Monday January 15, 2007

No doubt the iPhone will be a hit and help to change the balance of power between wireless operators and handset makers. In the US, I can see why many folks might jump for the iPhone. Still I predict that the iPhone will not be the market defining gadget that the iPod was- at least until Apple recognizes and addresses some obvious shortcomings. Here is why:

1. No Java! Yeah, Apple has redefined the music player landscape single handedly, but even it cannot beat the momentum behind the billions of phones that support mobile Java. Looking at just one segment of the market- Java games downloads- its unclear why Apple chose not to play in it. Sure, OSX is cool as a development platform but it is absolutely no contest to J2ME. For my personal cellphone, that support was instrumental in my being able to download the free and capable Gmail mobile client.

2. The GSM market in the US isn't the place for mobile innovation! Only 2 of the 4 major network operators use GSM. Furthermore, under their iron grip there is little incentive for the average user to go out and buy a particular handset. Many folks typically first choose the network operator and then pick a locked handset from a limited list. This is opposite to the experience in many fast-growing worldwide mobile markets- where handsets are not subsidized and not sold locked. In other words, what if one likes the iPhone but does not want to (or cannot for coverage or other reason) use Cingular? Will the iPhone single handedly cause a move away from CDMA, and away from the other GSM operator to Cingular?
Finally, US network operators currently charge exorbitantly for a data plan compared to European or Asian operators causing few to use data services. Will the iPhone encouarge Cingular to make its data plans more affordable? I sure hope Apple isn't planning to sell both a network and software locked handset in the rest of the world!

3. My own cellphone is a Sony Ericsson W810i with a 2 GB Memory Stick Duo in it. It has a 2 MP Auto Focus camera with photo light, a music player that supports MP3 and AAC, a WAP 2.0 compliant browser, Bluetooth 1.2, and USB synchronization (that works perfectly well with Solaris Nevada!). And did I mention the hundreds of mp3 songs on this phone? All this for under $300. Because it is unlocked and has Quad frequency GSM support it can be used virtually anywhere in the world. Other than WiFi support, I guess I don't see a single missing feature that would make it worthwhile to upgrade to the iPhone at $499. At that price point one can get a network unlocked Nokia N-series handset with WiFi support. The recently introduced N95 even supports high-speed networks, GPS and a 5 MP camera. In other words, Apple will have plenty of competition from well established market players who have strong, mutually beneficial relationships with network operators around the world, quite unlike the situation in the digital music player market when Apple introduced the iPod.

Sure, none of the above are significant issues for the iPhone. After all this is a 1.0 product and Apple has done well building on its first iPod. To the extent that Apple recognizes and addresses some of these issues, the iPhone can only help to jump start the maturing of the GSM market in the US and hasten Apple's transition to a consumer electronics company.

( Jan 15 2007, 07:29:56 PM PST ) Permalink