Fortune: Steve Jobs’ Apple ‘iPhone’ could upend entire US wireless distribution model

“If Steve Jobs’ Apple decides to build a wireless phone, as widely rumored, the company has the chance to shake up not just the wireless device business – an industry dominated by the likes of Motorola and Nokia – it also could upend the entire wireless distribution model in the United States,” Stephanie Mehta reports for Fortune.

Various sources wonder if Apple would seek to become a virtual phone company, and/or build a phone with built-in Wi-Fi service that would allow customers to make calls and download data and music from the free or cheap Wi-Fi networks proliferating in urban and suburban settings, bypassing traditional cellular networks, and/or do the traditional selling of its iPhone through the carriers. “Or Jobs could do something really experimental and sell devices in its stores completely independent of the service,” Mehta reports.

“But no matter how Apple decides to enter the wireless phone market, it is sure to change the status quo,” Mehta reports. “Here’s why: Today, phone companies heavily subsidize handsets in exchange for long-term commitments from customers. That Nokia phone you got for free from Cingular obviously cost the phone company something – probably hundreds of dollars – to buy from Nokia. Cingular, in the meantime, can make all kinds of demands of Nokia: It can ask for special packaging, prominent logo placement, etc. This system drives Nokia and other wireless device makers crazy.”

Mehta reports, “This is where Apple comes in – and why Nokia, Motorola (Charts), Samsung and LG might be secretly rooting for the iPhone to be a minor hit. Apple seems uniquely positioned to convince consumers to pay a premium – not demand a discount – for wirelessly connected devices, thus changing the economics of the wireless industry. Put another way: If a consumer is willing to pay $250 for an iPod Nano, why wouldn’t she pay even more for a Nano that can make phone calls?”

The excellent full article, highly recommended, with much more here.

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33 Comments

  1. “Any chance the iPhone will solve global warming or did one of Apple’s board members already fix that problem?”

    Apple Macs have a feature where ownership of one immediately causes the owner to fill up with a lot of hot air.

    Since that heat has to come from somewhere, the planet is correspondingly cooled.

    Good Work Steve!

  2. “You all are missing the point. If you can get an iPod for $250, would you pay $50 more to get an unlocked iPod w/video w/phone? If so, why would you ever lock yourself into a 2-year contract with a network provider just to get a $50 (or free) phone?”

    You’re missing the point, if you plan to use a cellphone for the next 1 or 2 years, the lock isn’t really a big penalty. Your service isn’t going to be any cheaper if you supply your own handset. If you don’t plan to use the service for 1 or 2 years, the cost to break the contract is usually about $150 and you get to keep the handset. So whatever way you look at it, you still come out financially better off taking the subsidized phone.

    I’m sure Apple can be modestly successful selling high end unlocked handsets, but using that strategy, they’re not going to get anywhere near the 80 million music capable phones Motorola sold last year.

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