A Call From Jobs
by Paul McGoldrick

You would have had to have been lost in a rain forest in Brazil for the last six months to not be aware of the iPhone from Apple (Google finds about 70,300,000 mentions as of today). The wait is nearly over and the first buyers are already camped outside the Apple Store on Fifth Avenue in New York, as I write. On Friday June 29, 2007 the approximately 200 stores will close from 2 PM to 6 PM to ready the spaces for the 6 PM launch. When a store exhausts its stock, after re-opening at 6 PM, the doors will close again.

Additionally, almost 2000 AT&T (the extremely new version of AT&T, that was Cingular Wireless -- what a sad story AT&T has become) stores will be selling the phones on the same day. The rumors of the initial production quantity available vary dramatically and I have heard numbers between 100,000 and 500,000, with a general consensus of around 300,000. Think out the math here: both Apple and AT&T will also be selling the phones online. Will they allocate any of the initial batch to those orders? Some analysts think they will, maybe putting one-third aside for that purpose. I don't think they will allocate any - it's easier to say, "Sorry, we're out of stock" electronically -- and will satisfy online orders from the next couple of months' production.

If I'm right, then there will, on average, be fewer than 150 phones per store, and that's assuming that there really have been no manufacturing and test problems. Volumes after the launch are predicted to be about 200,000 per month.

One of the nicest things about the acquisition process of an iPhone is that the buyer will not be facing a pushy sales person in a mall store, or manning a cart moored in a big box aisle. The buyer will take the phone home and then set everything up using iTunes; choosing the service wanted -- with no pressure -- being able to fully read the contract, and then activating the product. An existing cell phone number can be transferred to the iPhone, if the user wants, which can take as little as ten minutes to happen, or as much as 24 hours -- depending on your existing carrier's willingness to accept they have lost a revenue stream.

The actual costs of the transaction will include the phone itself at $499 for a 4 Gbyte model or $599 for 8 Gbyte. There is a one-time activation fee of $36, and then a two-year contract with AT&T starting at $59.99 per month for 450 minutes of air time, going up to $99.99 per month for 1350 minutes (that's 22.5 hours a month!) Those numbers are about $20 higher than AT&T's standard service charges (but cheaper than Blackberry and Treos) and include 200 minutes of texting and unlimited data services (e-mail and Internet access). You can buy more texting minutes if you want them… Over the two-year contract, the iPhone will cost most users about $2000.

The 4 Gbyte and 8 Gbyte memory numbers are rather misleading. 700 Mbyte of that memory is used by the software in the phone and what is left will allow for about 850 songs in the smaller version and 1850 songs in the larger.

The iPhone looks like a very smart device. The single finger touch screen operation looks about as easy as it can get, for general navigation, but there have been reports that actually making a phone call takes four or five steps, and that the audio quality (in both directions) is not that good. There is also, of course, the matter of the screen and how scratch resistant it will actually be. But Apple now has a bunch of experience in this arena so one expects this not to be a problem.

Providing cell phone, video iPod, camera and data services is certainly a unique combination of features and, hopefully, other vendors are taking notice of the user interface and how they might implement similar systems. They might also think again about providing Wi-Fi communications in phones which, up until now, they have regarded as competing with cell service. One of the big positives with the iPhone is that you cannot get lost in menus -- you can go to the home display from anywhere. However, with USB charging you are tied to being near a computer at the end of the day, and I have already experienced grief from my daughter not being able to charge her iPod when we go on vacation next month -- as I will not be taking a laptop. Apple are quoting 8 hour talk time on the iPhone, or 7 hours for video, or 24 hours for audio (both the latter with the phone and Wi-Fi functions turned off). Users will probably have to charge their iPhones every second day -- not good.

Who is going to buy, or try to buy, the iPhone? Well, I for one, am on the no-buy list; I am a Luddite in consumer electronics and, besides, I live outside AT&T service areas. There will, of course, be those who just have to have the thing: they couldn't possibly be ever seen out without the "right" anything in their hands. But when you get beyond that select group -- who would also buy a silver top for their Marmite jars, or top and sleeve for the Tomato Ketchup bottle -- the initial group of buyers is going to be limited to those who are nearly finished with their present cell phone contract.

This isn't like the launch of the iPod. When that happened, in October 2001, the MP3 market was producing boring players that were not tactile in their operation and for which no decent (legal) download service was available. They were either featured -- but clunky -- or small, but featureless. The iPod was creative, highly functional, pretty (because of Jonathan Ive's incredible design talent), small, and came with the convenient iTunes music store. The iPod Mini in 2004, and then the iPod Nano, have allowed Apple to sell well over 100 million units.

What is different about the iPhone is that it is tackling a market that has already seen a number of generations of cellular phones with, probably, one in the hands of 90% of the population that will ever carry a mobile. That is a completely different market to win over. The hype is there, the product is great, but the users are already tapped into an alternate solution. Any marketer will tell you that is probably the most difficult position to be in -- especially because your local carrier is more than likely to have plans enticing you to sign you up for phone service with your phone(s) costing $50 and less. And if you are doing the "bundling" thing, with cable or satellite plus high-speed access thrown in with the phone service, your hands are really tied behind your back.

The other problem that Apple faces is that it may actually be competing with itself. A 70-Gbyte video iPod is priced less than the iPhone and, obviously, can hold nearly ten times the video content on the iPhone. The heavy user of the video iPod is not going to be an iPhone customer. Like the iPhone, the iPod Nano can be had with 8 Gbyte of memory, but which would you use for your music while jogging, or in the exercise room?

The Pope has an iPod Nano donated by Vatican Radio and it is said that he often listens to podcasts from the station. How can a nearly 80 year old Benedict XVI be more savvy in technology than me? Or is it just a gift from God…