iPhone's strange new world

Apple's first foray into mobile telecommunications gets everything right that it can. That may not be enough — and that may not matter
Written by Rupert Goodwins, Contributor

Let's play a game. Let's assume that everything Apple says about the iPhone is right, that people will pay £300 for a mobile phone, that the interface works as well as it looks, and that it doesn't matter that it's a closed system. All this could be true, but that still leaves Apple with a bigger mountain to climb, and it's already tripped up.

The launch was premature. There's no shortage of evidence for this — trademarks not locked down, developer strategy unclear, technical details that remain secret for no good reason. But the biggest factor is that you don't give your competitors in Asia a year's clear warning unless you absolutely have to. (iPhone won't officially launch in Asia until 2008). A design as different as the iPhone is like the four-minute mile. Once you see it can be done, it doesn't matter exactly how.

Why launch so early? The excuse Jobs gave was that FCC approval involves publishing details before launch. Apple just wanted to get there first. True, but no more true for Apple than for everyone else, and no reason to give Hoi Sin Industrials (Shanghai) a solid 12 months to tool up.

The iPhone is unique because it's the first time a major consumer electronics company has entered the mature global mobile phone market from a standing start. Motorola invented personal two-way radio back in the days of valves. Nokia got GSM before anyone else. Sony Ericsson was there, albeit as bachelor and spinster, back in the analogue. All these companies know things that Apple does not: unique distribution channels, relationships with the networks, how revenue works. The mobile phone world is an alien planet with a complex, confusing, even perverse logic of its own, and Apple's landing craft is going to find it hard to pick an empty site for touchdown.

Take two features of the iPhone, one that's in there and one that should be. Random access voicemail is in there: you see the list of waiting messages and pick the one you want to listen to first. Great stuff, even though it uses technology that's been around for a decade. Company voicemail systems do this without a second thought. But for a mobile to do this, you need to get the network to add the feature — and Apple has only persuaded its one network friend, Cingular, to do this. Only it's not Cingular any more, it's been bought by AT&T — which is going to ditch that particular name, and who knows what else.

There are 400 GSM networks around the world. If it took Apple two years to pull one deal together with a company that now no longer exists — well, you do the sums. It illustrates the huge barrier to innovation in the system, even if it's for something that does nothing but good to users and network operators alike. It's hard for established companies; it's next to impossible for newbies.

The iPhone feature that's missing is voice over IP. This is, of course, the phone system of the future. It's also the reason the networks aren't going to be able to rely on voice and texts to provide 80 percent of their revenue any more. Every instinct in Apple's body corporate will be screaming: "Tell the networks to stick their 100-year-old business model up their Strowagers, we're going VoIP". And every one of those 400 GSM networks will say: "I'm sorry, we thought you wanted to do business with us."

That's the trouble with being a consumer electronics company in the mobile phone world — the mobile phone world hates consumers who don't toe the line. "Think different" is a four-letter word. And that's why the launch was so badly timed: just because you make the hardware and write the software, doesn't mean you get the whip hand in the deals. Apple may be ready to fly — and its launch schedule built along the iPod model of "once it's close to production, you know the ship date" — but the paperwork's nowhere near cooked.

Perversely, the iPhone may yet succeed — if success is judged merely by the creation of a whole new wave of services, features, innovation and growth. It may not succeed if your definition also involves Apple getting the lion's share of the benefit. The company's predicting 10 million sales in 2008, which in a total market of a billion phones, sounds commendably conservative. But the real market it's operating in is the expensive, smartphone market which ships 40 million a year, tops, and that's under conditions of intense competition and some very aggressive, experienced manufacturers. Getting a quarter of that is not going to be easy — especially now that competition has been given quite so long to gird its loins.

It's going to be fun watching Apple try.


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