Good analysis. The iPhone was a long time coming - it was predicted in 1979...

Apple is locked into a 5-year exclusive agreement with AT&T. This isn't a possibility for at least that long.

Grogan,

Wonder why it's such a ridiculously long term? Think about how Verizon will be hurting after the release of the 5th generation iPhone.

Of course, all agreements can be renegotiated if one party has the others over a barrel.

And what happens when potential iPhone buyers are put off by the shoddy AT&T customer service and inferior network? It's already happening with reports of AT&T customer service hanging up on iPhone purchasers, forcing people to buy accessories, etc.? Jobs has already spited news outlets who haven't positively influenced the public's perception of the iPhone - what's his reaction going to be when the iPhone gets dragged down with AT&Ts reputation?

Just look at the Europe carrier situation and now you can see why Apple chose AT&T - AT&T needs the iPhone to remain competitive. You can easily assume they made every concession necessary to win the contract including giving Apple full control over the selling price - something Vodafone won't agree to do.

Their decision had nothing to do with "taking over the wireless industry". It was a matter of contractual control over how the product was sold.

September 1st ~folks still buy Verizon to avoid the suffering of AT&T Wireless users.

I find it interesting how Apple continues to diversify the business into different transactionally-based models (beyond the hardware). First iTunes from which it gains revenue for every purchase of a song and now with the iPhone I heavily suspect Apple gets a cut of each iPhone-related AT&T monthly bill in some form.

It's all about the interface to most users. Only the die hard techies really care about the plumbing. Your average user only cares about how cool the device is and looks. So you're right its the networks will succumb eventually

http://tinyurl.com/2ftbxh

I travel a lot and got to a lot of business meetings ...

It used to be that you never saw a Mac laptop in anybody but a student's hand ... now MacBooks are EVERYWHERE. It's more shocking now to see a business man with a Dell than a Mac.

I think Apple is making a lot more of an advance in selling computers to the business world than you give them credit for.

I think your view makes sense, but only taken as somehting given that people WANT an iPhone.

Now let's take a different approach. How many people have an iPod. I mean not the 62% Jobs claims, but in total. There is a lot of people who actually survive without an iPod.

"Jobs nows everyone will buy an iPhone".
Are you sure? Pay that amount of money for an iPhone when you can get a phone for free with the contract?
Believe it or not, there is a lot of people out there who have phones who do not even know an iPhone exists (and are not bothered).

Reality check guys. Buying an iPhone is not as buying an iPod. And anyway, the iPod is leader in personal MP3 players, but not everyone has an iPod. Luckyly, they will hit 5% of phone market.

Flammae,

I'm not basing this on the current, expensive 1st gen iPhone. There will be cheaper variations for the masses, just like Apple created the iPod Mini, Nano, and Shuffle.

Apple has an excellent shot, given a few years and a few generations of the product, to ultimately sell more handsets than any other handset maker.

And you're right that buying an iPhone is not buying an iPod -- buying an iPhone will REPLACE buying an iPod.

I've played with an iPhone and it's pretty impressive, but to call it revolutionary is quite amusing. In many reguards the phone is a step backwards in usability, but it does have more redeeming qualities than bad ones. The worst part about the iPhone has nothing to do with Apple at all. As everyone points out, it's the network that sucks, but they don't point out all of the reasons, it's the network that AT&T says will be used to spy on customers for the benifit of teh RIAA, and will lead to an erosion of our privacy. People died died defending that privacy, it's not something we should easily forget and turn a head to, whether you think it revolutionary or not.

Rough guess: Verizon turned him down, and T-Mobile didn't want to cannabilize interest in its own Sidekick. Jobs went with AT&T because he had no other choice.

I was with you up until the last paragraph. Apple is turning away from the computer industry and becoming more and more a consumer electronics company. They are moving toward becoming an American Sony and moving away from trying to be Dell. I'll go so far as to say that they aren't looking to gain marketshare in PCs. They're looking to become a gadget maker across as many markets as they can.

Again, this because Jobs is no dummy. He knows corporate sales drives the PC market. He knows graphics designers and film editors aren't a big enough demographic to support Apple. He knows that the PC market was lost a long, long time ago and in the age of web apps and mobile devices, the PC is incidental.

Charles H,

I'm sure that Verizon turned down Jobs, but that's because he was asking for terms they wouldn't agree to, and he didn't have leverage yet -- that's what the next few years will be about, getting leverage.

"in the age of web apps and mobile devices, the PC is incidental"

That's like saying IM killed email. The PC, especially the laptop, is still essential hardware at the center of the digital world. Would you be willing to do ALL of your computing on a three inch screen? There's still a huge opportunity to grow PC marketshare.

Good thoughts. The same strategy is done with the iTunes Store, as he got all the major labels to offer up music, and starting with Disney is hoping other studios will add their movies. It's a matter of having such a great service and product that the content owners feel obligated to offer their stuff on it.

I believe Apple originally approached Verizon and they turned Apple down.

I think you may be wrong about Apple's desire to sell unlocked iPhones. The reason they went with AT&T was the control over the user experience- the same reason Verizon wouldn't bite. The gamble AT&T took was a market share play and it will work but...the entire wireless business has now been turned upsidedown. The truly revolutionary thing Apple is doing is forcing the industry to offer free wi-fi access and a real browser, meaning they cannot charge for individual services. Watch how fast iPhone-specific web apps roll out. This would not happen if Apple wasn't running the user-experience not only on the device but also with the network- something that they could not do with unlocked phones.

MartinE,

You're absolutely right about controlling the user experience, but Apple can still do that in a "network agnostic" environment. The ideal user experience is a phone that has access to WiFi and EVERY cell network, so that it can optimize for the best possible signal in every location. Then the consumer pays whichever network provider they happen to use with some kind of centralized account. Sounds far fetched now, I know, but Apple wants what's ideal for the user, and that is what's ideal.

Switching between WiFi and wireless is truly disruptive, but it's only the first step.

I'm with MartinE here -- beyond the buzz, people buy Apple gear because they trust they will have a great user experience (ease of use, intuitive, etc.). That is their brand. So...look for things where the user experience sucks or is cost-prohibitive (e.g. wireless, web apps) and you'll see Apple making their move. It's good for everyone.

Very interesting conversation here. What if the US market is just the first strike in a much bigger picture? Many in the EU wonder why the iPhone was launched in the US before the more 'advanced' mobile markets of EU. Is it because the leverage Jobs gets from the hype in the US what he needed to make the carriers in the more competitive and lucrative EU markets bend to his will? Will the iPhone appear with multiple carriers in the EU? In Asia?

Your theory rests on the assumption that other handset vendors can't design a good phone. Of course they can.

There are very talented designers and usability people at Nokia, Motorola, and other places. All they need is the executive backing to prioritize user experience, as opposed to the other business goals that are currently given more weight.

If it turns out to be a competitive necessity for other carriers to improve their user experience (which I think is likely to happen), then they can request it, and Nokia etc. can deliver it.

Jacob,

The real issue, then, is whether that "competitive necessity" will be sufficient for those companies to adopt the singular focus on usability that Apple has -- that kind of reorientation can be done in theory, but it will not be easy, and Apple will continue to charge ahead, setting the bar higher and higher.

Apple's avowed goal is to grab 1% of the mobile phone market by the end of 2008, a goal that most analysts are already saying is "extremely aggressive".

1%.

Similarly, comparing the iPod story to the iPhone is ludicrous. Apple doesn't depend on anyone to sell iPods, but they depend on carriers and regulations of every single country they will try to sell the iPhone to.

Taking over the wireless industry? Not any time soon.

Scott,

Agree that it's *usually* a slow process for a company to increase its focus on usability, until it finally reaches the point of becoming a user-driven corporation (where not just the screen design and Web design, but the product strategy itself is driven by user needs).

In my model of usability maturity stages, I call this later step stage 8, and Nokia is probably only at stage 5 right now. In my experience, it takes many years to progress through the upper stages of the model through natural evolution. (Whereas it's fairly quick to progress through the initial stages, since they are so primitive - but that's where most companies are right now, so that's why I am generally an optimist for huge growth in the usability field.)

Usability maturity model: http://www.useit.com/alertbox/process_maturity....

However, my point in my previous posting is that we don't *have* to wait for natural evolution to take its time. If the CEO makes the decision to prioritize usability and truly drives that as one of the company's main goals, then faster progress is definitely possible.

If *all* the other companies continue with business as usual, then yes, they are doomed. But they *could* change.

And we don't have to rely on just Nokia - I am just using it as an example because I know that they have a bunch of good designers and usability specialists. There are several other companies where the CEO could decide to make usability job #1. (But of course, it can't just be a slogan; they have to spend the money and drive the company in the right direction. Considering the billions at stake, I think that'll happen in at least one company. Usability is cheap compared to 10% world-wide market share in mobile.)

I do not think Apple wants to sell unlocked iPhones unless they get a piece of the recurring revenue. The giant sucking sound coming out of AT T right now is monthly revenue for all service plans.

Its true that Apple doesn't need AT T but they will gladly lock in users for long term revenue sharing.

What a great conversation. I’m with you on this 100%, Scott.

I moved to at&t to get a Blackberry Pearl because Verizon didn’t have them. I would have moved to get an iPhone even faster. I was with Verizon since the late 90’s! While everyone says that the at&t network is crap, it has yet to impact me. Guess I’m not a power user – it’s good enough to meet my needs. I also bet I’m not that unique.

It didn’t take me 10 minutes after hearing about the iPhone (and wrestling with MS Vista) to decide that my next machine will be a Mac AND I can’t wait until the day that I can lose my iPod in favor of the iPhone.

That day will not be until next summer when the hype has died down, my current equipment is due for replacement, and Apple and at&t have worked some of the bumps out of the process.

Monday, July 2, 2007 - 3.0.017

Stupid Is -- As Stupid Does - Part XVII

Remember, in my world there are no stupid people, only human beings -- which means that we are each capable of saying and doing some very marvelous things in addition to some very stupid ones. The object is to increase the former at the expense of the latter.

Since this is my web site, i guess that I have the power to make a little switch now and then -- the world is NOT all about our stupidities.

Take Scott Karp's Publishing 2.0, where he speculates, "How Apple Will Use The iPhone To Take Over The Wireless Industry." 

Jeremy Toeman responded with, "Why Apple will NOT Take Over the wireless industry."

And Donna Bogatin piled on with, "iPhone Flash: Apple to 'TakeOver' Microsoft AND Google."

Both Jeremy and Donna missed the real point, IMHO, where Scott wrote:

"From there, Apple will turn its attention to the last great battle -- PCs. Once you own both an iPod and an iPhone, you're going to look at your Windows PC and ask yourself -- what am I thinking?"

Now connect that with a couple of letters that I sent to Steve Jobs back in February of '06

02/21/2006 - Will Apple Adopt Windows...

02/25/2006 - How to Capture the DeskTop...

And we might get a small glimpse of Mr. Jobs intentions. The PC DeskTop is up for grabs -- sooner or later, somebody will stake a claim -- why not Steve Jobs??

The stupidity in this case is the the absence of any effort in that direction so far. The fear of Microsoft is wearing off -- slowly, but surely.

And, naturally, I am here to help -- in any way I can. Hey, Scott, do you want to expand on your thoughts in this area??

To be continued... naturally!!

Doug Skoglund
SandS Software, Inc.
skoglund@pdmsb.com

BTW: If you wish to discuss this matter you might check my off-line forums at http://nationalcomputerassociation.com

I seriously doubt Jobs has any designs on taking over the mobile industry. Given its size that 1% percent figure is probably what Apple feels is the minimum necessary beachhead to establish its presence.

Apple is all about experience. Yes, the iPhone is a nice, user-friendly phone, but more than that, it's one more compelling reason to buy a Mac.

This is the brilliance of Jobs/Apple. They find ways to extend the Mac experience into new product categories with devices that are good standalone, but rock when paired with a Mac.

The Mac is the core of Apple user-friendly marketing message, and every iPod & iPhone reflects and enhances that message.

As more things go digital, they radically increase in complexity, and consumers are having increased difficulty dealing with it all -- hardware, software, service plans.

That super-friendly, well-integrated product line is going to serve Apple well in the coming years, regardless of whether they hit some analysts' arbitrary market share numbers.

-- Course, with PC iTunes and now Safari, what constitutes a "Mac" may soon completely change. ;)