True IPhone Impact Won't Be Known for Months

The Iphone frenzy has passed, thankfully and finally. What does this device really mean for the wireless industry looking forward?

The IPhone is clearly an extraordinary and transformational device that has the ability to change the way people live.  Some early adopters and Apple fans are using it to make phone calls, surf the internet, check email, listen to music, view movies - all on one device.  As my early article discussed, the folks at Nokia never contemplated this, much less the rest of us.  It is the type of product that seems to come along once every decade (and for some reason seems only to be created only by Steve Jobs - is he really that much brighter than the rest of us?)

 

I believe that with all untested products, there is a high likelihood of an unforeseen glitch in the product that causes it to become a bust over the next couple of weeks.

 

Glitch or no glitch, the true transformational impact of the IPhone won't be known for months.  That transformational impact won't be measured in terms of iPhone purchasers (or purchasers of any other Apple services) and it won't be measured in terms of people moving over to ATT.  It actually isn't going to be measured in terms of anything relating to the device itself.

 

The reality is that there is a battle, maybe a war, underway today between device manufacturers and their main customers.

 

Device manufacturers want to put as many features on their devices in order to drive the next hardware cycle, whereas carriers want to keep devices sticky - they want to keep them aligned to their wireless network.  They want to be sure that access to the internet, as well as to music and video services is through their own network (ie., that their customers remain ondeck).  (I alluded to this war in my earlier article on Nokia on this site; it also was well discussed in a recent Wall Street Journal article - http://online.wsj.com/article/SB118178419580134700-search.html?KEYWORDS=research+in+motion&COLLECTION=wsjie/6month).

 

There are many recent examples that the carriers have tremendous power and are winning this war.   The carriers dictated terms to Research in Motion which unveiled its first consumer device (the Pearl) with neither WiFi nor 2-way Bluetooth communications.  The carriers furthermore have made certain that ubiquitous WiFi remains a fiction and, at least in the US and with the exception of T-Mobile, have discontinued sponsoring free WiFi spots.

 

Only someone with the power of Steve Jobs and Apple had the ability to reverse the carriers' negotiating power.  In the case of the iPhone, he clearly forced ATT into accepting, promoting and reselling a device which needs to use alternative access in order to do anything meaningful on the internet (WiFi, if available, instead of ATT's 2 G network).  Moreover, he forced ATT to allow its subscribers to easily access an alternative entertainment source (iTunes).

 

The ultimate impact of the iPhone will be determined over time by not just Apple, but by other equipment manufacturers trying to duplicate the iPhone's offering, and by the wireless carriers themselves in determining what balance to draw in countering the Apple / ATT offering.

 

In spite of ATT's concession, I am still betting that the wireless carriers are too smart to become a bunch of AOLs.

Ari Socolow
Ari Socolow: Ari Socolow is the Chief Economist and Editor-in-Chief at BestCashCow. He is particularly interested in issues relating to financial literacy and bank transparency. Since co-founding this website in 2005, Ari has been frequently cited in the media as an expert on local and national savings accounts, CD products, mortgage and loan products and credit card rewards products.

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Comments

  • Anonymous

    July 02, 2007

    I am big fan of the device and believe that you are understanding how transformational it is - you are speaking entirely about the broader industry effects and your perspective is interesting.

  • Anonymous

    July 03, 2007

    This was an interesting article. I just read about how Asia is way ahead of the curve in rolling out feature rich phones. Hopefully the iPhone will herald the beginning of that here. Then it will be transformational.

  • Jennifer Hollingsworth

    October 13, 2007

    It is known - the IPhone has changed everything. If your article is correct, I fear for the viability of the carriers.

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