The IP Development Network Blog

It's easy to be jealous of Apple. They are in your face and they are successful. You see their little white earphones on fellow commuters in the morning, you hear them brashly disparaging competing products, and you read about them. Not just here, but all over the web. iPhone Mania is here and all for a product only available on AT&T's network in the US.

Blogger generated content, most of it too. The PR department doesn't have to do a lot - just a few tidbits to the gadget freak bloggers out there and they're away. Sit back and watch the hype build. Unlike many gadgets though, their products break into the mainstream because Apple has that intangible - coolness.

The company was born on April Fools day in 1976... A child-prodigy, they took on the bullies in the playground with the Apple Lisa and got a whipping. Undeterred, they bravely came back for more, stronger and better looking with the Mac. Suddenly they were the teenager everyone wanted to be friends with (and more).

Whether it was hormones, or just being a stroppy teenager, the company went off the rails in their late teens until they hit a golden streak in their 20s with a change of tack, the iPod. Now, having just turned 31 and backed by AT&T and Google, the company is ready to take on the world (starting with a small corner of the United States).

The ups and downs of the Apple story, together with the visual brilliance of their product design make people want what they have to offer. Their exclusive with AT&T is for two years during which time expect to see significant iPhone driven switching.

What is happening is that the US mobile phone market is, perhaps for the first time, becoming style concious. Things have always been thus in some markets... I remember sitting in a cafe in Milan one evening in 1998 watching as the Italians strolled past, Nokia held casually in position as they stalked up and down the strip. Phones have always been a fashion accessory in Italy, but in the US, they evolved from pagers and were for years worn on belt-clips like an old fashioned gunslinger. At least the iPhone puts that to bed.

For sure, the AT&T launch will be a success in the US. Pre-orders and waiting lists show that to be a slam dunk as long as the yet-to-be-announced pricing plans don't get in the way. Are they hiding something by not publishing them yet? Of course they are. They don't want the details to get in the way of a good story.

Then there is the question of where next for the iPhone. Feature-wise, the application side has been thrown out to the open source world with the announcement of support for web 2.0. This will undoubtedly work for an aggregator like Apple who can keep the best and leave the rest by low cost trial and error. Oh yes, and there's also the tie up with YouTube on the iPhone.

This whole piece is a touch peculiar to me. On the one side you have a service that needs high bandwidth and on the other a network that is increasingly using 3G, and yet the iPhone device stitching them together is boasting EDGE, with 40 - 200kbps connectivity when the network is capable of so much more...? Of course the iPhone has a WiFi connection, so YouTube clips can still be downloaded over broadband, but its not ideal. Who's not ready? Apple or AT&T?

The irony of the Google -> Apple -> AT&T link up is surely not lost on those who watched the Network Neutrality debates. Has Google vs AT&T become Google + AT&T? Do you think that YouTube is going to get the same best efforts wireless connection to the iPhone or will we see QoS used to make sure that Google gets to its public "best on AT&T"? Google using priority routes..? Never.

Which brings me onto the other piece of "where next for the iPhone?" Starting with a small corner of the United States is a strategically good move. It gives the perception of scarcity, adding to the coolness of it all for those on other networks and in other countries. It also gives Apple a controlled ramp up minimising the impact of any critical post launch issues faced. It may also have been a strategically necessary move for both parties too. It is understood that the AT&T network integration required was not trivial but was driven by AT&T's desperation for an icon to drive its rebirth.

But it is only a start. It is this ability to start big and get bigger that gives Apple much of its kudos. They have set expectations high in the past and have exceeded them. For different reasons, regardless of whether you are a new entrant or an established network operator you have a decision to make about how to approach Apple. They don't need you, but you might need them...

Of course, there are new entrants in many markets that would bite Apple's hand off for the chance of an exclusive in their territories, and that is the threat to all established operators worldwide. Here is a device, which in your competitors exclusive hands, could suck you dry if you let it. You'll no doubt see an emphasis targeting the not so unique touch screen USP with devices like the latest UTC or Prada phones. There are plenty of other devices which work the same way, and for them, the iPhone is a probably good thing because of the knock on impact. For the operator however, having the real thing on your books might be precious.

Its a dog eat dog world, right? Will operators stick to the "lower subsidy" policy, or will they go for broke and launch another device subsidy price war, either to sell or beat whoever is selling the iPhone? Apple don't care, they still get paid, as will the makers of other smart(er) touch screen phones. Will operators never learn...?

Or is it that they have no choice. Your money or your life? Certainly, in order to prevent an iPhone led exodus onto a competitor's network some pretty drastic sacrifices might be required.

We have seen device led markets, but have we seen anything "game changing" as AT&Ts CEO would have us believe the iPhone is? Has a handset manufacturer ever sailed so close to the wind with its lock in to an exclusive network? Probably not.

But does Apple not also need the operator? They are clearly getting a lot from AT&T!

Will Apple be blown off course as it tries to cross the Atlantic and Pacific Oceans to negotiate the countless treaties it needs to extend its reach? Will it be able to get its network rolled out before the rest of the market catches up? This is Apple's biggest weakness, and crucially is not something it faced with the iPod.

The iPod worked with a USB connection into any internet enabled PC, for anybody who bought one or was given one for a present. The iPhone is not the same. The iPhone is part of a system that requires elements in the network to make it operate as it should. Apple needs to work with the system. Can it do that or does it's coolness genetically predispose Apple to fight the establishment? Will it be coolness or jealously that wins? YouChoose.

Labels: Apple, AT+T, Google, iPhone

# posted by Jeremy Penston @ 6/25/2007 06:25:00 PM

Monday, 25 June 2007

iPhone Mania