Apple introduced the iPhone and all hell broke loose:
Going Private writes, “Suddenly, rather than needing a network provider to subsidize the hardware costs because consumers won’t even pay $100 for a chunk of Nokia fertilizer, $600$500 out of your own pocket doesn’t seem crazy for a phone. It was only crazy back when you thought you were just buying a phone. Or, should I say, what passed for a phone.”
“If Apple follows the experiment to its logical conclusion, we should see them buying a wireless provider one of these days. Or building one. Flat fee for (true) unlimited data couldn’t be far behind,” Going Private writes. “Could it?”
Going Private writes, “Why do I love Apple, despite all peer pressure and conventional wisdom? They understand that superior products kill three porter birds with one stone.
They eliminate substitutes, increase development costs (and therefore reduce new entry threats) and decrease supplier power. Locking consumers into a closed system only gets you one, and pisses your revenue source off at the same time.”
Going Private writes, “Why do I love Apple? They intend to make money because of my desires, not despite them.”
Excellent full article – highly recommended – here.
[Thanks to MacDailyNews Reader “Captain Insano” for the heads up.]
Uh Huh.
my iPhone syncs with my Mac properly, and i don’t have to go thru a 3rd party to get my email.
I could have paid $1000 for my iPhone, and it would have been worth every penny.
So, the iPhone is associated with five circles of hell?
I must live in heaven in NZ. Still no sign of the iPhone here.
With not only the iPhone but also the Mac, all hello broke loose, I’d say.
I’ve always said, Apple seduces, and Microsoft coerces.
Unlimited data already exists with ATT’s new plan. They describe it as unlimited calling. But that just means that ATT can shift your $100/month fee from calling minutes to data usage, as more and more calls are completed over the internet. iPhone 2.0 with iChat/Skype anyone?
Fantastic article. Makes a lot of sense!
Agree with Jimithy. The author is a very smart lady. Way better than the usual BS from what passes for “analysts”.
That would be awesome if Apple made its own network, if the price is better and the service is better than verizon count me in
One of the most well thought out anc cogent article I have read in ages. Worth every second of my time. Long is not bad when it’s worth reading.
“$0.10 per SMS at 160 characters per message works out to around $1,000 per megabyte.”
That is insane.
Going Private must not have read that the iPhone is already irrelevant in Canada.
lmao oh how the tune of the media has changed…
Apple these days is all about leverage, leverage, and more leverage. They seek out inefficient, played out, non-consumer-centric products and business models and replace them with the 21st century version.
The end result is that they drag all of us: consumers, the computer industry, the music industry, the TV industry, the movie industry, the telecom industry, the cable and satellite industries, kicking and screaming into the future.
It’s fun to watch, unless you’re one of THEM!
Peace.
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Olmecmystic
@ Gregg Thurman
It won’t be ‘unlimited’ until I’m not limited on what kind of data I transfer. I still have to pay for text messages, and I can’t have iChat AV. The network constructs these limitations.
But I agree, that if Apple has their way (and they will) then one flat fee will cover the pipe, no matter what you put through it.
Brilliant analysis. It is nice to see someone step back and really see what is happening.
“Why do I love Apple? They intend to make money because of my desires, not despite them.”
How wonderfully summed up!
I have used my iPhone twice as much as any other electronic products I’ve ever owned. I have become my third hand. It has so much capabilities it’s not even funny. All this is pre SDK, so imagine after the SDK.
edit above. ” It has become my third Hand”
I’m not sure Apple has the desire or needed capital to run their own wireless network. WiFi hotspots across cities .. possible. The upkeep and constant upgrading would be a major challenge.
Everyone would love to get cheaper wireless plans but unlimited for a low few is a ways off .. sprint is trying their all for one price and I’ve sure other carriers are watching to see how adoption rate is. $100 a month is still expensive for me as I still use a pay as I go phone with no monthly contract, but that’s me I rarely talk on the phone.
While I use and enjoy Apple’s products I wouldn’t exactly call them saints and pro-consumer. Itunes is locked to ipod devices so isn’t that a “locked system” the blogger is so against?
no, that isn’t a locked system. I can get music onto my iPod any number of ways. The itms is iPod or iTunes or CD burn capable. The system is far from locked in.
“I’m not sure Apple has the desire or needed capital to run their own wireless network. WiFi hotspots across cities .. possible. The upkeep and constant upgrading would be a major challenge.”
Sorry, but I find this an amazingly shallow analysis.
As of 2008-03-29, Apple is sitting on $9 billion in cash, and $19.5 billion in cash and short term equivalents. They hold $0 in long term debt. This is not an accident, and it goes beyond even the typical tech company out there. They aren’t using this to by $200 million chip makers, folks. Let’s not even start with the absolutely gold mine that their current stock price is for them as acquisition currency if they choose to use it.
AT&T;Wireless was picked up by Cingular for $41 billion. At the time that was a massive premium to the market. Most commentators feel that the price Cingular paid was mostly the result of Vodafone’s inordinately aggressive bidding and their conviction to make sure Cingular overpaid if it looked as if Vodafone was going to lose the bidding (which it soon did). I think Vodafone succeeded brilliantly.
At the time, AT&T;Wireless had $1.2 billion in operating income on $16.7 billion in revenue (a 7.7% operating margin). The price paid by Cingular was 2.45x revenue (I hate this metric) or 34.1x operating income (and this is why I hate the revenue metric). Just for reference, Verizon is trading at 1.16x revenue right now.
Cingular had something like a 13.0% operating margin.
Let’s put this in perspective. AT&T;Wireless had 22 million subscribers at the time.
Let’s put the industry in perspective. The amount of consolidation in wireless has been dramatic. (This is usually a sign of industry maturity, and, therefore, the approach of commodity pricing).
Apple doesn’t need to buy AT&T;Wireless. Apple needs a wireless (cellular) infrastructure for about 4-6 million customers with good coverage in their entry markets. This is easy to map. Look at the Apple stores that have the highest iPhone volume and look for coverage there. I haven’t done the work here but that is likely NY and CA- traditional early adopter havens for Apple. In any event, it should be major urban areas to start. Apple doesn’t have to take the entire market over. They need to get a foothold (think iTunes) and shake up the industry a little.
The reality is that everyone is rushing to push 3G, the timing is great to be pushing out new equipment as a semi-startup, so as long as you buy the towers (real-estate) to be independent of the other providers and plan on some investment, you can push the technology out.
So where in the world is Apple going to find a smallish wireless provider with strong penetration in CA and NY, about 5 million subscribers, old tech begging for new investment, something under 1.5x revenue, so about $6 billion, and the kind of independence that is really needed to float the trial balloon? Hmmmmm (-ahem- AMEX:USM).
Also, your article here has tripled my traffic. So much for my quiet little semi-anonymous blog. Thanks! (I think).
I wouldn’t call my comment an “analysis”. I havn’t seen Apple bidding for the latest spectrum that was released which I believe Verizon and At&t;bought for a sizable price.
Coverage to cities is WiFi not cellular wirless. To a user it would function the same and with improvents to VOip would be an interesting play if it was priced right.
Apple is profitable as they don’t take gamables and for the most part are still a small niche. Becoming a pc/mobile/media entity is everything Apple is not and as I noted don’t have the resources to manage all of them.
Who knows crazier things have happened.