iPhone Business Model Hits a Snag in France

Serhei writes "It seems like the iPhone might not be released in France by this holiday season, since French requires by law that all cell phones sold there must be obtainable in an unlocked version. Apple will not be able to do so, since it has launched with a 5-year exclusivity agreement with AT&T. That deal will probably require exclusivity worldwide to avoid grey-market imports. (In return for this agreement Apple receives a large share of AT&T's monthly revenues from iPhone subscribers.) If the iPhone falls through in France, the country can join Belgium and a potentially long list of other countries with unlocking laws, whose Apple fans will have to make do with other, less Apple-y phones. Note that there is currently no mention of the iPhone on the Apple France page."

Comments

Good news!

[OdinOdin_]

This is excellent, it means those EU countries which won't accept iPhone will have to churn out something thats a whole lot better, this is good news for consumers!

Re:Good news!

[jcr]

good news for consumers!

No, it means they can't get a product they want. It doesn't mean that they can get the product on different terms than the rest of the world can.

-jcr

Re:Good news!

[Richard_at_work]

You understand wrong - there is no EU wide law making the tying of products illegal, otherwise the entire mobile market in the UK would have been in deep shit years ago.

Re:Good news!

[timmarhy]

what are you dense or something? apple isn't holding france to ransom over the iphone, apple is missing out on sales in france. you have the issue back to front my friend.

Re:Good news!

[anticypher]

There are no EU wide laws. There are directives, from which countries create their own versions as laws that meet local customs, historical precedent, and local lobbying/corruption influence.

There are strong anti-tying directives, to keep the american-style business model (microsoft, walmart) from damaging the economy here. France has consumer protection laws at least as strong as those in Germany, and most countries here have varying levels of enforcement. The UK has some of the weakest consumer protection laws, and with OfCom, no enforcement whatsoever.

I've been hearing more iPhone rumors this week, the biggest is T-Mobile has put their rollout plans on hold because they could not show the regulator the required unlocking function or unlocked phones. O2 in the UK is safe, because even though they will be violating laws there, the fines will be years down the road and only then a tiny percentage of the profits made.

There are no other populous countries in Europe where the iPhone could be sold without an unlocked version. Apple has really shot themselves in the head with this move. By locking themselves out of the largest GSM market in the world, they can't hope to achieve any kind of marketshare.

the AC

Re:Good news!

[BorgDrone]

Because they limited the ability of business to make money on a product;

Nokia doesn't seem to have a problem making a profit selling unlocked phones, neither does SonyEricsson, Samsung, LG, HTC etc. Apple could have sold way more phones if it had been available worldwide, unlocked and without a plan, just like e.g. the iPod.

And they should have released in Europe first, by the time the iPhone was released in the US, it was high-tech for the US market, but not so much for the EU market. by the time it arrives in Europe, it's outdated. Sure it has a nice user interface, but it misses a lot of the features people expect, like UMTS or HSDPA.

Exclusivity - bleh

[Divebus]

Exclusivity deals with a sub-desirable carrier is working against Apple but "Designed in the USA" is probably hurting them worse in France. Next.

Re:Exclusivity - bleh

[moosesocks]

Oh come now. Although I don't want this to turn into a political flamewar, France doesn't have any sort of pervasive hatred toward Americans.

Yes. France disagreed with the U.S. about Iraq (and yes, even though their reasons for doing so weren't the most honorable, it's fairly safe to say at this point that they were on the "right" side of the debate). However, this was a criticism of a matter of foreign politics and policy, and not some sort of personal vendetta against the entire population of America (especially those evil industrial design firms in California!)

It was the US who took the issue way too far. Even though it was a joke, serving "freedom fries" in the senate cafeteria was terribly crass.

Surprise! The world does not hate Americans by default. Most of them don't approve of what the government's doing, but neither do 70% of Americans these days.

something is missing

[microcars]

I find it very hard to believe that Apple Legal did not see this coming.

also- from the link, the "5 year exclusivity agreement with AT&T" is only for US Distribution.

Re:something is missing

[Tim C]

from the link, the "5 year exclusivity agreement with AT&T" is only for US Distribution.

Yes, hence the comment about grey-market imports. It's unlikely that AT&T would be happy with the iPhone being sold unlocked in any country, as those unlocked phones could then be imported into the US, despite the exclusivity agreement.

No, it wouldn't be as easy as if the iPhone was available unlocked in the US, and yes there are ways to unlock an iPhone, but that's not the point. If I were at AT&T and negotiated the deal, I'd have made damn sure that Apple were bound not to sell the iPhone unlocked anywhere, to make it that bit harder to obtain an unlocked one. Remember, you don't have to make it impossible, just hard or risky enough that that people can't be bothered.

Re:No worldwide exclusivity

[Divebus]

See? We should have let the Germans keep France.

Correct me if I'm wrong here....

[mark-t]

But couldn't Apple have just prevented this whole mess if they had charged like $1500 for the iPhone, and offered a $750 mail-in rebate for purchasers who signed a 5-year contract with AT&T?

Re:The iPhone will be known as Steve's Folly

[jcr]

In the end, the iPhone has turned out to be a real disaster.

It sold a million units in 75 days. How can I make my next product a "disaster" like that?

-jcr

errors in summary

[venicebeach]

This has nothing to do with AT&T.

Apple has already announced an exclusive deal in France with Orange (France telecom), and it's this deal that is in danger because of the law. Apple is partnered with T-mobile in Germany and O2 in Britain, so this really isn't about any worldwide exclusivity for AT&T.

AppleInsider's report on this situation.

Re:errors in summary

[v1]

That's actually a very good idea for them. The big argument right now is that Apple can't release an unlocked phone in another market due to grey market import of unlocked phones. Soooo, release it locked by another carrier in a new market. In this way the two markets do not compete, and yet consumers in both markets can obtain and use the product.

This is probably Apple's original plan. A year from now we are very likely to see the iPhone for sale in 1/2 dozen markets, each locked to a single provider in that market.

Re:The iPhone will be known as Steve's Folly

[erroneus]

It's not a disaster yet. I have at least two users at the office with iPhone and they are 'in love' with them for the moment. One even converted to Mac in the process. They are "forgiving" of all the shortcomings encountered thus far. Somehow the "coolness" outweighs the negatives for the moment.

What I'd like to know is.....

[zuki]

...what are the terms of the deal that made Apple so giddy about 'locking in' with AT&T for FIVE YEARS!!!

The argument is that Apple obviously has legal counsel who foresaw all of these problems (risk of class action, being made illegal in certain countries, etc...)
Yet they do not have any problem doing this for what (in hardware evolution time) is several lives long, and they are basically risking everything on this gamble.

What could it be that made the pot so sweet that they went with this deal on a debut product?

And on the opposite side of the coin, what could have been so incredibly bad about offering the phone unlocked with a SIM card slot
that they, -who pride themselves in public for being so 'open'- did not see that as a viable option?

Do they act so arrogant that they don't even want to please all of the international travelers who swap SIM cards
every time they arrive in a new country? Someone, please drop some science on us. As it is, it makes no logical sense.

(Oh yeah, and BTW Steve, if you happen to read this, just email me the 411 directly...! KTHXBYE)

Z.

What?

[sebastianboethius]

If i were to meet steve jobs right now i would slap him.

France? Heh.

[NotQuiteReal]

I bet the French even mandate that you use Arabic numerals on all cell phones. ;-)

Actually Apple is popular in France

[AHumbleOpinion]

"Designed in the USA" is probably hurting them worse in France.

Actually Apple is popular in France, major executives have been French.

You might also check up on current events, when French and German citizens got to vote the results turned out a bit different than what the mass media wanted to portray. Candidates friendly to the US won.

When I was in Paris last year I was treated very well. Even though my French language skills are nearly non-existent. Disagreeing with a government's policy decision does not translate into a population hating companies or citizens.

a note: iPhone uses an ordinary SIM, in a slot

[Gary W. Longsine]

I'm not really sure why this myth continues to propagate. iPhone has a SIM slot. iPhone has a SIM slot. It's visible on the top of the phone, with a tiny pin hole. Inserting a pin or paper clip ejects the SIM card from the slot. You can use this SIM in any other GSM phone.

Re:No worldwide exclusivity

[Tony Hoyle]

No it won't.. German consumer law is one of the strongest in the EU. You think it'll stay locked for long?

And a product sold in one country of the EU is available in every country of the EU (common market rules) so everyone will be able to buy one.

Re:You have got to be kidding...

[Dion]

I'm sorry you have become so turned against the idea that governments can be on the side of the people.

A free market is not a goal in itself, just like unlimited freedom of citizens isn't a good idea either.

It's a good idea to limit the citizens freedom to commit murder, just like it's a good idea to limit the freedom of companies to pollute and corrupt the marketplace.

Businesses cannot be allowed to rule the marketplace without oversight as it's very profitable for the monopolist to corrupt the market and keep other competitors out, this leads to less competition and less choice for the consumers.

Even if a company cannot get a monopoly it can still enter into price fixing agreements and again the market and customers lose.

There are tons of situations where companies just don't do the right thing and the market forces are too weak to steer them straight.

Saying that any regulation is always worse than no regulation is naive in the extreme.

Our laws enable us to use any phone on any network and it allows us to change operators easily without changing phones, that has led to very low prices and a wide selection of phones, saying that it's worse to have more competition and lower prices at the cost of a little regulation sounds downright silly.

A government isn't totalitarian just because it regulates a market, it's a much bigger problem if it started passing laws governing what citizens could do in the privacy of their own home.