Why a tiny Apple iPhone could be a very big deal

Philip Elmer-DeWitt reports for Fortune, “Peter Burrows, a tech writer who knows his stuff, reports in Bloomberg Businessweek that Apple is putting the finishing touches on two key technologies: An iPhone one-third smaller than today’s model that could be sold for about $200 without a contract; New software built around a dual-mode chipset and a universal SIM that would allow users to change carriers on the fly.”

“Why is this a big deal?,” P.E.D. asks. “Because as long as customers buy subsidized cellphones on the cheap — say a $49 iPhone 3GS from AT&T on a 2-year contract — they are slaves to their carrier for the life of that contract (or until they pay an early termination fee).”

P.E.D. writes, “If the carriers won’t sell a carrier-independent iPhone, Apple has a few hundred heavily-trafficked stores that will. Moreover, there are huge overseas markets — India being the biggest — where most users buy unsubsidized phones and pay for their minutes as they use them. ‘Instead of targeting 25 percent of the global mobile-phone market,’ Needham’s Charlie Wolf told Bloomberg Businessweek, ‘Apple would be going after 100 percent.'”

Read more in the full article here.

[Thanks to MacDailyNews Reader “Dan K.” for the heads up.]

Related article:
RUMOR: Apple working on smaller, contract-free iPhone model – February 10, 2011

31 Comments

    1. Grubers comment was in regards to the iPad mini. As far as i know it was an “un-confirmed source” who came up with the iPhone mini rumor.

      Gruber’s admitting he had no source for the iPad comment:

      “Now when I make actual guesses, some people (not unreasonably) think I’m being coy and actually releasing information that I know. Henceforth, when I say I’m guessing, I’m really guessing. That includes what I’m about to guess about the iPad hardware release schedule.)”

      http://daringfireball.net/2011/02/the_next_six_months

  1. I’m not a big fan of cross-posting, but I’ll make an exception here, because it is pertinent. I posted this in the other thread:

    The main question here is, how many people are out there carrying a small dumbphone and a regular (non-touch) iPod. These would be the prime candidates.

    Keep in mind, a cheaper iPhone is not just a cheaper phone; it is a cheaper plan. There are quite many people who simply can’t afford (or justify) $80 per month (almost a $1,000 per year — two iPads!) for a mobile phone plan. In fact, there is an enormous market out there in the world for pre-paid (i.e. full price, no plan) phones, where an iPod with a phone (which doesn’t demand a data plan) would thoroughly trounce all those Nokias.

    If an iPod nano (previous generation, with click wheel) cost $150, the same device with a phone and some slick user interface changes could go perhaps for $220 and still hold onto the healthy profit margins Apple requires before even considering making/selling the device.

    Let’s not forget, all these devices plug into the entrenched iTunes ecosystem.

  2. 100% of the market is great. If like the mp3 market they only get 75% or more, that is great. Just push the scraps to the floor for the other iKillers.

    This would make a great FREE iPod with your students new Mac this summer!

  3. “Why a tiny Apple iPhone is just a figment of John Gruber’s imagination.”

    Gruber? Where did you get him? The article is written by P.E.D. (Phillip Elmer Dewitt), quotes Peter Burrows, as well as MG Siegler. Gruber isn’t mentioned anywhere.

  4. A cheap phone (NOT iPhone) from Apple that can benefit from the iTunes ecosystem will tap the low end of the market will increase the iTunes community population.

    There has to be clear differences to ensure it targets those who have a phone budget only and not entice away potential iPhone with an expensive plan away.

  5. This could be a huge issue for people who travel overseas regularly. Instead of paying extortionate data roaming charges, you can register as a pay as you go customer with a local telecoms provider. This would be particularly true for Internet rather than voice calls as you don’t have a fixed number for internet access and can access your account from multiple places. For voice, people need to call you on a known number.

    If this catches on, established cellphone providers will have to reduce data roaming prices in order to retain those customers.

    In the UK, there are already companies that offer low rates, either PAYG or monthly deals ( no ongoing contract obligation ) to customers who provide their own phone. I see a bright future for this style of operation.

    We’ve had a couple of decades of rapid evolution in mobile phones. In recent years, we have become accustomed to signing up to a contract and changing our phone every year or so, whether we needed to or not and then finance that new phone through higher monthly charges throughout the year.

    I’d much rather buy a phone that I like, pay less each month and keep that phone for a few years.

    1. Nothing prevents Apple from doing that, and they have in fact been doing it in some markets. However, since the iPhone normally retails for north of $500 (and in some countries, up to an equivalent of $1,000 US), such an idea is quite unattractive to consumers.

      The question is whether this roumored phone is a smart- or a dumbphone (i.e. whether it focuses on smartphone features or not). I have a cheap (free with plan) Sony Ericsson that has G-mail and Google Maps (downloaded from Google), an Opera web browser, Walkman media player, a camera (that shoots video), plus many other “smartphone”-like features, but it is essentially a dumbphone, as it doesn’t require data plan and it doesn’t really encourage you to use any of those features. If this mini-iPhone ends up like that, it has the potential to kill the dumbphone market. If it ends up being a cheaper iPhone (with emphasis on apps and data), the appeal will likely be more limited and cannibalisation may occur.

      1. £600 unsubsidised iPhones direct from Apple seem to be selling well enough in the UK. We bought two and can run them on a far cheaper plan that the subsidised 3Gs we had before. Also, swapping the SIM card when travelling between countries saves a bundle on roaming charges from a single provider

  6. apple going for the jugular, I like it! so this is that cheaper world phone we were hearing so many rumors about last year. it makes sense.. like a smaller version of the 3GS without the retina display, along with an improved UI that moves things out of the way that aren’t necessary. I think it will be great for cash strapped people, third world nations, and girls who don’t care much about the apps or performance but still want a great (slim) phone. I have a feeling it will be ‘delayed’ at least a couple months from the iPhone 5 launch though 😉

  7. @ chris f
    “third world nations and girls who don’t care much about app or performance” How about just millions of ‘guys’ and first world nations who just needs a phone that combines an Ipod? Not everyone has a compelling reason to have apps on their phone.

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