A Sinking Feeling Down in San Antone?

Posted by: Peter Burrows on September 05

For the boys down at AT&T, Apple’s iPhone partner, there was plenty not to like about Steve Jobs’ many announcements today. Here’s a few:

Hope you enjoyed those Ringtone profits — The days of fleecing folks for $2.49 for a snippet of song may now be numbered. Apple will let you take any part of an actual song for $.99 (so long as you’ve also spent the $.99 to buy the original from iTunes). As far as I know, the carrier gets nothing. It’s not just the lost cash profits that will hurt. To the extent that the industry has to follow Apple’s lead—highly likely—then AT&T and its carrier pals will no longer be able to point so much to this silly market as proof that they can build profitable new consumer service offerings on top of their basic business of selling connections. If ever there was a market just waiting for disruption by the likes of Apple, this was it.

Hello, Wifi — When the iPhone launched, Steve Jobs made a good show of talking up the merits of Ma Bell and its network. But today’s wireless download services work only with WiFi, not with AT&T’s or any other cellular carriers network. Jobs even went out of his way during his presentation to point out that WiFi is not only faster than the 2.5G network iPhone users now get from AT&T, but faster than 3G networks as well. Now, spin things forward to a future of ubiquitous WiMax connectivity, delivered in large part courtesy of Apple’s friends at Intel. If that day ever arrives, is there any doubt where Apple will focus its efforts?

The iPod touch — It’s a compelling product in many ways—but the most obvious target market are folks who would love to have an iPhone but just don’t want the phone part. That means there will be some people that might have switched to AT&T to get an iPhone, anyway—but now don’t have to.

A plug for T-Mobile — AT&T’s name didn’t come up all day today, but there was a mention of its rival carrier T-Mobile—which provides the WiFi access to Starbucks.

If there was any good news from AT&T’s perspective, it’s that Apple’s price cut on the iPhone will surely pressure other smart phone makers to follow suit—and cheaper smart phones means more ability to sell higher-value services. As Jupiter’s Michael Gartenberg joked, “the Nokia95 now costs as much as two iPhones. Nokia may have to think about making an adjustment there!” (Actually, it’s not quite double. Two iPhones will set you back $800, while an N95 costs $750, according to Nokia’s website).

So where does the Apple-AT&T partnership go from here? I’m not saying it will be the disaster for AT&T that the Rokr relationship was for Motorola. But if this tie-up were a stock, I wouldn’t be investing in it.

UPDATE: Thanks to readers who pointed out my mistake in typing out Gartenberg’s quote, which I’ve fixed. Mike was saying that you can now get two iPhones for the price of one N95—not the other way around.

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