BBC NEWS | Technology | Apple iPhone warning proves true

[Andrew Robinson]

On 10/1/07, Peter Korsten <peter at severity-one.com> wrote:
>
> Andrew Robinson schreef:
>
> > The real problem here is that the mobile phone market is built on an
> > insane and obviously doomed pricing model.
>
> Which has nevertheless worked quite well over the last 15 years, at
> least from the providers' point of view.


Exactly... but the end is nigh. I think the end date of the first 2-year
iPhone US contracts and the first 18 month European iPhone contracts
matching can't be a coincidence. The only reason I can think of that they
match so closely is that Apple have that date pencilled in for turning on
VOIP.

> It's an unavoidable fact that VOIP will eventually turn mobile access
> > into a broadband-like commodity, the question is just when it will
> happen.
>
> True, but who is going to provide that broadband to you? There's no such
> thing as free network access. And a mobile service is more than just
> having access to a network; it's having a phone number as well, for
> example. Or switching, not to be sniffed at either.


Oh, definitely. Mobile phone companies will still do what they currently do,
and phones will still have a sim-card that grants paid access to an existing
network. It's just the pricing structure that will change to a monthly flat
rate fee for everything, with different definitions of 'unlimited' and
different speeds (for broadband's range of dialup/adsl/adsl2 we'll have a
mobile equivalent edge/3g/wimax or similar.)

> I see it like this: Apple gets a kickback from the phone companies which

> > includes a percentce of call revenue. Why? To bribe Apple not to install
> > the inevitable iVOIP app that will kill the phone companies stone dead,
> > and to give Apple has an incentive to stop anyone else porting Skype /
> > unlocking etc.
>
> Ah, here's were you are mistaken. Phone companies already know that
> everything will be VoIP in the future, and are clearly steering towards
> it.
>
> For example, I work at a mobile operator and we have a WiMax offering.
> We have nomadicity, but not yet mobility, which we'll get in a next
> release of the specification.
>
> So you can already run VoIP software on a mobile phone at the upper end
> of the market, and it won't be long until you get WiMax in hand-held
> devices.
>
> Again, who is going to provide you with the network? Are you going to
> spend several hours a week setting up peering agreements with your
> friends and their wi-fi connections? What if you move out of range?
>
> A mobile company offers you a service whereby you are always reachable
> if you want to, without having to worry about setting up this or that.


Indeed - I'm not disagreeing with any of this, I'm just saying the pricing
structure has to go if it's going to make sense, and I'm also predicting
that the device that precipitates the change is going to the the iPhone,
when people wake up one day and discover the iVoip app that Apple have
dropped onto the existing installed base.

> So, Apple didn't go out of their way to make v1.1.1 of the iPhone
> > software compatible with third party firmware alterations. Surprise
> > surprise! If I'd hacked the firmware in my MacPro, I'd hardly expect
> > Leopard to work out of the box with it, so why are people expecting
> > iPhone to be different?
>
> Because Apple is a cool and non-evil company, who would never do such a
> thing?


Strikes me as a strange assumption to make, especially given that a major
reason OSX isn't a crufty mess of driver incompatibilites as Windows
arguably could be described as is that Apple have always kept tight reign on
the hardware/firmware that their stuff runs on.

> It's significant to note that the US iPhone has a 2 year fixed contract
> > and the European ones (released about 6 months later) have an 18 month
> > contract. I'm guessing Apple has iVOIP and cross network compatibility
> > ready to turn on  in 19 months, once they have the a big enough market
> > share to be unstoppable, and both sides know this.
>
> I think you vastly over-estimate Apple and their knowledge of the
> European mobile market. The iPhone is a very high-end device (at least
> price-wise), so it will never be more than a niche product, if you
> consider that penetration in some countries is way over 100%. For
> example, in Luxembourg it's 164%!


The yes, the iPhone is an expensive phone, but it's not unusually expensive
for a mass-market mobile device. It's price is consistent with the launch
price of the PSP, and with other high-end ipods, which sell very well. At
?269 it's not cheap, but it's not prohibitively expensive, and Apple's
original statement of wanting a 1% market share worldwide in 12 months is
looking very conservative, especially in the light of the recent $200 price
cut stateside... and that's before the persistent rumours of an iPhone nano
are factored in. The iPhone is pricey because it's a 8Gb iPod, and the
market will understand that.

164% penetration strikes me as meaningless. I own 3 mobile phones... I
sony-ericsson that's dying, 1 nokia communicator that I keep for nostalgia's
sake (battery life dropped to 15 mins standby, replacement battery price
quoted at the time was 350% of the price of the phone) and 1 even more
ancient Philips (I think) one that's at the back of a drawer. So, I'm at
300% penetration, and I'll still be in the iPhone queue on day 1.

Add to that the by and large lower average income in Europe, and you're
> looking at an very different market. Apple has not sufficiently realised
> this, nor the fact that Europe is still very much a patchwork of
> different operators and regulations. For example, the current iPhone
> contract would be illegal in Belgium.


I think his is in Apple's favour. Apple can't drop the lock-in without
angering AT&T in the US... but they can simply add new markets for the
iPhone until some government somewhere forces network compatibility. This
way AT&T can't kick up a fuss when the US market switches to buying unlocked
Belgian iPhones.

The impression that I and several of my colleagues have, is that the
> iPhone is an over-hyped product that fails to deliver when it comes to
> technical features. Putting a ?400 (at a guess) phone in the market and
> it won't even have 3G, that's plain daft.


Rightly or wrongly, 3G is viewed as a joke by the public here in the UK.
It's tainted with association to the network called 3, and it's hopelessly
blocky videophones that didn't take off. I'm personally undecided on it.
I'll wait to see how edge+wifi works in the areas I will be using my
iPhone... but given that a usable mobile web browser is a necessity before I
will make good use of any sort of data transfer service except sms, and only
the iPhone fits my defitinion of a usable web browser, the choice for me is
iPhone now or the inevitable iPhone with 3G when Apple launches it - still a
win/win for Apple.

> I'll have an unlocked iPhone in 19 months, if not sooner. I'll put up
> > with a locked one for a bit to get there.
>
> Good luck to you, but there's a Dutch saying about cats and trees, and
> I'm going to wait and see what happens. I'm not at all confident that
> the iPhone will be anywhere near as much a success as the iPod.


Apple are aiming for a 1% market share for the iPhone in 2008. That's a long
way short of the 50%+ they have in the large-capacity portable media player
market with the iPod, so nobdy expects iPod-like dominance, that's not a
good yardstick to measure it by.

I'm not aware of the cats and tree saying, but I can't see Apple bricking
iPhones unless you renew with exclusive providers, that really is a
different ballgame to re-locking (and not as news reports suggested
bricking)  phones when giving away a free, optional software update. Apple
have always said that AT&T have a 2-year exclusive deal, not a rolling
exclusive deal.

- Peter
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