Seven Overlooked iPhone 3G Details 26 comments
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The blogging world is abuzz at Apple's new $199 iPhone 3G, with most writers (including Yankee Group) bemoaning the lack of surprises in Steve Jobs Keynote. But my analysis of the press releases that came out after the event actually produced more surprises than I would have expected, including:
- More upfront payments to Apple (AAPL) in exchange for no subscription payments. Based on data released by ATT (T), Apple will no longer receive a cut in carrier subscription revenue for iPhone 3Gs. For first generation iPhones, that amounted to $10 per iPhone per month, or about $240 over the 2-year contract. Instead, ATT is subsidizing iPhone purchases, presumably paying Apple about the same amount on the day of purchase. So who cares? Well, Apple and ATT investors do: despite charging $10 more per month for the iPhone 3G data service, ATT will take a hit of about $600 million annually over the next two years, all of which presumably will show up on Apple's balance sheet due to subsidies. Note carefully: this does NOT mean that Apple is discontinuing its accounting for iPhone sales prices over 24 months -- it simply means that it isn't getting monthly payments from the carriers for iPhone 3Gs. By the way, the original iPhone subscription payments will continue for the full two years.
- In-store activation required in the US. Apple pioneered do-it-yourself phone provisioning through iTunes last year. Sadly, ATT has forced Apple to drop this unique feature, now requiring in-store activation of the phone, presumably to ensure that it earns back its iPhone subsidies from subscriptions. This has two significant implications: 1) Apple can no longer sell its phone online through the Apple Store, and 2) anyone waiting in line on July 11 for a phone should expect to wait hours longer as people buying phones each wait 10-12 minutes for in-store activation. This is one of the rare circumstance where Apple has decided to degrade the customer experience to please its carrier partners.
- Multiple carriers in some countries. As Apple pushes forward to deliver the iPhone is 72 countries, it seems to have gotten overly enthusiastic in countries like Portugal, Austria, Switzerland, Italy, and Australia, each of which has gotten not one, but two carriers offering the iPhone. So much for exclusive carrier deals.
- iPod touch is poised for a price cut. With the iPhone cut to $199, iPod touches selling for $299, $399, and $499 seem out of place. While there's no similar carrier subsidy to reduce these prices, Apple's not dumb enough to leave them there. Expect a $100 price cut on these products before the back-to-school season.
- Apple's toe dip into running an iPhone NOC. This was a real sleeper, but an important one for developers. Apple has refused to allow developers to run background applications on the iPhone (understandable given power and stability requirements). Instead, Apple is providing a centralized push application service that can present badges, sounds, and text alerts on any number of phones at the same time. What Apple has actually created here is a poor man's Blackberry Enterprise Server and Network Operations Center, complete with the associated single point of failure too. It's too early to know how much developers will embrace this service, but it in essence makes the iPhone a cloud computing client.
- Multi-mode location-based services. Yes, Virginia, the iPhone does support both GPS and photo geotagging. But the dirty secret of GPS is that it doesn't work in the most common places you use your phone -- inside and in the shadows of buildings in cities. But just as the navigations systems built into cars do, the iPhone integrates multiple sources of location information -- cell tower triangulation, WiFi network triangulation, and GPS -- into its location service. The result: the iPhone's location services may actually be better and more reliable than those you get from your average Garmin or Tom-Tom personal navigation system, simply because it will work in more places.
The seventh and final observation I'll make is one that was hiding in plain site during the keynote.
- Steve Jobs dedicated nearly 40 minutes to third-party software demonstrations during the two-hour keynote. That's more time than any other topic received. If there's one thing we know about Jobs' keynotes is that he doesn't waste time on things that are unimportant to users. By dedicating nearly 1/3 of the keynote to third-party applications, Jobs served notice that the Apple iPhone is not just a consumer device, but is Apple's third big developer platform, following the Mac and the iPod. And while it isn't yet a third of Apple's revenue, just wait. It will be -- and sooner than you think.
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This article has 26 comments:
The camera is not upgraded, it is only 2MPix ands no flash, which is far behind 5MPix that Nokia & SE have offered for many years.
"How many people use a feature like this on a regular basis? It's a niche feature at best. "
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Hmmm... If it were a niche feature, wouldn't only a small niche of haters be descending on the blogs moaning?
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And for all we know, that's all it is. Ever heard of "astroturfing"?
ohhh. i guess that other thingy.. Junkberry doesn't either...
wish list maybe... LONGGGG AAPL.. go babyyyy.
they can think about throwing in a little extra camera
plus I am sure the battery life will be cut in half with a video camera, suddenly a 15-20 minutes call can drain your phone.. then people wil be bitching about that too LOL
FREE TRADES
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@ Andrew N
$600 Million = 2.5 M iPhones. I am afraid the computations are a little more complicated than that.
Assume a subsidy of $200. -> 3M iPhones - BUT
no more revenue sharing saves $10 (we guess) per month so, if average is 6 months per year for new iPhones then this saves $60 per year. Also, they have boosted data plan by $10, so another average of $60 / year. So the real cost of a new iPhone subsidy is only $80. Well, I assume Jobs can do this math, so let's say subsidy = $220. After deduction this leaves an even $100 cost to ATT. That would imply 6 M iPhones sold.
Of course this calculation is very crude. And I am not sure that ATT will sell 6M per year.
If we assume that the $10 per month sharing fee is correct, then Apple was getting $400 + $240 = $640 for each iPhone. I assume that they do not want to reduce this too much. In negotiations, both parties need to give up something. So lets say that Apple is going to give up $140 per phone (a lot!) That still leaves $500 or a $300 subsidy. As indicated above, you need to subtract the revenue changes for ATT at $80, so cost to ATT now is $220, or a little less than 3M iPhone to get to $600M .
This is the most important piece of data I would like to see: what IS the subsidy paid by ATT and other carriers.
Even iPhone web/email activity will cause some strain.
Have patience!
Nice article Carl.
If you go to the iPhone page in Apple Store, and look in the "What's in the Box" box you will see....
(You can find it here:
store.apple.com/us/bro... )
At the bottom of the list of 7 items is "SIM ejector tool"
THE iPHONE 3G IS UNLOCKED! period.
Sorry dude - look again:
Where to buy:
iPhone will be available in 8GB (black) and 16GB (black or white) models1 at Apple Retail Stores and AT&T Stores.
Find a store
from:
store.apple.com/us/bro.../