The iPhone Is Out - Again

N/A • 09 Jun 2008 • EDITORIAL

Apple fans are high fiving each other yet again over the second coming of iPhone. Be warned, you may feel compelled to join them in celebrating it as if it were the second coming of the messiah! Today, Mr. Bill Gates announced the new iPhone at the Apple Dev.... Wait! Sorry! I mean Steve Jobs. It is getting harder to tell those two apart these days. I’m pretty sure one of them wears a turtleneck and is so smug that I end up wanting to punch my computer screen every time I watch one of his sermons.

Back to the plot... Apple has put the mobile industry in a frenzy again announcing their sleek new 3G iPhone one year after the unprecedented fanfare of the original iPhone launch. Other than a few minor changes to the industrial design, the new device looks pretty much identical to the original. Under the hood, the new device plugs some (only some) of the holes in the original iPhone. The biggest upgrade is the 3G capability allowing the new iPhone improved download speeds and simultaneous data and voice sessions. Follow that with GPS capability allowing location aware applications to more accurately pinpoint the device’s location.

Another major change is in the price which is initially set at $199 and conjoined with a 24 month AT&T contract. After trying its own pricing model and activation process, Apple has more or less reverted to the industry’s standard subsidy model and activation process in conjunction with the carriers. This has much to do with the 20% of iPhones that were purchased last year but never activated on the AT&T network. Having given its weight in blood to Apple in order to secure the initial iPhone exclusive, AT&T was less than pleased to see 1 in 5 devices going straight to the grey market.

Still missing are MMS, cut and paste, a removable battery, removable storage (SD card), and a keyboard. If Apple is to go the distance in the mobile phone industry, they will need offerings to fill these gaps. These are deal breakers for many consumers and loyal fans are fickle and therefore cannot be relied on for the long term.

In conjunction with the new iPhone, Apple will also roll out an application download service called the AppStore. The service will be part of iTunes and will work very much the same way. You browse through a set of Apple certified applications and purchase the ones you like and sync them to your iPhone. This may sound fairly novel but it has been around in a number of different incarnations from mobile carriers and off-deck providers. It has been integral to any Brew phone for some time. Apple has now delivered it to their base of loyal fans and tied it to the ubiquity of iTunes. This is both good and bad. Good in that it will increase awareness to downloading applications from somewhere other than a carrier. Bad in that it is essentially exchanging the existing walled garden of the carrier with another from Apple. (A walled garden in the context of mobile applications is a set of restrictions and lack of open/neutral access typically imposed by a carrier.) Apple will not let any application into its catalog. If you don’t make it in, you can’t get onto the iPhone. It’s a closed system and the only way to the finish line happens to go straight through Apple’s pocket.

As well, Apple isn’t creating the AppStore to support the mobile applications industry. They’re doing it to support iPhone sales. To get an idea of what I mean, take a look at how Apple deals with the music industry. Apple and the music industry have a bitter sweet relationship. Apple doesn’t care if there is almost zero profit in the sale of music on iTunes. They only care about the sale of iPods. Providing the music is only a means to sell more iPods. So Apple’s answer is to make sure the consumer spends most of his money on the iPod and very little on the music. Good for the consumer in the short term and even better for Apple but bad for the health of the industry. Apple will try to do the same to the mobile applications industry. Apple has no interest in supporting the mobile applications industry other than to meet its own ends. Be warned those who become too dependent on Apple for mobile revenue.

Back to the iPhone, I’ve always been a fan of Apple ergonomics. They set a new benchmark for elegant and intuitive design. The company clearly spends a tremendous amount of time and resources refining the quality of the user experience. The mobile industry has a lot to learn from Apple in this area. As a whole, the mobile industry will continue to benefit from the wake up call that Apple has dropped on us. Functionally, iPhone has been an evolutionary step in the right direction. The fans need to settle down and stop calling it a revolution. As disruptive as the iPhone has been, it could do a lot more. And it has competition. The Blackberry continues to transform into a major consumer device. They have already benefited from the iPhone as result of the increased awareness and desire for smartphones. It will be interesting to see how well Blackberry does in the youth market given it doesn’t have the loyal fan base that Apple does.

 

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