More More MORE Speculation On The iPhone

Posted by: Arik Hesseldahl on November 16

Now here’s an interesting iPhone rumor. Om Malik of Gigaom.com is speculating the Apple might sell the phone unlocked, as in, beholden to no network in particular. Did I not read somewhere that Apple had done some sort of exclusivity deal with Cingular Wireless concerning this phone?
Such a move, he argues might “save the handset business” especially in the U.S., where carriers have far too much say over what features a phone can have, because it is the service provider who sells, the phone in it stores.

Well maybe “sell” isn’t the right word. The service providers subsidize the upfront cost of the phone in exchange for your commitment to stick to a service contract for a year or two. And if the carrier doesn’t want a feature, the phone’s manufacturer usually has to do what its told or risk losing the sale.

This fact really annoyed me a few years ago when I first got a Motorola V710 phone, which was technically capable of many fancy Bluetooth features — like syncing with a Mac via iSync for instance — but many of those features had been turned off at the demand of the wireless carrier who offered it, which in this case happened to be Verizon Wireless. Eventually consumer outcry over the deliberate hobbling of the phones functionality caused Verizon to see the light. But by the time I got around to updating the firmware on my phone, it was more or less time to upgrade again.

One issue that would certainly annoy the carriers: Music downloads. Motorola’s ROKR phone was a side-loader, meaning you’d load your music onto the device via a physical connection and not an over-the-air toll-bearing download. The iPhone, I would imagine would be a side-loader too, just like its cousin the iPod. I can imagine wireless carriers finding this very irritating, seeing how they’ve invested billions in wireless data networks that aren’t getting quite the volume of use they should be and want people to download music over their networks.

In fact they could want wireless downloading so badly they could conceivably tell Jobs and Apple to take their pretty little phone and go jump in a lake. Selling the phone unlocked could be his response, and could explain why it’s taken this phone so long to come to market.

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Reader Comments

Mark U.

November 16, 2006 07:17 PM

I would argue that wireless data networks are getting exactly the volume of use they "should" be, because -- as with almost every cellular offering of any type, across the board -- the providers continue to badly overestimate the value proposition of their data products. A decent data plan is absurdly expensive. Who wants to pay a fortune for a product you can't use everywhere, will have reliability issues to boot, and delivers largely uncompelling and frequently gimmicky capability to a device that's probably got compromises of its own? The services are just too expensive for most anyone to sign up for on a lark.

They have more potential for use with laptops (either by using the cell phone as a modem or via a card), but even then, with the preponderance of free or inexpensive pay-by-the-drink wi-fi now, that utility is also limited.

Even basic voice plans are ridiculously expensive compared to their fixed (wired) counterparts, but the providers can get away with that -- for now -- because the phone service itself is unquestionably useful, and convenient. But I think data services are just going to have to get cheaper -- a lot cheaper -- for them to have a chance of taking off.

mark

November 16, 2006 10:59 PM

As I commented on GigaOm, Apple seems intent to take the Internet model to both the TV/cable and cellular carrier industries. SJ has been quoted calling the cellular carriers "orifices" and referring to the cable TV industry in likewise manner (though without the language).

Apple is content to let the carriers collect basic fees for transporting media content, and they can even charge per unit (i.e., minutes, Megs up/down) - Apple doesn't care about that; it's not in the transport industry. But Apple will fight to allow its hardware devices and media content sales/services to not be locked into any limited transport system.

Apple generates profit on Apple hardware, and little but some profit on Apple services (iTS, .Mac, Mac software) that it uses to drive sales of the hardware. Remember that Apple trademarked MobileMe a year ago. Nobody seems to really know what it is. This could be an MVNO. But I think its more likely some form of Apple subscription, akin to .Mac, where you buy Apple online storage for your contacts/ bookmarks, documents/Web pages, even media library, and services like iChat video for the iPhone (which I think will actually be called an iPod "name"). In this way, MobileMe will even drive sales of Macs (for iChat, iWeb, etc).

Why will some carriers play? Apple will persuade the cellular carriers that people who use the Apple device will be likely to pay for unlimited or very high minute plans, and more importantly, the premium for 3G service. If nobody wants that revenue because they prefer their own walled garden approach, then Apple could go the MVNO route.

Why will people pay for an iPod phone? Because it is an enhanced iPod. Would people pay $50 more for a 2GB iPod nano, or $199, if it had unlocked phone, side-downloading camera, microphone (and recording), video iChat, online personal iTunes library access capabilities? More than probably; it'll seem like a great bargain to many. (Of course, you'll also need to pay for 3G cell service and MobileMe subscription to get full value.)

Apple's iTS continues to expand its competition with cable/dsl on-demand and pay-per-view with the coming iTV. In the same way, Apple will now move on cellular. My big fear is that Apple is shaking too many new trees all at once: music labels, radio, TV studios, cable TV, movie studios, and now cellular. And all the while still trying to make headway in the computer hardware, OS, and software industries.

limeybloke

November 18, 2006 07:17 AM

In the UK at least the carriers are getting into the provision of internet services for your home either through the phone or cable and all of the mobile services are offering music download stores, but very few people are using them.
The '3' network is trying to encourage more mobile data use by partnering with skype and others and they all keep coming out with gimmicks to try to get you to log on.

But nobody does.

None of them want to connect the dots.

The reason iTunes succeeded was because it offered simple reasonably priced downloads with (relatively) few restrictions.

Hopefully Steve can make them see the light i.e ;

Offer a single contract that gives you UNLIMITED internet use for your home AND on your mobile for a REASONABLE price and let the people use iTunes, Skype etc without piss-taking data charges and virtually everyone will sign up.

Heck they could offer premium speeds, syncing services, concierge services etc to the business users to get more money if they wanted.

Surely it would be better for them if just about everybody paid them some money than only a very few paying them a lot.

Sadly as usual they're just being greedy.

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A blog on the daily doings of Apple and the many companies in its orbit, with insight and analysis by two longtime Apple-watchers BusinessWeek Senior Writer Peter Burrows and BusinessWeek.com Senior Technology Writer Arik Hesseldahl.

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