David Prosser: No cheap stocking filler from Orange

The future may be bright, but it's not going to be any cheaper. When Orange last month won the right to begin selling the iPhone – following an extended period of exclusivity for O2 – hopes were raised of a pre-Christmas price war. But its announcement yesterday of the tariffs it will offer when it finally begins selling Apple's blockbuster phone next week has rather pricked that bubble.

In fact, the savings Orange is offering are in many cases so small as to be insignificant – just 19p over two years on the top-of-the-range model, for example (which isn't much cop on a total price of £175). On the less fancy iPhones, Orange is a little more price competitive, but the savings are still nothing to write home about. It intends, instead, to compete on the quality of the 3G network coverage it offers compared to 02.

From Orange's perspective, this strategy makes great sense. Those of its own customers who always wanted an iPhone but didn't want to move to O2 will now sign up. In addition, many customers of O2 may jump ship – there has been a growing clamour about problems with network coverage there, so there will be iPhone users tempted to give Orange a try in hope of an improved experience.

The challenge for the company will be to sew up as much of the market as possible in the run-up to Christmas. For both Orange and O2 know that their great rival Vodafone will also have the iPhone from the new year onwards (in time, Three will get it too). At that stage, genuine competition on price becomes much more likely, particularly if Vodafone goes for the mass market, rather than simply smart phone users who are prepared to pay a premium for their handsets.