The huge success of the Apple 4S, especially its Siri voice interface, has brought about the first big choice of Tim Cook's reign as Apple (AAPL) CEO.
As a result, there's a growing divide between “data hogs” and the rest of the data universe, with 1% of users consuming half of all traffic, and 10% consuming 90% of traffic.
But these 1% 'ers aren't investment bankers and CEOs. They're just the leading edge of a growing wave, people who are taking advantage of the latest kit (as the Brits would call it). From Apple.
Why does this matter to Tim Cook? Because all the big telcos, not just AT&T (T) but Verizon (VZ) even Sprint (S), are now limiting downloads from these heavy users, while they fight to catch up. As the number of Siri users grows, the pressure will mount, and the latest estimates are Apple will sell 125 iPhones this year alone.
Several things can happen:
- Telcos could dramatically raise prices on these “data hogs,” who aren't all rich. Those who are not rich could wind up blaming Apple for their financial problems.
- Apple could find a way out for these data hogs, buying a network like Sprint's.
- Alternatively Apple could give people simple hints on reducing the cost of their data usage, like seeking out free WiFi, and agitate for more consumers to open their networks to mobile users in some way.
The danger in the first case is that Apple gets blamed over something it has no control of, and iPhone sales are reduced by the cost of using them. The danger in the second case is worse, as I've written about before here – owning telco infrastructure is a losing game. The danger in the third case is it's a short-term fix to a long-term problem, something Apple doesn't like.
Reportedly, Steve Jobs thought seriously of buying a telco before launching the iPhone, seeing that this would be a problem. As Paul Kapustka wrote at Muni Wireless, shortly after Jobs' death:
Watching the big cellular carriers trying to justify their existence in an iPhone world is kind of like watching dinosaurs roam the tar pits as the meteors crash down - they are still big enough to eat most of the other creatures and you need to stay out of their way so they don’t crush you, but soon their days will end.
What's needed, as Kapustka says, is someone who will build a network as powerful as the devices coming onto it, with simple pricing plans that encourage abundant use, rather than discourage it.
That's now Cook's challenge. The question is, will he take it on?
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.