June 30th, 2007

How Apple Will Use The iPhone To Take Over The Wireless Industry

by

Steve Jobs isn’t stupid. He knows that AT&T Wireless sucks. So why lock the revolutionary iPhone into a crappy network?

Because Jobs knows that everyone will buy an iPhone anyway, even if they hate the network. And that, as Umair points out, shifts all the power to Apple.

Apple will significantly improve the already revolutionary iPhone in subsequent generations, and lower the price, as they did with the iPod. With each new release, more and more people will look at Verizon and Sprint, who don’t carry the iPhone, and say, WTF!?

The real battle for control is between Verizon, which has hands down the best network, and Apple, which now has hands down the best handset. The tide will turn when die hard Verizon customers start switching in significant numbers to AT&T to get an iPhone. People like me, who stood firm on the network is more important principle, will crack under the pressure. There will come a tipping point, then, when the cost to Verizon of refusing Apple’s terms will be greater than losing customers to the iPhone.

What Apple really wants is to sell unlocked iPhones that can be used on any network — and I believe they will pull it off. Thus, Apple will do to the wireless carriers and other cell phone makers what they did to the music industry and makers of digital music players — they will completely take over.

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?

Comments (59 Responses so far)

  1. (codinghorror.com) 5 points by tocomment 5 hours ago | discuss[IMG]10.[IMG]Tutorial on developing a Facebook platform application with Ruby On Rails (liverail.net) 5 points by brett 6 hours ago | discuss[IMG]11.[IMG]How Apple Will Use The iPhone To Take Over The Wireless Industry (by making the network provider irrelevant) (publishing2.com) 22 points by gibsonf1 1 day ago | 11 comments[IMG]12.[IMG]

  2. And that was last night, so I’ve had almost a full day of productivity already, and everything is much, much better. At the end of the day, however, Apple doesn’t need the iPhone to convince people like me about the desktop. Companies like Sony and Microsoft are doing their work for them.

  3. t imagine spending $600 and then saying “nope, I don’t like it.” Whatever else, I’d have to show my love for the object that demanded so much of my money. With the success of the Apple iPhone, some are wondering where Steven Jobs will focus his attention next. It is likely that the personal computer market will be the next great challenge. Powered by ScribeFire.

  4. So the iPhone is officially out.  I’m sure you’ve seen the news, the videos and photos of people lined up for days just to get their hands on one.  All that excitement, all that hullabaloo and all those claims that Apple and the iPhone will completely take over the wireless industry

  5. . So why lock the revolutionary iPhone into a crappy network? Because Jobs knows that everyone will buy an iPhone anyway, even if they hate the network. And that, as Umair points out, shifts all the power to Apple – Read On. Posted in iPhone | No Comments »

  6. I love this post by Scott Karp that incorporates all the potential ahead for Apple. Read all his links as well to capture who helped him get to his concise post. For as long as I have been writing about Apple and the iPhone and my concerns about AT

  7. are being slowly whittled away. When Saddam was hung, illicit camera phone footage ran on every major network for three days. We’ve crossed the snuff film barrier; all we have left is hardcore pornography as a limit to what media won’t portray.” How Apple Will Use The iPhone To Take Over The Wireless Industry “Steve Jobs isn’t stupid. He knows that AT&T Wireless sucks. So why lock the revolutionary iPhone into a crappy network? Because Jobs knows that everyone will buy an iPhone anyway, even if they hate the network. And that, as Umair points out, shifts

  8. http://www.readwriteweb.com/archives/why_iphone_may_really_matter.php500,000 iPhones sold over the weekend http://crave.cnet.com/8301-1_105-9738446-1.htmlHow Apple Will Use The iPhone To Take Over The Wireless Industry http://publishing2.com/2007/06/30/how-apple-will-use-the-iphone-to-take-over-the-wireless-industry/Big iPhone headache: Waiting for AT&T activation http://news.com.com/8301-10784_3-9738300-7.htmlHow to port ‘ineligible’ mobile numbers to AT&T and iPhone

  9. while others are in awe of what the device has done to move convergence ahead. Some think convergence is highly over-rated. Some worry about its durability. Others don’t think durability is an issue. Then there are some that believe this is a brilliant move by Apple to take over the wireless industry. Whatever your opinions about Apple and the iPhone, we can all agree that Apple has done something right. Wouldn’t we all LOVE to have people line up, or send others to line up, to buy our product?

  10. of Apple’s strategy to control the wireless industry with their iPhone. Scott Karp also added some great insights over at Publishing 2.0. The real battle for control is between Verizon, which has hands down the [�] Original post by Apple’s Strategy to Control the Wireless Industry | Personal Insights on Web 2.0, Blogging, and Business

  11. managed, through hubris and greed, to destroy the industry that they had managed to dominate. We are about to see some serious “creative destruction” in the recording world. They have no one to blame but themselves. The real winner here will be Apple.

  12. [IMG ] Open the SIM Tray Originally uploaded by bryanchang I really just wanted to show this kewl pic by bryan chang of the sim card in the iphone, so to fill the post I’ll add Scott Karp on the underlying power subtext of Apple’s choice to go 2.5GPRS-Edge : “The real battle for control is between Verizon, which has hands down the best network, and Apple, which now has hands down the best handset. The tide will turn when die hard Verizon customers start switching in

  13. . Why Tim Wu thinks it isn’t really that revolutionary. Kevin Tofel does a John Kerry on the iPhone. The Red Tape Chronicles on the iPhone. Will Jobs do to the Telco industry what he did to the music biz? Publishing 2.0 thinks so. Betting on the Apple Hype. And some non iPhone reading worth sharing. Ohio has a stolen laptop problem. Rabbi Marc Gellman on the Stem Cell Debate. A study finds that infants begin lying at the ripe old age of six months

  14. if the version of iPhone launched in Europe later this year isn’t a second iteration with 3G, for instance. Mobile phone makers have had years to get it right, and consistently haven’t. However, you can go too far in assessing Apple’s strategic nous. Scott Karp of Publishing 2.0

  15. How Apple Will Use The iPhone To Take Over The Wireless Industry

  16. have clamoured for these sorts of function for years. Will it give them the requisite kick up their collective behinds? They still have immense market power, and rising to this challenge can only be good overall. Postscript…just seen that Publishing 2.0 and Umair have made a similar point re US plays. And as for 3rd Parties…. Apple integrates its systems very well into an end to end delivery chain, from content collection through to end device…other players in more dis-integrated horizontal

  17. I love this post by Scott Karp that incorporates all the potential ahead for Apple. Read all his links as well to capture who helped him get to his concise post. For as long as I have been writing about Apple and the iPhone and my concerns about AT

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

  19. [...] Link to Article verizon How Apple Will Use The iPhone To Take Over The Wireless Industry » [...]

  20. [...] Posted by Bob Morris on July 1st, 2007 What Apple really wants is to sell unlocked iPhones that can be used on any network — and I believe they will pull it off. Thus, Apple will do to the wireless carriers and other cell phone makers what they did to the music industry and makers of digital music players — they will completely take over.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? [...]

  21. [...] Link to Article steve jobs How Apple Will Use The iPhone To Take Over The Wireless Industry » [...]

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

  23. 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.

  24. 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.

  25. [...] analysis of Apple’s strategy to control the wireless industry with their iPhone. Scott Karp also added some great insights over at Publishing 2.0. The real battle for control is between Verizon, which has hands down the [...]

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

  27. 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.

  28. 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

  29. 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.

  30. 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.

  31. 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.

  32. [...] Scott Karp believes Apple will take over the wireless industry. He contends the iPhone will get cheaper and [...]

  33. 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.

  34. [...] How Apple Will Use The iPhone To Take Over The Wireless Industry. Scott Karp with an interesting, and wholly plausible, conspiracy theory. [...]

  35. 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.

  36. 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.

  37. 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.

  38. 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.

  39. 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.

  40. 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.

  41. [...] response to the article How Apple Will Use The iPhone To Take Over The Wireless Industry, I’m opening by saying “take over” is a ludicrous claim.  Do you have any idea [...]

  42. 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?

  43. [...] Nevertheless, a blueprint for “how Apple will use the iPhone to take over the wireless industry,” is offered by Scott Karp, in six convenient paragraphs. [...]

  44. 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.

  45. [...] love this post by Scott Karp that incorporates all the potential ahead for [...]

  46. 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.

  47. 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.

  48. 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.html

    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.)

  49. 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.

  50. 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.

  51. 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

  52. [...] a fascinating take from Publishing 2.0: Apple will significantly improve the already revolutionary iPhone in subsequent generations, and [...]

  53. [...] end of the day, however, Apple doesn’t need the iPhone to convince people like me about the desktop. Companies like Sony and Microsoft are doing their work for them. Related [...]

  54. 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. ;)

  55. [...] How Apple Will Use The iPhone To Take Over The Wireless Industry (tags: iphone linkpost) [...]

  56. [...] you can go too far in assessing Apple’s strategic nous. Scott Karp of Publishing 2.0 is surely moving into conspiracy theory territory when he implies AT&T was deliberately picked [...]

  57. [...] How Apple Will Use The iPhone To Take Over The Wireless Industry “Steve Jobs isn’t stupid. He knows that AT&T Wireless sucks. So why lock the revolutionary iPhone into a crappy network? Because Jobs knows that everyone will buy an iPhone anyway, even if they hate the network. And that, as Umair points out, shifts all the power to Apple.” [...]

  58. [...] on AT&T’s crumby edge network — and I refused to buy one for that reason — I predicted that Apple’s real endgame was to break the wireless carriers’ stranglehold on handsets, [...]

  59. [...] The Untold Story: How the iPhone Blew Up the Wireless Industry is the title of a story Fred Vogelstein story in Wired. Back in June, I wrote How Apple Will Use The iPhone To Take Over The Wireless Industry: [...]

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