By Carl HoweOne of my colleagues in the ex-Forrester Mafia is Paul Callahan, who rightfully questions why Apple's (AAPL) iPhone doesn't support high speed, third generation (3G) phone networks and/or High Speed Download Packet Access (HSDPA; who comes up with these absurd and untypable acronyms?). Instead, iPhone only supports the ubiquitous GSM/EDGE standard. I'd argue there are three pretty compelling drivers for this conservative decision:
• The exclusive Cingular deal. Despite its marketing, Cingular doesn't exactly have a ton of support for HSDPA yet in its network. Further, the chip support for this standard in the iPhone would raise its cost dramatically, and the price is already at the upper end of what the market will bear. Rather than advertising their exclusive partner's lack of coverage to the leading edge adopters of iPhones, Apple chose instead to save high-speed support for another version -- possibly one that could make use of the multi-megabit wireless networks outside the US.
• The bundled apps. Think about the applications demonstrated on the iPhone. Which of them require high-speed real-time data? Email doesn't unless you're getting huge attachments. SMS and chat doesn't. And all music and video is sync'ed via the dock, not done over the air. Only Web surfing has the possibility of dramatically illustrating the low speed of the EDGE network, and that's only one element of the phone experience. As Jobs said, the iPhone emphasizes a great phone experience first and foremost, and GSM/EDGE is going to satisfy 90% of the iPhone and Internet experience just fine.
• Built-in WiFi. The reality of consumer usage is that not that much Web surfing goes on while you're driving or taking the train, while a lot of it goes on in areas that have WiFi wireless coverage. So even for high-bandwidth apps like Web surfing, the iPhone can still deliver a decent high-speed experience if the user is in a location with WiFi. I say decent because anyone expecting Mac Pro Core 2 Duo speediness from a hand-held processor is going to be sadly disappointed, regardless of how fast the network is.
Remember, Apple's design goal of the iPhone was to reinvent the mobile telephone to become more powerful, easier to use, and a great multi-media device. Every design decision has tradeoffs. The iPhone pushed the envelope with radical hardware design, more radical software, and a completely new user interface. Apple went conservative on the phone network since it was, after all, their very first phone. If this one works and sells well, they'll get to do more versions with more bells and whistles, just as they did with the iPod. If it didn't work because of some glitch or chip availability problem with the high-speed networking gear, they wouldn't sell any, and that would be that for Apple phones. Which decision makes more business sense?
Even using good old GSM/EDGE technologies, my prediction is that Apple will sell every single one they can build for the next 18 months. Those that just have to have high-speed can wait for iPhone 2.0. But for the majority of phone users, iPhone is plenty drool-worthy as it stands.
The iPhone on display