With Sprint, Apple's iPhone loses exclusive sheen

The tech press are in a breathless tizzy this week about the possibility, however remote, of Apple's iPhone arriving on the Sprint network.

(Here's the math: AT&T and Verizon already have it; and with T-Mobile's merger with AT&T upon us -- nevermind the legal hoops that could scuttle the whole ship -- that leaves only Sprint.)

There have been several intelligent views on what it means for the wireless phone industry. Some have noted the competition on the GSM standard (finally giving frequent travelers carrier choice for overseas iPhone use), some see the phone as a chance for Sprint to catch up to its outsized rivals, some say it's the end of Sprint's unlimited data plan (nevermind the Android phones already in its portfolio), et cetera.

But my first reaction was simply: what will Apple do now?

Like a new nightclub, the iPhone for the last three years has traded on exclusivity. The company collected on lucrative contracts -- first AT&T, more recently Verizon -- as U.S. wireless carriers scrambled to land the smartphone industry's hottest attraction.

And like a good club, Apple has managed to extend that excitement for as long as it could. It was only in January of this year that the Verizon deal happened, with an unnaturally high-profile press conference just after the Consumer Electronics Show.

Consider Apple COO Tim Cook's comment during that event: "No one more than us wants to give Verizon customers the choice they've been waiting for."

You can almost see the line of people waiting. (Even though they failed to show up on launch day.)

That's just it. Since launch, Apple has taken advantage of its esteemed reputation by making sure it doesn't let everyone in. It's good for business, of course, but it's also great marketing. Let 'em clamor at the gates. The iPhone will always be hot, and when it starts slowing down, we'll let more people in.

The iPhone continues to be attractive, despite steep competition from myriad Android and Windows Phone 7 (can't believe I'm saying that) models. However, the luster is wearing off once more: the halo effect of the iPhone is not as strong the second time around, and fewer people are willing to make a carrier switch to get their hands on the device -- mostly because there are fewer people who don't have access to the device.

So a move to Sprint makes sense: if Apple's success is already slowing on Verizon, Sprint is the next logical step. The steps come more quickly. Apple must expand more rapidly to attract the remaining customers in the U.S. wireless market, either through expanding to a new network or through offering a cheaper model to reach people who are willing to pay for data but not a $200 phone.

But there are fewer of them to begin with, at least in the U.S. No carrier will ever see what AT&T saw in those early, frenzied days.

And then what? That's the concern here. Once Apple fully saturates the market, it has lost exclusivity (and associated revenues) as a tool to stoke customer demand. It may have taken four years, but soon everyone can have an iPhone. Which is somewhat alarming, because then the iPhone must compete directly with other handsets in a carrier's portfolio.

Of course, Apple will say that its phone is superior to competing handsets, and that's partially true. But customers, in droves, have demonstrated in sales of Google Android devices that "good enough" is in fact good enough when it comes to a smartphone, and they won't lose too much sleep over whether everything is just perfect or not.

Which leaves only experience and marketing as tools to keep Apple ahead. (Technical superiority counts for something, and Apple has its own pipeline for this, but this ultimately ends up as "experience" -- few care what kind of chip is in an iPhone.) Its new challenge is to retain existing customers -- continue delighting them with Genius Bars and other Apple-controlled customer service experiences. (Sorry, carriers.)

Can Apple keep the momentum? While a ubiquitous smartphone is not an exclusive one, it can still be popular: exhibit A being the proliferation of Macbooks on college campuses. Quality matters; customer service matters. You're no longer competing on carriers or price or even technical prowess; they're nearly equal in the marketplace.

In many ways, a move to Sprint (and a successful AT&T-T-Mobile merger) is the first real challenge for Apple with regard to its popular handset. It in many ways has been riding the long, long coattails of its first entry into the market -- with such built-in popularity, it merely had to continue delivering on its promises with every new model. (No easy task, sure, but you understand what I mean: the "best phone" doesn't always correlate to the "best selling" phone. With such tremendous early success, Apple had the sales built in.)

Now, it must deliver on less tangible fronts. We all know Apple can deliver quality products. But so now can other companies. Can it continue to weave the narrative -- or will rivals see the writing on the wall and begin nurturing customer relationships that go beyond the cash register?