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Apple Can't Afford iPhone's Carrier Exclusivity
WirePosted writes with an ITWire article about the problems that Apple's AT&T exclusivity deal could pose in the coming years. Initially the company needed AT&T's commitment to the project, to ensure features like visual voicemail would work. With the iPhone a hit even at its current high price that no longer seems to be the case. Can Apple afford to stick to an exclusive carrier in the future? If for no other reason than consumer choice? "iPhones are being sold unlocked in the markets of Asia where you can't get them with a carrier plan, but they're also being bought and unlocked in the US and Europe. The message is that many and probably most iPhone buyers would like to be given a choice of carrier when they buy their iPhone. Some would be prepared to pay more as they do with other smartphones and buy their iPhone unattached to any subsidized carrier contract. The point is many consumers feel no loyalty to carriers and resent being forced to choose one."
It's not just visual voicemail, people. Jeez, if I had a dime for every time I heard that used as the only putative reason that Apple is tied to AT&T...
It's also having structured, simple unlimited data plans, which is really what makes the iPhone shine.
It's about doing things like setting your voicemail greeting all through a GUI on the phone, without having to call into some number and follow prompts. (Simple? Sure. Not a big deal? Sure. But still, one little detail among many.)
It's being able to walk out of a retailer with the iPhone sealed in a box (which itself probably has more attention to design than most handsets do), and then the ability to seamlessly activate via iTunes, with a simple selection of choices, in the comfort of one's own home in a fashion fully supported by Apple and the carrier.
It's about expanding the iTunes/iPod/iPhone/iTunes Store ecosystem with a carefully planned strategy.
It's the user experience from end-to-end (peoples' own individual gripes with AT&T or any other carrier aside).
That's the issue, and all of those things take a lot of backend work and cooperation between Apple and the carrier. It's not just a handset; it's a complete end-user experience from purchase, to activation, to use.
And yes, some customers might not "care" about all of these things. The power users, the hackers, the cutting edge geeks. But normal customers are a much larger target, and those are the people reading reviews, and those are the people who will drive to Apple's goal of 10 million iPhones. With wildly varying user experience and differences from carrier to carrier, how will the iPhone be viewed in the eyes of the iPod-buying populace?
And remember, contrary to the article's assertion, since owning an iPhone isn't mandatory, and we presumably have free will, no one is "forced" to do anything.
What about this is so difficult to comprehend?
That, and the fact that AT&T may be giving Apple as much as $200 per activated iPhone, and then 3%/month for existing customers and a staggering 9%/month for new customers on top of it, so that the end-user cost when people buy one in a store is manageable? Yeah, the iPhone might not be "subsidized" in wireless industry parlance, but you bet your ass it's "subsidized".
There's more going on here than "evil Apple" wanting "lock in". Like all products with Apple, it's about more than just buying a commodity...it's getting a pleasant experience along with it, from end-to-end. (Yeah, yeah, insert a billion gripes about how the iPhone sucks for one reason or another here. Go tell that to Google's CEO, who says the iPhone is the first of an entire new generation of products. Yes, this platform really is that special, no matter how much you, personally, might hate Apple, the iPhone, or both.)
Apple has also shown it does these sorts of things -- and going into the mobile handset business is a HUGE foray -- in baby steps. Is it any surprise that the stage we're at now has carrier exclusivity for a variety of reasons, even beyond what I've already articulated above? Just because YOU don't like it or some IT rag pundit waxes philosophic about it doesn't mean it's not the right business decision for Apple at the present juncture. It doesn't matter how many people buy iPhones to unlock them. There is a vibrant unlocking and hacking community for just about any desirable phone, including ones not available in particular markets, etc.
It may be that someday, Apple really can't "afford" carrier exclusivity. And you know what? I'd imagine we'll see a change, then, won't we?
My current carrier doesn't provide many services you can get in other areas, such as video transfer and texting outside the local area. I'm not talking about extra-cost, they simply don't offer it.
On top of all this, cell service is expensive. With these things in mind, I can't imagine how "loyalty" is supposed to even come into the equation. As far as I'm concerned, I'm just looking at which side of the ship to jump off of, knowing that the next ship over isn't likely to be any better anyway.
I've fallen off your lawn, and I can't get up.
Apple designed a phone that is very good, and found a carrier that was desperate to play ball and risk a new world order. Apple exclusivity, therefore, serves that new world order. When Apple does not have to cripple a phone in order to insure that the carrier will make enough money. The phone is as Apple wants it for it's customers that are willing to pay for good hardware, not for the carrier customers who largely want believe they are getting a good deal by paying for 'services' throughout a long contract.
And this is where Apple may have blundered, at least in the US. The two year contract. We don't want it, we don't need it. Apple could charge half of what it made with the two year extension, $60, and still likely come out ahead in the long run.
"She's a scientist and a lesbian. She's not going to let it slide." Orphan Black
Why can't we have all phones free as in freedom? When I buy a computer I can hook it up to any TCP/IP network and access the internet. Some I pay for and some I don't. When I buy a land line phone, it isn't locked into any phone company. I can plug it into any jack and it works. All I want from my cell provider is a data pipe to get to the internet or the voice network. Period.
Apple is trying to upset the traditional business model for handset makers in that they wish to get a cut of recurring subscriber revenues, not just a one-time equipment sale. Apple is able to get this revenue (which in the long term means more than the phone sale!) precisely because it has granted exclusivity to a single carrier. If AT&T was no longer guaranteed to capture the vast majority of iPhone subscribers, it would neither have (a) implemented the needed Voicemail and EGDE network upgrades and the billing system+iTunes interface, or (b) agreed to give a cut of subscriber MRC to Apple.
The simple calculus here is that carriers will do special things that Apple asks for (changing the way they bill and provision customers, plus handing over a cut of service revenue) in return for Apple doing something the carriers ask for (exclusivity). I don't think anyone would sensibly argue that carrier exclusivity is in the best interest of all customers, but that doesn't mean you're really tied to it. Those with the means and technical knowledge will continue to purchase and unlock phones to their hearts' content - that's the beauty of a GSM ecosystem (well at least for 2 of the 4 main US carriers). Apple and all the carriers internationally that it deals with - plus all the cellphone users who just want all of their cool Apple features to work with a minimum of hassle - will continue to pursue the exclusivity model for the foreseeable future.
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Steve Jobs wanted to change the way cell phones are bought but ended up just making so many annoying restrictions, even for customers that want to use AT&T/T-mobile/Orange that he ended up destroying the "simple" experience he so desired. He wanted people to be able to buy the phones directly from Apple without having to sign anything in store and/or online. However, when people started to unlock the phones Apple put in place tons of walls even for buyers that plan to use Apple's carrier. For example, you cannot buy iPhones with cash or Apple gift cards(in the states anyway). They announced this right before Christmas and many potential iPhone buyers already let it be known that they wanted Apple gift cards for Christmas so they could buy the iPhone. Instead, Apple just kicked them in the teeth.
What I don't understand is why, when Apple dropped the price, they didn't just make the price drop a subsidy for AT&T customers instead. They could have offered $200 off AT&T service after the first month that wasn't applicible to cancellation fees, and could have extended it to early adopters so they wouldn't have felt burned. Would have allowed Apple to drop the price to AT&T users(well, it would take a few months to see all the savings I suppose), and would have given Apple 50% more revenue from unlockers. But I think Steve was just so set against "subsidies" that he decided to take the "I'll do anything to prevent you from getting an unlocked iPhone" route instead. I think that costed Apple not only customers and revenue, but a LOT of goodwill too.....
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The whole point of the iPhone business model for Apple is to offer it exclusively so they can get part of the revenue. The idea is that iPhone as single product is so desirable that it will get people to switch from competitors (which is very expensive to achieve by traditional campaigns). And the real revolution of Iphone is that Apple managed to get this from the carriers. If there's no exclusivity, there's no revenue sharing.
This idea of Apple being "forced to exclusivity" is ludicrous; they've worked very hard to achieve the exact opposite!
I think it's why they're called cell phones. Cell as in "imprisoned".
Can Apple afford to stick to an exclusive carrier in the future? If for no other reason than consumer choice?"
Can Apple leave its five year exclusive contract with AT&T? If for no other reason that to heed the cautionary woes of a Computerworld writer with tenuous grasp of business and markets?
The problem with wags is that they talk about Apple, Microsoft, AT&T, etc as if they were characters in a play they were writing, apparently unaware of the real world constrains of money, technology, personnel, opportunity cost, and other resources. They write like they're genus for printing ignorant wishful thinking that sounds good only if you don't know what else is involved.
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The iPhone is revolutionary because it just works.
I've looked at smartphones in the past, and play with them whenever I'm paynig my wireless bill at the store instead of the mail.
Other smartphones don't have web browsers that just works, they don't have email that just works, they don't connect to the computer in a way that just works they don't have a user interface so simple my mom can use it but so powerful I'd love to use it.
I don't have one yet, because I don't NEED a smartphone. But if I wanted a smartphone, rather than just a cellphone, the "It Just Works" factor make it the iPhone or nothing.
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"and then the ability to seamlessly activate via iTunes"
"Seamlessly"? You have to have a computer connected to the Internet just to activate your phone? That is so lame. There's a huge population of people, especially outside the US, who have mobile phones but not computers. I wonder what percentage of those un-activated iPhones were bought by people who didn't realize they had to mess with a PC just to turn the phone on.
And you still can't download music over the air link, can you?
I've read a lot of articles, and at least seen mention of a lot more, that spout off about how Apple screwed up it's iPhone licensing deal by tying themselves to a single carrier. However, a lot of the time within the same article, or another article on the same site will often rave about how it is an example of one of the greatest product launches of all time. If Apple screwed up so bad, how did they do so well? It all strikes me as fanboy baiting. Write an article praising Apple, their products, or their tactics to bring in the apple hater, then write one denigrating Apple, their products, or their tactics (often implying that Apple is the new Microsoft) to bring in the Apple fanboy's (of which I'm arguably one). Each article is carefully crafted to miss obvious points and make glaring mistakes so as to ensure that it's attacked in the message boards driving up the hit counters and making more ad revenue than any other article that day.
Bureaucracy expands to meet the needs of the expanding bureaucracy.-Oscar Wilde
No one *needs* the iPhone. It is simply something that people desire.
But that's besides the point.
The article is about going global. No one is saying that Apple really plans to go exclusive around the world for the long term. They'll sign some agreements to get traction with the big carriers, and when 3G arrives, they'll adjust. They'll probably go for less than 5 years exclusive.
Technology changes so fast that this is really a moot point. I'm not even sure why people are getting excited or worried.
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Like being able to activate at home without having to wait for a sales droid.
The whole notion of phone activation is very CDMA like and is not part of the usual GSM experience. The only thing that should take activating is the phone account, and then you are free to move your SIM card from phone to phone. I have never need to activate any GSM phone I have got, so why should I need to do this with the iPhone.
The iPhone has got many things right, but this does not make it a perfect phone. There are still missing features, that some people take for granted in GSM phones, like being able to transmit files and contacts via Bluetooth and MMS messaging, amongst others. Hopefully Apple will correct this or the competition will offer something that is even better, for us to lust over.
Jumpstart the tartan drive.
For me, it's simple. I cannot afford the iPhone right now (and not for another 2 years). $400 for the gadget, 2-year commitment to AT&T (not a reputable company; caved in to admin demands to turn over its records to the government), another $600 to abrogate existing service commitment. FOOEY!
It strikes me that the mobile networking situation in the US right now is what our wired Internet would be in had the greedy money-grubbing carriers been in charge of designing it. Your email would reside in central offices, and you would pay $1 to send or receive one (plus $1 per megabyte of attachments). The Web would be a set of AOL-like walled gardens with mutually incompatible content formats. Yay for VCASTrated YouTube! The scary part is that there were projects at former Bell Labs developing systems along that line under the PCS label. *shudder*
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It's also having structured, simple unlimited data plans, which is really what makes the iPhone shine.
T-Mobile has had those for half a dozen years for the Danger Hiptop.
It's about expanding the iTunes/iPod/iPhone/iTunes Store ecosystem with a carefully planned strategy.
Yes, that is what it is about: vendor lock-in. And that's why Apple is evil.
It may be that someday, Apple really can't "afford" carrier exclusivity. And you know what? I'd imagine we'll see a change, then, won't we?
You don't seriously believe that Apple has a lot of time on their hands? This isn't the desktop market, where Microsoft's monopoly has slowed progress to a crawl; Apple's features and UI will be cloned and improved upon within six months by a dozen phones, and at half the price.
Last week a guy from America was here in our Tokyo office and he wanted to use his iPhone SIM card in a japanese phone, bummer, does not work. It worked with his previous plan, but well, iPhone SIM is so locked down, nothing works. Plus, the iPhone has no G3 so there is no way it will work in Japan anyway.
Another example why lockdown is just plain stupid.
"Freiheit ist immer auch die Freiheit des Andersdenkenden" - Rosa Luxemburg, 1871 - 1919
Fitt's law. You're wrong, Apple's UI team is right. Not an opinion, either. UI design is science, not opinion.
Also, Ubuntu has a very nice UI, but Windows? I remember installing a wifi card in a Windows laptop. At one point, the installation instructions told me to open the context menu on a entry in a subment of the Start menu to get to the card's properties. Really? That's less confusing than Mac OS? You're probably used to Windows and thus find Mac OS X confusing. Fair enough. For somebody who uses both regularly, the winner is obvious.
Again, you're wrong.
I think you don't quite understand how usability research works. This isn't some kind of voodoo where somebody simply determines that something works better than something else. These are valid studies, and there are rules that can be derived from doing these studies which apply to most people. GP mentioned the buttons in dialog boxes: On Windows, the default dialog box is a YesNo box. There's some text, then there are "Yes" or "No" buttons. On the Mac, the buttons contain verbs. For example, if you clean out the Recycle Bin, Windows asks you: "Are you sure you want to delete [your file]?" with "Yes" and "No" as possible answers. Mac OS X asks you something like "Do you really want to delete the Objects in the Trash? You can't undo this." with "Cancel" and "OK" as possible answers (I'm on Windows right now, so I can't check the exact wording). This is certainly not perfect, but it is better than Windows, because "Cancel" obviously cancels what you're doing, while you can't be sure whether "Yes" or "No" cancels the action on Windows. So, did somebody just set up this rule that you have to use verbs in buttons? No, Apple did a lot of usability studies when they originally came up with the Mac interface (read Tog's book on the subject for some interesting anecdotes about this). They found that people were faster and had less errors when the buttons contained verbs, because most people simply don't read the text in the dialog boxes (and if you have done support, as you claim, you'll know this).
Another example is the menu bar you mention. You complain that the "universal" menu bar on the Mac is dumb. That's an opinion. Usability tests have shown that it is, in fact, faster and less error-prone than the "menu bar inside the window" solution on Windows an Linux. Why? Because you can't overshoot the top-of-window menu bar. According to Fitt's law, entries in the menu bar have infinite size. You just jam the mouse to the top of the screen, and you'll hit the menu. Again, the Mac's solution is not perfect, especially if you have multi-window setups, but it is better than the Windows solution, despite of your dislike for it.
Which leads me to my final point: Unless you do studies, you don't know what solution is best, which is probably why you consider usability research BS. Results gained from studies often don't fit personal experience. The reason for this is not that the research is BS; the reason for this is that you can't evaluate usability objectively when you're observing yourself. A great example for this is keyboard shortcuts. People who use keyboard shortcuts think they're faster than using the mouse. Actually doing usability studies shows the mouse generally wins out, except for some specific, often-used shortcuts like Ctrl-C and Ctrl-V. This is science; hundreds of tests have shown this again and again. Your personal experience does not fit the actual facts. You can't evaluate usability based on your feelings (although a happy user is, of course, important, too :-).
As with the original Mac the raw hardware performance largely fades into the background. EDGE is slow, sure, but even in slow mode the iPhone browser beats the tar out of the using the lousy-to-the-point-of-useless browsers on other 3G-capable phones I've used. What the hell good is a fast network connection on those things, when you can't even use it?
In terms of using the thing as a phone, I figure it's worth waiting for both 3G and the AT&T exclusivity arrangement to work itself out. In the meantime it's possible to get most of the usefulness of the device without AT&T, by far the major suckage point of the iPhone, even though it does mean giving up even EDGE support. I bought an iPod Touch as a replacement for my Palm T|X, now that Apple has come to its senses and shipped it with a full set of applications. The improvement in interface versus the Palm series (a product line that has thoroughly stagnated over the last three years) is really hard to overstate. I don't know what Apple's expectation of market is, but their "music player" is the best PDA on the market by leaps and bounds. (With one major misfeature: Needs a louder alarm!) I kind of wonder if Apple might, in the years before the AT&T contract expires, produce an iTablet that is pretty much the iPhone without the phone, or the iPod Touch with cellular data support. I have a Kindle as well and the EVDO support in it is brilliant where it is integrated well (Amazon store support) even though its web browsing feature is super-primitive to the point of being a "really need to know right now" limited tool. It could be an interesting product, although perhaps not mass-market enough.
As an aside, I can only hope that touch-style UI design takes off. It's nice to see all the other vendors scrambling to make products with those kinds of interfaces, having been caught flat-footed (although you want to skip some of the other first-gen devices; the Touch phone that Verizon is selling right now ... let's be charitable and say it feels rushed). On small form-factor devices it is the difference between "works great" and "is practically unusable". Moreover I would absolutely love a 24" touch display for my desktop, that would make Photoshop way, way more convenient (mice suck, the tablet is a big improvement but it takes a lot of training to get used to writing down there while looking up here, and the Wacomm monitor/tablet that offers the best ergonomics on the market is ridiculously expensive). The interface is vastly superior to the mouse.
So, getting back to my original reason for replying, I don't see that the iPhone hardware is really all that mediocre. There are a couple of design decisions, like EDGE and the fixed battery, that annoy a subset of the population but in the greater scheme of things appear to make little real difference (especially in the US which has narrow deployment of 3G networks). In terms of display, and interface, and application performance, and WiFi networking the devices thoroughly embarrass the competition. This is so much the case that I often wonder if the people complaining about lousy hardware have actually used an iPhone. It works more smoo
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