why AT&T May Deep-Discount the iPhone? This is one of the best article that accurately depicted the iPhone-Smartphone-Apple-AT&T relationship I've seen in a long time. The article has correctly captured the market today, where increasingly, we are seeing competing manufacturers trying to come up with a product to catch-up to iPhone. The article suggests that if AT&T doesn't react and quickly lock-in more new customers, its just a matter of time before Verizon, T-Mobile and Sprint end up with another product that is comparable (if not already) which will be able to attract more customers back their way.
I have mixed feelings toward the said "competitor" phones in the article. While I agree some of the upcoming models are looking very attractive, none will likely offer the same visual-interactive-ease-of-use experience as the iPhone. If anyone has taken a picture with an iPhone cam and sent that exact image via email using the built-in Gmail application will know that this interaction is about as close to a desktop experience as can be (and the graphics engine is just amazing). I am wondering if the iPhone is so many years ahead of its competition that AT&T may be subsidizing just because it is a proven business model to lock in new customers (and not because of anything else).