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Apple Turning Cell Phone Market Upside Down?
joek writes "This MacRumors analysis puts some of the iPhone/Cingular pieces together and suggests that Apple may be turning the the cell phone market upside down. Everyone assumed that Apple's $499/$599 prices for the iPhone was subsidized by Cingular. But, it appears that Apple is not allowing mobile carriers to subsidize the iPhone. Why? Because when Apple comes out with the Touch iPod, they don't want it compared in price to a discounted/subsidized iPhone. Add to that rumors that Cingular may heavily discount service (but according to a Cingular rep, they will not be giving away service, as previously suggested) to attract Verizon customers. Without kicking in $100-$200 against the price of the phone, Cingular can discount the service as an incentive. Other cell phone manufacturers will certainly be interested in the outcome of this new model."
But anyone with a scanner can tune in and intercept your calls. Amateur license forbids encrypted communication of any kind.
I wonder if I use bold in my signature, people will notice my posts.
And as I should note, We hams use distance of the wave to indicate frequency. 2 Meters is 144-148MHz, and .7 Meters is 420-450 MHz . The reason I specify a distinct band is that our rights only extend in those bands (and not, say 143.8 MHz or 452.1 MHz).
To grasp what rights we ham operators have, look at this PDF CHART to understand the spectrum here in the US.
Without kicking in $100-$200 against the price of the phone, Cingular can discount the service as an incentive.
Okay, everyone who thinks this will happen, raise your hand. Nobody? That's what I thought. Cell phone companies do not base the price of their service on how much it costs them to provide it (including the cost of the phone). Rather, they price their plans purely on how much people are willing to pay. As long as people are willing to pay exorbitant amounts to lock themselves into multi-year contracts, the cell phone companies will continue the practice. And if you're willing to pay $500 for the phone, chances are you'll be willing to pay full price on the plan.
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I never wanted/needed video camera, mp3 player or camera on my phone but I always wanted cheaper service and shorter term contract. I realize that iPhone has all of these things, but I'm hoping that service-discounted business model will succeed and move to other offerings, so we finally can get affordable no-frills phone and basic service for cheap.
That Apple (and Apple phones) would not be contractually (for Apple, anyway)tied to Cingular.
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What makes you think that Cell Phone conversation is safe as well? We just understand that it all is open, whether the laws prevent "listening" or not. Encryption and obfuscation can be cracked, so whats the point. Just dont say things that are inappropriate.
Since the phone is not subsidized, there *should* be no 2 year contract requirement. That would really spur competition among the mobile carriers if people weren't forced to stick around for 2 years under penalty of paying full price for their phone. Of course the fact that some use CDMA and others use GSM complicates this a bit - we need phones that support both for true service portability. In fact, a *smart* carrier would offer either non-subsidized phones at a monthly service price of X, or subsidized phones at a monthly service price of X + Y (where Y basically recaptures the phone discount over the life of the contract).
The more you regulate a company, the worse its products become.
Do you lock your doors at night? Because I can zip through that lock in 2 seconds, and if I can't, you have some mighty nice windows. Therefore, what's the point? In fact, might as well remove the door altogether.
I wonder if I use bold in my signature, people will notice my posts.
If Cingular cannot subsidize the phone, then why did Apple give them the exclusive and require that all customers sign two year contracts? Usually the two year contract requirement is to pay back the subsidy... without the subsidy, there's usually no incentive to sign a contract. If that's the case, I think Apple botched this one for the customer.
--Aaron Greenberg
Because it's more or less guaranteed that somebody is going to be listening to your QSO on the radio, but less likely (not impossible) for them to listen to the cell phone conversation. Plus, 70cm (with typical power) is going to transmit a bit farther than a cell phone at a higher frequency and tens or hundreds of milliwatts.
I think phone patches are cool, though I've never used one (I am a ham). But I don't see them as any sort of replacement for mobile phones. Plus, you can't use amateur frequencies to run your business, so any type of commercial communication is right out. No profanity (on both sides), no commercial communications, absolutely no privacy whatsoever, half duplex, and you're still going to need a phone line at the other end to communicate on the PSTN. No, not a replacement.
Unlock all the phones in your family. T-Mobile and Cingular are both GSM so all their phones will work with the new service. Problem solved.
"Nature doesn't care how smart you are. You can still be wrong." - Richard Feynman
Add to that the cost of a tower on the end with the repeater or phone patch (since it's going to need to be high enough for you to get to it from a reasonable distance), the cost for the phone lines themselves, worrying about it all getting zapped by lightning when a storm is brewing, etc. Is it a cool thing? Sure. But it's hardly a replacement, especially not for the majority of the population.
I think an interesting move may be for Cingular to offer to pay the Early Termination Fee (which happens to be in that $100-200 range) for people who'd consider getting the iPhone but are stuck with another carrier. Obviously they'd need other incentives for customers not in that situation, but I definitely think that would be a big shot against Verizon, etc.
Sadly, PS/2 was yet another victim of USB, which doesn't care what you plug into it, the electrical slut.
There was no subsidy, but there was a considerable amount spent by Cingular updating their software to support things like the visual voicemail and other new and innovative features that you can only get with the iPhone. The 2 yr contracts will help them recoup the development costs for this effort.
The current system essentially amounts to anticompetitive bundling. It frosts me that I cannot take "my" phone with me if I change carriers.
It also makes the overall package so complicated that it's fairly hard to make a cost comparison between competitive carriers.
It also creates an incentive for bloated, overly complex phones since it is in the carrier's interest to be certain that you are capable of using any cost-added services they provide.
Just as Consumer Reports advises that you should always negotiate car price, car financing terms, and tradein as separate deals, what I want to do, and what I think is best for the consumer, is simply buy my phone as a separate transaction from buying service... and be able to change carriers whenever I feel like it, while continuing to use the same instrument.
If the iPhone moves us toward that model, good.
"How to Do Nothing," kids activities, back in print!
If this is true, and the pricing will be based on the actual cost to produce them and the number sold will be determined by how many people are willing to buy them at that price (supply and demand, anyone?) without all sorts of shell game market manipulation, the headline should read:
Apple Turning Cell Phone Market Right Side Up
It's sad that we've gotten to the point that a rational straight forward pricing model, without games, is considered "upside down."
--MarkusQ
The barrier to getting people to sign up for wireless service (or a lot of other subscription services) has always been equipment cost. Even though a customer is likely to pay $1k or more in service fees over the course of a 24-month contract, consumers focus on the $300 upfront for the phone, not the monthly fee. Cut the phone price, and more people sign up.
BTW, for you folks who don't want to sign up for a contract, you don't have to. Get your own phone (paying retail price), and Cingular or Verizon or Sprint will put you on a month-to-month contract, no problem. There's no way the economics work, though, to have free RAZRs and no contract.
I have no doubt the integration between Macs & iPhone is going to be ABSOLUTELY UNBEATABLE. I know Apple will keep the interface simple, even though I know they will upgrade it over time, I know from experience, I can rely on Apple to DELIVER easy to use functionality. I don't have countless hours to study new equipment and software for dozens of hours a month.
I have had so many phones that had crap that didn't work, every new phone had a different keypad buttons and menus & icons, and menu structure, and non were consistent or easy to sync (if possible at all) and the bluetooth earphone reliability was iffy.
Physically most wound up with so much lint in them, I'ld have to figure out how to disassemble them to blow the lint out. Antennas would break, battery cover doors would not latch right, and tape was the norm, and god help me if I had to read a screen in open sun.
I expect to buy 2 iPhones, one for my wife who can barely figure out how to do basic uses on her "LG" phone, so for once she can have her entire phone book on the iPhone along with calendar and notes, etc. This may be the godsend that finally means I can get her to stop using the inch thick phone & calendar book with the pages that get torn out.
For me to be able to move on and off the the phone, & web means I can simplify keeping in touch as just a starting point.
You make it sound like cellphones have only legal locks and can be listened to in the clear, or just with the help of a particularly powerful computer.
CDMA (both CDMA2000 and W-CDMA based systems like FOMA and UMTS) conversations are practically impossible to evesdrop upon. Even if you have the key (close to impossible), the timings and need for location information make evesdropping unbelievably hard.
On a technical level, the GSM system is easier to tap, but on a practical level it isn't. Early GSM networks used relatively breakable algorithms (at the behest, believe it or not, of British Intelligence who clearly hadn't heard of phone taps...), but after this was cracked most networks were upgraded to much more secure algorithsm. And just to identify a specific handset you need information only exchanged when the phone is turned on. These algorithms are publicly known, and there are as many people who want to break it as, say, SSL.
For all practical purposes, the only time your (post-analog/post-D-AMPS) mobile phone is going to be intercepted is if someone is working at the telco and has a tap on your line. Casual evesdropping is probably non-existant.
You HAM based system on the other hand can, and probably is given the frequencies, intercepted by casual evesdroppers all the time.
I know which I consider more secure.
You are not alone. This is not normal. None of this is normal.
Okay, everyone who thinks this will happen, raise your hand. Nobody? That's what I thought. Cell phone companies do not base the price of their service on how much it costs them to provide it (including the cost of the phone). Rather, they price their plans purely on how much people are willing to pay. ....
The math doesn't add up though - if they are selling smart phones with a large subsidy today, that subsidy money comes from somewhere. That somewhere is the guarantee of fixed income for a certain period of time, in other words the service cost is not just what people are willing to pay but also builds in the subsidy of the device you are getting for a discount with that service.
There's no reason why it does not make as much sense to say, that they would provide service for a reduced cost for a set period of time as well. All sorts of things already work like this - you pay less per year if you pre-subscribe for a longer period of time.
I think the argument that Cingular might want to use this opportunity to really pull in marketshare away from other carriers to be compelling, and with the iPhone at a fixed price it leaves them no choice but to use service pricing incentives as a tool to obtain that marketshare.
"There is more worth loving than we have strength to love." - Brian Jay Stanley
Along with the specialized features that someone above points out, Apple gets some very targeted marketing out of it. They realize that today no one goes to Apple looking for phone service. But they do go straight to providers. So when Cingular markets this phone with their service they'll target many many more customers than if Apple did all the marketing independantly. I imagine they also expect some people on their current Cingular plans to upgrade to these iPhones once it's marketing by Cingular. So Apple gets more customers through more targeting marketing, and Cingular gets more premium customers.
Developers: We can use your help.
Unless Apple is totally nuts, they will have negotiated the contract terms in advance with Cingular, and threatened to go to one of the other GSM providers if the terms were not as favorable to the customers as possible. They should in fact be able to negotiate terms that makes the iPhone a loss-leader for Cingular, as the iPhone exclusive will be of great promotional value to the company.
If Apple is totally nuts they might have let Cingular in a position to decide the fate of the iPhone. Cingular might then very decide that iPhone is the perfect low volume high margin product, as the most determined Apple fans will buy it at any price.
>Do you mind if others make calls through your autopatch?
Not at all, go ahead.
Open Source Drum Kit, LPLC deve board - mjhdesigns.com
You live in a non-regulated market with regards to cell phones (as I understand it at least).
I live in a fairly heavily regulated market (Denmark).
Here, with the most expensive plan being prepaid phones, I pay about 4.3 cents/SMS including a 25% sales tax. About 14 cents/minute to make phone calls I think (I don't make that many - others call me)
Sure, we may not get as "awesome" a phoneplan as you guys do, and thus we probably don't get the phones as cheaply as you do.
But we don't pay for incomming calls or SMS' at all, which is rather nice - especially on a prepaid phone.
Also, when we go shopping for a phone, the sellers are required by law to tell us exactly the minimum price of purchace including the minimum price of any required plans (which can't go beyond 6 months btw).
Example:
Sony Ericsson W810i
Cheapest I can find is US$ 247 (minimum price during the 6 months)
This is 104$ for the phone, 17$ for the start-up fee, 125$ for a 6 month plan (and a bit of rounding).
Those 125$ (20.84$ a month) are simply the minimum cost - if you call, SMS/MMS etc for less than that per month, they'll just charge you the full monthly price.
Long live the free and unburdened market.
We do not live in the 21st century. We live in the 20 second century.
But wouldn't this lead others to want discounted service if they supply their own non-Apple phones? If an Apple Iphone user gets a discount for supplying his own phone, shouldn't a user who just wants to use a less expensive phone be able to supply it and buy the service at a fair price too? That would ruin the business model of the cel companies. The current business model of all of them, even though they are prohibited by anti-trust laws from all agreeing on how to screw the consumer. Isn't going to happen. Sure, there might be some claims of this, but new ways to screw the consumer will be created at the same time to make up for it.
Come on, the industry knows that the iPhone people are exactly the people who have too much money, they are not going to be giving them a break, at least not a real one.
I'm an American. I love this country and the freedoms that we used to have.
My experience is that Cingular and Verizon have roughly equivilant coverage. There are places, however, where ones works and the other doesn't and I think these just about wash out. If you happen to be one of those people that live or work in one of their dead zones, of course you're going to think it sucks. So, pick the service that works best for you in your tiny subset of the coverage area, but don't extend this to make general conclusions about coverage. Besides, EVERY company in the US sucks incredibly large donkey balls compared to the coverage offered by European carriers.
I'd stay away from Cingular if I were you. I switched to T-Mobile, tried the new SIM on my old phone, and noticed that there was a noticeably better sounding voice on the other end when using T-Mobile.
Dropped calls means nothing if the conversation sounds worse than an AM radio. I've had two dropped calls in the last five months that I've had T-Mobile, one of which I suspect was my friend's phone (it sucks). When I was on Cingular I was using a particular word rather frequently..."What?"...I think I'll take a dropped call every five months over not being able to hear what the other person is saying.
The cell phone service is going to be the 4th commmunications industry to pass thru this ridiculous hoop.
First was the US Mail - who realized the carriers had to walk the route each day and walk past each house each route. They oculd support fixed message cost, and it made them wildly successful. Sears didn't mind it either.
Next was the data networks, which charged per message, and when we all figured out they weren't epoxying together a brand new tube for each message, went to fixed cost per period.
Then we knocked on the telco's door and told them we figured out that they didn't have to run a new wire everytime we called someone, not even for the first time. They 99% went to fixed cost per period, with some sucker plans for people who still didn't get it and thought they could beat the telco out of the 99% plan. Vonage et. al. pretty much dope slapped anyone who still didn't get it.
Now come the cells. They still make us think that they have to send a squadron of pixies, who subsist on gold and caviar, flying out of the hayloft every time we want to place a call or send a message. Apparently the text pixies have never seen a salad, and the 411 pixies are down-right clones of Roseanne.
In the days of tower buiilding, when no one knew we'd all have these glued to our ears constantly, charging by the message unit was the only way anyone was ever going to let you take a risk like that.
That's all changed. The network is in place. The towers, T1s and infrastructure are all on, all the time - their operating cost is known and predictably rising with the cost of energy, inflation etc. The system scales now. Your unit revenue per user should find a point where it supports the scaling. Energy costs marginally less at night than at daytime, but it's always daytime somewhere in the net.
It's all a matter of who blinks first. Nights and weekends is slowly creeping wider, the others will have to follow. They are slowly, inexorably creeping towards flat monthly, but they're still betting some of us will put up with the sucker's bet.
I hope it works that way - in the telco case we had help from non-traditional suppliers who had nothing to lose and could bust the Bell model. In the cell case, there's the big six(?) who may slowly compete to some equilibrium, it won't be the rest that bust it - as MVNOs they just follow what the biggies do.
Here's hoping, anyway. Nice to see that Apple can make them think about dancing, though.
"Win treats sysadmins better than users. Mac treats users better than sysadmins. Linux treats everyone like sysadmins."
In Europe this is 'standard' since most countries (I know for sure in Belgium and I think it's a European directive) banned giving away free phones with a x-year signup contract on cell phones. So you usually pay full price for your phone (maybe $10-50 rebate) but you can't get the phone for free. You can step in-and-out of a contract at any time though (no early-termination fee, just pay whatever you started that month) although if you stay longer, you'll save up rebates and freebies. The phones (GSM) aren't locked so you can keep your phone in whatever provider you go (provided that the frequencies are all supported, but the newer phones don't have that issue).
I think that's also why Apple went with Cingular/GSM technology. 1) there is only one phone they have to develop for both Europe and US since CDMA is nearly unexistant in Europe, and 2) you can just switch your SIM cards to get another provider, no lock-in possible.
Custom electronics and digital signage for your business: www.evcircuits.com
> Why do we need a license for that?
> As long as you don't interfere with someone else's communications, there's no need for a license.
> Big Brother is bad enough with not allowing encryption, but requiring a license, well that itself was the foot in the door.
Good point! Why do we even need a license for driving?
As long as you don't run into someone else's car, there's no need for a license.
Of course, with radio, your signal can propagate around the world in 50 milliseconds, so you do have a few billion more potential someone elses to worry about...
But really, what are the chances that an unlicensed person would accidentally transmit on a frequency in use by an aircraft instrument landing system anyway?
Who needs government protection for airplanes anyway? Can't they defend themselves? Give 'em all rockets. An armed society is a polite society. Now, if you knew your jamming transmission of a pizza order to your brother-in-law's delivery service might result in an RPG aimed at your antenna, you'd be sure not to interfere. Very satisfying and much better than a piddly test that requires demonstrating understanding the technology involved and the regulations.
I saw take your idea and run with it!
They provided the unlock code for my Razr V3 and were polite and friendly while doing it.
Some mornings it's hardly worth chewing through the restraints to get out of bed.
Only if your T-mobile phone is a quadband phone. T-Mobile and Cingular do not generally use the same frequency bands for GSM. In the US, T-Mobile and Cingular use the same GSM bands. T-Mobile outside of North America uses different GSM bands.
If the iPhone can break mobile "phones" away from the US carrier lockin to their original network, then it's worth every penny. We need to be able to switch networks dynamically on service price/quality, not this insane AOL monopoly business model. Every step towards opening the "last mile" to multiple access is worth taking.
Apple has been the main driver forcing record labels towards discarding their archaic "scarcity" bizmodel, however limited its own movement along that road. Let's see if Jobs can force the networks open the way Apple forced computing to be "for the rest of us".
--
make install -not war
I find it interesting that no one wants the freebie phones. I mean, why not? They make and receive calls just like the expensive ones. Oh yeah, they don't have web access or really annoying music ringtones or wallpapers or nifty games. So what? who surfs the web while driving? These phone don't do anything I want a phone to do.
Here's what I'd like to see in a phone:
flashlight (white and red (for those night sails));
compass (not GPS, compass);
built in lighter;
retractable mirror;
built in usb flash drive;
audio recorder (separate from the camcorder function);
AM/FM/Marine radio receiver;
personal PA (Public Address System);
thermometer/barometer (note, not a feed from a weather site); and
powered micro screwdriver with detachable heads.
Give me all that and I might start thinking the non-freebie phones are worth it.
Say bad words about my book, in cold oatmeal, or I shall sue!
Most of the time I actively use the phone, I need pretty much three buttons on it. One to summon the phone book, two to scroll up and down and then I press the first button again to place the call. And sometimes I need one more button to hang up. Most of the time I use the cell phone, I use it passively to accept a call, I need one button for that, one to hang up. And I would not mind if it would be the same button.
As for the occasional SMS, 75% of them are selection from a template. But, of course, people will need the input device sometimes, but I say they will not need it so much that the touch display keyboard will be a problem. Those who need keyboard so much that would cause a problem for them do not constitute majority and they still do not need the keyboard most of the time anyway. How can you justify it to take 1/3 to 1/2 of space on the cell phone when it is not used even 1/9th of the time?
If programs would be read like poetry, most programmers would be Vogons.
You should add to that list:
Floats in water
Emergency Locator
And wile where at it:
Microwave
Kitchen Sink
Shark cage
Sail repair station
Resin resevoir
Docking station (for your boat)
On a practical level the carriers of GSM make it easy to intercept signals in the clear. Between the handset and the cell station the signal is encrypted. (In most countries, and most of the time) Each handset uses a different key. Making decryption more difficult is that the keys can and do change frequently. In effect, as you state, it's usually too expensive to bother with man in the middle attacks at that point in the system. http://www.gsm-security.net/ has a good FAQ
The cell site is where the decryption takes place. From here the signal is (in the very vast majority of instances) microwaved either directly to the exchange, or via other cell sites. These signals are sometimes transmitted over a series of standard E1, or T1's. Usually this happens between 1 and 4 GHz. Telco's do get rather creative with their multiplexers though.
Equipment needed is not cheap, but is definitely available off the shelf. Spectrum Analyser. Downconverter. Modem. Antenna. Computer, and a digital capture card. From this point onward there isn't much software available to break out the mux so you might hear Joe Six Pack talking to his mother. If you get this far, you would likely have enough cash left over for programmers though.
So a "missing" $200 subsidy translates to $8.33/month on a 2-year contract. Perhaps instead of directly subsidizing the phone itself, Cingular is subsidizing the cost of the data plan for the phone? Seems like this would make good marketing sense, and provide the potential buyer with a perceived savings (since that same data plan at retail might actually cost them $10-20/month).
DiscDividers tabbed plastic CD dividers: divider cards f
You left out LISP interpreter, and that would just about cover it.
Don't blame me, I voted for Baltar.
I see you chose to respond to this person's post, but ignored mine. The licenses are to separate those who are operating legally from those who are not. Your callsign is registered to a specific address, you have to pass a test to receive a license, and there are rules and regulations you must follow while operating your station. A lot of the requirements also change depending on the type of license.
So, on to the next part. Why is encryption illegal? That's simple. Because encryption hides what you're doing. When using amateur radio frequencies (or any frequencies, for that matter), you're utilizing a public resource. While utilizing this particular segment of the radio spectrum, there are rules on the content of your messages. If it's encrypted, it can't be determined whether or not you're following those rules. The FCC has been given the authority by the government to manage this public resource since the usable radio spectrum is finite. Radio stations, telivision stations, amateur radio operators, maritime radio operators, pilots, airports, companies that operate satellite equipment, cell phone companies, and more are all required to have licenses (whether via testing, purchasing, whatever) to operate on the public airwaves.
There are a few exceptions to the licensing rule such as part 15 devices, being a cell phone user, CB and FRS radio, etc., where a license for the end-user is not required. But, there are still rules you must follow when operating those devices as well, and they are much more strict.
Does it mean that people can't use the spectrum illegally? Nope. But laws don't ensure that people don't break them either. That's doesn't invalidate the reasons for having them, though.
Well, consider the monthly bill for a smart phone. A decent talk plan, a data plan, SMS, and whatever additional fees they tack on, can run you $100 to $150 a month. Although this might not bug certain enterprise users, for consumers who just now considering a smart phone, that monthly bill is going to be a shock.
If Apple can workout a deal to lower that ridiculous monthly bill, I would consider a nice phone that didn't sodomize my wallet once a month for 2 years. If they can't lower that talk + data plan price, well, you can count me out of the early adopter club.
All in all, if the gadget is cool enough, you can probably get away with charging more up front and less down the line. Heck, people were willing to pay a premium for the iPod when that first hit the market.
"Things are more moderner than before- bigger, and yet smaller- it's computers-- San Dimas High School football RULES!"
It doesn't need to plug in - they could design a bluetooth keyboard. I'd be astounded if Apple doesn't already have a portable bluetooth keyboard in the works - all it needs is software on the iPhone to link up to it. Unfortunately you'd need to be able to load arbitrary software for that (or for your plug-in keyboard).