Editorial - Apple and Compromise in the Mobile Phone Market

| Editorial

Prior to Macworld last week, there was a lot of speculation about how Apple would approach the mobile phone business. Hereis a list of issues and how Apple ended up dealing with them. The first three were based on compromise and the last three were based on no compromise at all.

1. Pick a delivery mechanism. Previously, I tended to doubt that Apple would become a Mobile Virtual Network Operator. The reason is that as a MVNO Apple becomes a competitor and a threat in the market instead of partnering with a strong ally. Since Cingular/AT&T is Appleis partner for its own employeeis cell phones, working with Cingular made sense.

2. Avoid upsetting the partner. Once Apple selected a carrier partner, it didnit make sense to make the phone a hybrid phone, that is have the ability to make voice calls from one Wi-Fi hotspot to another. Thatis just lost revenue for the partner. Say it together. Donit annoy the partner.

3. Set monthly fee. I heard people talking on the flight from San Francisco to Denver last week about a premium monthly fee of $80/month to support the iPhone. Thatis just chatter, but it makes sense that the monthly fee will be steep, whatever it turns out to be, because of the modifications Cingular may have to make to its network to support visual voice-mail and other services. In any case, Apple has sized up what people are willing to pay to be free of mobile phone madness. It is probably not far off the mark.

4. Manage user experience and developer opportunities. Developer opportunities will be minimal. Steve Jobs wants a secure, dependable phone. No mucking around inside the guts of this phone will be tolerated. It truly is an iPod that makes calls. What we know now is that Apple had a better vision for how an iPod that makes phone calls would be presented and marketed than any of the rest of us. Since the hardware and OS X are so tightly integrated, I doubt if weill see Linux hacked to run on this device. After all, it only has one physical button.

5. Compete with yourself. Thereis an old saying. "Compete with yourself or someone else will." But few companies have the courage or vision to follow that advice. Apple did it by limiting the Flash memory in the iPhone to 8 GB. Now, do you want an 80 GB 5.5G iPod or do you want an iPhone? Yikes, you need both. You just may not always carry both at the same time. Bingo. Appleis problem solved.

6. Clarity of vision creates switchers. Recently I wrote about Appleis clarity of vision with their new phone. Thatis the only way to overcome constraints based on partnering with a legacy mobile phone provider. There are trade-offs. Surely, many customers have been annoyed, even outraged by the service theyive received from Cingular in the past. Others are probably very happy. The only way to make up for partnering exclusively with one of the major carriers is to make the iPhone so appealing that one will pay any price. Even switch to Cingular to get this phone. Itis a calculated gamble. And itis a new world for Apple.

One final note: I canit wait to see the "Hi, Iim an iPhone ... Iim a Blackberry" ads on TV. Ideas welcome.

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