The internet is up in arms about iPhone 5C’s high price without a contract ($549 and $649). The knee jerk reaction is that the ‘C’ was supposed to be the 'cheap’ phone. But if its still > $500 without a contract, doesn’t that diminish the whole reason for its existence?

Wrong.

Lets come back to the with contract pricing, which is $99 and $199. Previously, Apple just used to discount the previous year’s models at these lower price points. This time however, they have completely discontinued iPhone 5. And that is the key to understanding the purpose of 5C.

The purpose of iPhone 5C

Lets look at the options for anyone looking to buy a smartphone for a price lower than that of the 5S.

Without the 5C as a current year model:

  1. Buy an outdated, last year model (iPhone 5).

  2. Buy a new Android phone.

With the 5C, this changes to:

  1. Buy a (comparatively cheaper) new iPhone.

  2. Buy a new Android phone.

And that completely changes the equation. No longer are you thinking of buying an old iphone vs a new Android. Your choices are now buying a cheaper iPhone vs a cheaper Android.

Guess which one will win?