Apple's iPhone Partnership With Cingular Could Drag It Down

We hate to be a wet blanket but we were baffled at the end of Apple (AAPL) announcement today. Of course, like Apple users, we love the new device but to see a carrier guy come out on stage and say that they would be the exclusive distributor in the US?! Buying the device requires a two year contract with Cingular?! This is so ’90’s.

Since the device supports multiple networks and has built-in WiFi why wouldn’t this be a SIP or Skype phone? Steve talks about “skating to where the puck is going to be” and doesn’t embrace VoIP? Weird.

I know they want to move units and maybe felt that there are not enough potential buyers in the Skype/SIP universe but that is remarkably backward looking.

Since I’m not an expert and all this just hit the wires maybe I’m missing something. They could add Skype/SIP affinity down the road but it’s unlikely Cingular would do this deal without wanting to cut that option off or delay it as long as possible.

AppleTV is certainly a step ahead from what was announced in September but where is a new video iPod? Ah well, 2007 looks like a building year to us. Apple has a strong base and good momentum but the Cingular deal is a real anchor.

Comments

[Julian Ivan...:]

"Since I’m not an expert and all this just hit the wires maybe I’m missing something. They could add Skype/SIP affinity down the road"

Yes, they could. The iPhone runs OS X, which has a Skype client. I'm sure there will be one tailored for the iPhone pretty soon, once developers get their hands on the SKU. Relax.

2007 Jan 09 05:06 PM

[reinharden:]

SIP/Skype/VOIP/et al is nice and all but...um...without a service provider providing at least a data layer connection, how do you think the danged thing would work once you're out of range of a WiFi basestation?

To sell world-wide, Apple had to use GSM. That means they're dealing with Cingular or T-Mobile in the United States. Cingular has 5 times the customer base and a substantially larger network. If you're forced to deal with one, the choice is obvious. Although I can't imagine that T-Mobile was thrilled by the decision.

reinharden

2007 Jan 09 09:22 PM

[reinharden:]

In the interest of accuracy, the latest numbers I found said 29.5 million subscribers for T-Mobile and a touch under 60 million for Cingular. So that's only 2 times the customer base, not the 5 I said before.

reinharden

2007 Jan 09 09:29 PM

[Manny:]

reinharden stole my words exactly. Not a very well thought out article. Just to add, Cingular collaborated with Apple on some of the underlying technology, if it was in exchange for exculcivity who knows, but its not surprising that Apple chose Cingular.

2007 Jan 09 10:00 PM

[Kris Tuttle:]

Helpful comments and I'm feeling more relaxed. If Apple can evolve this to more carriers and VoIP providers can leverage the platform I'll be happy. As for what happens outside of WiFi? The answer is nothing and that's fine with me. I have WiFi everywhere I am in Boston, Paris and NY. With WiMax and other broadband services in the next few years it will get better. Yes you have to pay but have 100% choice as to who and how. Not true with carrier-based technologies that lock you in and charge you up the wazoo.

I lust after the new iPhone as much as anyone but just want it to be open and not tied to some crappy carrier.

2007 Jan 10 05:55 AM

[reinharden:]

At the moment, according to the most recent numbers I could find, 78% of world-wide mobile phone subscribers have access to a GSM/GPRS/EDGE network. However, once you move into the "heading into 3G" environments, it fractures into a dozen 2.5G, 2.75G, and 3G technologies.

As a shareholder, I heartily approve of making sure that you can address 78% of a billion unit market when you go to market.

AAPL should be able to easily make new versions that follow the cellular protocols as they come available. In particular, I don't think there's any way they ship in Asia without moving upscale in terms of protocols. Certainly EDGE won't cut it in Japan and Korea and probably not even China.

reinharden

2007 Jan 10 09:44 AM