iDay Plus Two: iPhone Buzz Falls Back From Saturday's High

Jul. 2.07 | About: Apple Inc. (AAPL)

By Carl Howe

It's a new month, and Apple (NASDAQ:AAPL) iPhone hysteria is beginning to fade slightly. But we're still at 14,386 iPhone news stories in 24 hours, which remains about double that of Microsoft's (NASDAQ:MSFT) XBox 360 at its launch and is certainly higher than any other consumer electronics launch we've tracked.

My Forrester colleague and friend Maribel Lopez has blogged about her 8 GByte iPhone purchase and the intense agony of detoxing from her Blackberry addiction for the iPhone. She noted the helpfulness of the AT&T (NYSE:T) staff in finding her a lower cost way to add an iPhone to her account so she wouldn't have to go through Blackberry withdrawal. We'll be getting to play with her phone this afternoon, and we'll try to grab some pictures of it.

I used the AT&T iPhone locater yesterday. It helpfully pointed me to my local mall AT&T kiosk, and my entire family visited our that store enroute to seeing the Pixar movie Ratatouille yesterday. Imagine our disappointment when they reported that they didn't actually have any, but had "virtual availability" through online ordering in 2 to 4 weeks. Not quite bait and switch, but we'd recommend calling ahead rather than relying on the AT&T iPhone locator.

iPhone stocks at Apple stores seem to be fairly robust, although 25 out of the 162 US Apple store are showing them to be out of stock, according to ifoAppleStore.com. I say according to, because it is now after 9 am on Sunday, and the Apple Store stock indicator isn't updated between 9 am and 9 pm. And Engadget is noting that you won't be able to use your iPhone if you're running a 64-bit version of Windows XP or Vista, a fact that Apple hasn't advertised much.

Umair Haque has a fairly thoughtful piece that the iPhone is actually a non-transparent plan by Steve Jobs to restructure the mobile phone industry. We've said as much before, but he notes that it may have been a deliberate strategy to "fix" the industry:

1) Pick an industry which sucks (ie, imposes significant nuisance costs/menu costs/externalities on consumers)
2) Redress the imbalance by making something consumers love
3) ...Which disrupts the long-standing industry equilibrium, and shifts market power
4) Use said market power to redesign (a hyperefficient) value chain

Now, note that this is a repeat of Apple's iPod strategy writ large. Conversely, if you don't swallow the argument, consider the fact that the economic pressures created by the iPhone will most likely force Apple to tread this path, whether they like it or not.

Apple can't offer totally open platforms, unlocked phones, etc, etc...yet. No network operator will consider giving away the channel control which earns them at least marginal returns - it's a classic case of a strategic trap, because the short term costs of the cannibalization that implies (significantly) exceed the short term gains.

But after the iPhone shifts massive market power to Apple, network guys will have little choice but to play by Apple's rules, to accede to it's newer, better value chain design - because the pool of consumers Apple offers access to will simply be too large a percentage of the profit pool for decisions not to be dictated by them.

It's a brilliant strategy. And it should be a very, very familiar one - it's exactly what Apple's done to the music industry. Labels couldn't give up the rights regimes and other mechanisms of channel control which propped up decayed strategies and rotting business models - until Apple made them.

I like the four step process, and it may shed some light on the Apple's next target. Let's see, what other consumer industry is controlled by a few large and dominant players who deliver products that consumers really want, raise prices year after year, and provide customer service often bordering on disdain? The TV delivery networks such as Verizon, ATT, and Comcast could be Apple's next target -- and the success of the Apple's iPhone should have service providers realizing that the Apple revolution may just be getting started.