A Crippled iPhone: Very Bad Idea

Olga Kharif speculates that AT&T might release a crippled iPhone later this month:

The exclusive U.S. iPhone service provider is considering cutting the price of its monthly service package or offering a range of lower-priced plans, say people with knowledge of the company’s thinking. One plan that could be introduced as early as late May would include limited data access at a $10 monthly reduction, the people say.

This is a stunningly bad idea. For one thing, $10 a month is not very much money, considering that the cheapest iPhone plan is $70 per month excluding text messages, and unlimited texts (which aren’t included in the unlimited data plan) cost an extra $20 a month.

More to the point, unlimited data is intrinsic to how the iPhone works. Everything from visual voicemail to thousands of different apps, including very data-heavy apps like Google Maps, relies on the fact that the marginal cost of data is zero. If you start limiting data access, you’re essentially limiting the use of the phone itself, and it becomes something to be mistrusted rather than something to be loved. If I press the Mail button by mistake, how much data will I inadvertently use? What happens if I think I’m happily surfing on WiFi, but then for some reason get booted onto the cellular network?

The iPhone was the first phone to be fully integrated into the internet; unintegrating it by introducing a limited-data plan would be a horribly retrograde step, especially when lots of other sexy new phones, including the Palm Pre, are about to be introduced.

Incidentally, at the end of that NYT article, we find this:

“Phones don’t stand the test of time,” Mr. Donovan said. “I look at my personal handset museum, and the coolest thing I had in my pocket eight years ago is laughable.” When it comes to phones, he added, “there are no ‘Citizen Kanes’ out there.”

Not true.

Comments

[LongAAPL:]

Right on, felix. I don't think Apple will go for restricted bandwidth since it would essentially put the brakes on it's own App Store. Anybody with a brain has learned that the App Store and the platform development are what makes the iPhone unique and far ahead of the competition. I just don't see Apple ever putting a customer in the situation of having to choose between e-mail or updating an app or buying an application or buying an iTunes music/Video.

Olga Kharif doesn't understand Apple.

May 18 01:13 PM

[jmmx:]

If they could get a plan down to $49.99 it would be a big deal. There are many people who are very cost conscious, and would buy the plan at that price, even if limited data access. Think of students, they are almost always in wifi range. And that $20/mo is $240 / 2-year contract.

May 18 01:14 PM

[XRTrader:]

If even ONE (net) individual is compelled to buy the phone because of the $10 per month reduction, then this will be a net gain for AAPL and T (notice, i say "net" as there will be a small number of people who would have bought the phone anyway, but will instead go with the reduced cost plan). While i agree that most will opt for the regular plan, there is a market out there for lower priced limited data plans...T should begin to fully explore it to continue/maximize this growth story. As long as they do it right, the risk of canabalizing their own business and reducing margins is limited.

May 18 01:18 PM

[Frohickey:]

Its up to AAPL to stop T from crippling the iPhone. Phone companies, especially AT&T need to fire its executives that make these stupid ideas. Instead of substantially upgrading their infrastructure to allow more data, they start charging or limiting service in order to make do with what they have.
Remember ISDN, that technology died because of the telcos.
Remember DSL, that technology survived because the smaller startup companies made it work, and the telcos had no choice but to start offering it at attractive rates.

May 18 01:30 PM

[dvd:]

Title and content mismatch... a limited data plan does NOT equate to a "crippled" iPhone. Many folks have wifi much of the time for which a limited mobile carrier (at&t) data plan provides FULL functionality at lower cost. Use wifi when available, and when not, mobile carrier to access the internet.

May 18 01:40 PM

[spamiard:]

Since when is MORE consumer choice a bad thing? I welcome this step towards a freer market. In the future, perhaps I will no longer have to violate Apple's EULA to get the iPhone feature set I want for the price I'm willing to pay.

May 18 01:59 PM

[Java User:]

Limited data plan makes sense since you have wifi. You only need AT&T network on road road trip.
Recently participated in LifeInPocket's private beta for iPhone. This app needs limited bandwidth while offers every thing you need on the road, includes voice activated navigation, business search, location msg, etc.
They are offering it for other phones for free while iPhone private beta is by invitation only.

May 18 02:03 PM

[jmmx:]

While I would not mind seeing the price reduction (I would consider getting one for my daughter at $49.99/mo) - I would rather see Apple go to other carriers.

Unfortunately, Apple has to be very careful to maintain a dominant position in the smartphone marketplace. Here I think they do not have the luxury of simply being "best of breed, and keeping the discriminating customer. That is why they may have to put out cheaper phones/plans.

So, I think it is likely that they will present a new iPhone in June that is much faster and a better screen, and reduce current models in price (perhaps without GPS) to go with the cheaper plans.

Just a thought.

May 18 02:10 PM

[LongAAPL:]

So, you think LifeInPocket will be useful if you are constantly worrying about running out of data and paying insane rates for out of plan minutes?

Sounds like empty pockets to me.


On May 18 02:03 PM Java User wrote:

> Limited data plan makes sense since you have wifi. You only need
> AT&T network on road road trip.
> Recently participated in LifeInPocket's private beta for iPhone.
> This app needs limited bandwidth while offers every thing you need
> on the road, includes voice activated navigation, business search,
> location msg, etc.
> They are offering it for other phones for free while iPhone private
> beta is by invitation only.

May 18 02:18 PM

[Alias:]

The bulk of my use is on wifi. If I can save $10 month, I am all for it. The key is I'll have the choice to see if unlimited data or limited data is more economical for ME. Why YOU don't want ME to have that choice is probably a different conversation than whether saving $10/month is a good thing for ME.

May 18 03:02 PM

[waf76:]

The overages will be so much in excess of what the data plans are that this will be more costly in the long run to the consumer.

May 18 03:53 PM

[User 416264:]

"The iPhone was the first phone to be fully integrated into the internet..." LOL, just lol. Since when was the iPhone the first smartphone? (ie. Windows Mobile, Symbian s60 and s80, even linux-based phones...) Creating limits on data for these types of phones is nothing new.

May 19 12:55 AM

[mollytjm:]

i don't think this does anything bad to the iPhone... it's the consumer who would be making the choice and they could always go up in a plan if they found it didn't work for them. however... $10 isn't much to save a month...it doesn't seem to me that it would be much of an incentive and might just lose ATT a lot of $10s a month.

my guess...they're worried about Verizon and other carriers eventually getting the iPhone...and they're right to be worried. so they're trying to come up with a way to get more locked in customers NOW. maybe it's worth it to them.

May 19 08:45 AM

[brewer:]

I agree with mollytjm, the discount needs to be at least $20 to be a meaningful discount.

May 19 11:26 AM

[schmiddi:]

the phone you should have shown at the end is the Ericsson T28 ... www.retrobrick.com/eri...
this is a 1999 phone that is still a great phone today.

May 19 12:28 PM

[coloneldebu...:]

Seems to me this is aimed at getting the people who are sitting on the fence about getting an iPhone. Get the fence sitters who then want to upgrade because they got a taste of the jesus phone. It's not like Apple is hurting for cash these days.

May 19 12:34 PM

[Plantinseeds:]

IMHO I think yall are all nuts. I grew up without cell phones and personal computers. I was forced ( by the company I worked for ) in 92 to get a bag phone. I was then forced to a hand held in 02 by Cingular from my bag phone. I have a Motorola V550 that has been going for 5 years. I can make calls and text. I don't do e-mails or any internet ( except for downloading of new ring tones ). I have a computer @ work and @ home for that. If I need to go some where where I have not been before, I just break out my atlas ( it cost me $5.00 4 years ago ). People will gripe about a $25 a month land line bill but have no problem with a $200 a month cell phone bill. If you are spending that much time on any phone you don't have a life.

May 19 10:12 PM

[Eric-59:]

Modern marketing is about confusing and tricking the consumer into spending more than they genuinely anticipated.

Many will stay within the the limit and some will use up the $10 in extra services making the reduction moot. Many however will certainly hit the wrong key or have an urgent need to "use this app now" and will certainly pay more than planned and that is clearly a bonus for the service provider.

The savvy consumer will either stay in the limits or buy the unlimited plan. I'm not sure where in marketing it says that the duller consumer cares about anything but the concept that they have a cool phone.

May 20 09:06 AM