More Handset Subsidies Because of New iPhone Pricing

Among the likely ramifications of the new 3G iPhone pricing are competitive responses from other carriers.

Wireless service providers are likely to increase their own mobile handset subsidies, boost marketing budgets, and reduce prices on some services, analysts and industry insiders say—all likely to mean slimmer margins, reports Olga Kharif at Business Week.

That would be a directional shift. In the past year, U.S. wireless carriers had scaled back on the subsidies that resulted in lower handset prices in exchange for long-term wireless service contracts. But now that AT&T is boosting its subsidy of the iPhone, chances are other operators will follow suit, especially on iPhone copycats.