iPhone Backlash: Apple Is Deliberately Limiting the Size of the iPhone Market

- 2007.07.20

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Bong! . . . :-) . . . Welcome to Macintosh!

In the weeks since my article on the iPhone was posted on Low End Mac, I've had quite the response from readers. I thought I would share some of the responses on this Welcome to Macintosh.

This one comes from Paul Allen (no not the Paul Allen). He writes:

Your absolutely right. The iPhone in not for everyone. Especially not at it's initial release as a new product on the rapidly changing electronics market. Every new product that is released is usually priced on the high side. Look at CD players, DVD players, even the Motorola Razor cell phone. All were very pricey, and few could afford them when initially released. The Razor was priced at $500 and had few of the features that the iPhone has, but now it's given away with some contract plans. And the other devices mentioned are all very inexpensive now, though initially out of reach for the common consumer.

Given that the iPhone replaces several pocket devices, does the price really surprise you? No need to carry an iPod, digital camera, cell phone or a PDA, just get an iPhone . . . at a price cheaper than it would cost to replace each of those devices individually. Contracts? Well, that's AT&T, not Apple's fault. But if you wait a year, they'll probably be giving them away with a nice year or two contract, like they now do with the Razor. And by that time, they'll probably be available with other service carriers and the price tag will have significantly dropped, as well.

But you always pay more when you want to be on the bleeding edge. Maybe you should let time 'blunt' that edge a bit before you think about acquiring one. You'll find it stings less than seeing the price drop significantly a month after you buy the 'latest and greatest' Oh yes, you loose some of the envy factor, the bragging rights to having the newest 'toy'. But that's what a 'low end' existence is all about.

Paul Allen (not "the" Paul Allen)

Next up is an email from Ian Campbell. He writes:

I read your article regarding the iPhone today. As for your predictions of it being a flop - I would have to disagree. Now, I'm not advocating the iPhone - I'm planning to wait for the second or third revision before buying (I did the same thing with the iPod - bought in at third generation). But I noticed some major flaws with your argument.

I'll start with your arguments:

1. Price - The Motorola RAZR retailed for $400 (subsidized with two year contract) at launch in 2004. Without the subsidies, the actual cost of the phone was close to $700. Also, people are presently paying $400-$600 (subsidized) for Treo's, Blackberries, and the like, so people are willing to spend this kind of money on a phone.
2. Limited to one carrier - Often cell phones are limited to one carrier at launch, sometimes for their entire existence in the marketplace. I'll use the Motorola RAZR as another example: It was tied to Cingular only at launch in 2004. Within 12-18 months, when the sheen wore off, it began to be offered by other vendors.
3. No prepaid option - The demographic that is being targeted by the iPhone truly doesn't care about this. Typically folks using prepaid service are using extremely low-end phones or models that have been out for a long time.

Your argument about the price and rate plans being expensive - again, if you are using a Treo or Blackberry type device, those rate plans are the norm. The iPhone is not just a phone, but a mobile Internet device. Frankly, only offering an unlimited data plan for $20 is pretty fair, considering that the alternatives are pricier in the big picture.

Another thing you may want to keep in mind is that Apple is more than happy to offer products for the rest of us - provided that we are willing to pay for them. The market determines the price and desire for a product. With the hype machine Apple has going, I believe that the iPhone will be a success.

One more thing to remember - and this a big one that I neglected to pay attention to for a long time. Apple is a business whose purpose is to make money for it's shareholders and employees. Making products customers want at a price they are willing to pay is a big step in that.

Within two years, every cell phone vendor out there will either have made good knockoffs of the iPhone, or Apple will start working with other vendors to improve the cell phone market.

I don't see a $49.99 or even a $199 iPhone being offered as a prepaid phone anytime in the not too distant future.

- Ian R. Campbell

The last email comes from Chris, who is the lone one to agree with me out of all feedback received, but he also shares this important tidbit:

Hello Tommy,

I was reading your article on the iPhone and noticed on the three issues with the iPhone (all of which are valid, in my opinion), you say that there isn't any prepaid option.

At the same time, though, I was reading TUAW.com and found this little gem: iPhone: Prepay the Right Way

It might be of help to those who are seeking to use an iPhone with prepaid. Because the contract is just astronomical in price. Though I'm not sure any LEM readers own an iPhone yet. (We all still use our 4th generation iPods.)

Just thought I'd point that one little tidbit out to you. But even still, great article. I agree with it.

-Chris

I'd like to take the time to thank everyone who read my initial thoughts on the iPhone, especially those who took the time to email me. I enjoy receiving feedback from readers, even when they have a different viewpoint than I do. Healthy dissent is a wonderful thing - it encourages debate, thus strengthening viewpoints and making them clearer. Without readers sharing their feedback, I wouldn't be here doing what I love doing, which is writing. I say kudos to you all! :-D

As for what I think now in regards to the iPhone: For the most part, I'm sticking to my initial predictions, while realizing that things can change. Just look what happened to the iPod, as an example.

Was I too hasty? Perhaps. Perhaps not. Time will tell. But if I'm wrong, I will gladly admit it and eat a big helping of humble pie. I hope I am wrong, because the iPhone is truly a marvel of simplicity and has a chance to revolutionize the cell phone industry, as well as pave the way for the next generation of Internet in your pocket.

Let me be clear: I have no qualms about the iPhone in terms of the device itself. I have not yet had the privilege of using one, but from what I've seen and heard from others, it truly blows my mind.

Am I stupid enough to believe this hasn't been done before? No, but in a sense, it hasn't been done before - at least not this way. With the iPhone, cell phones (or at least smartphones) have been reborn. With the iPhone, gone is the expectation of traditional, kludgy user interfaces that are hell to navigate; gone are the tiny physical buttons which the iPhone in one fell swoop has deemed unnecessary; but most of all, gone is the expectation that "this is the way cell phones are."

In short, Apple hasn't done anything new from a features standpoint. Many of the features have been in different smartphones over the years. What they have done is take the complexity out of cell phones and bring them down to a simple, easy-to-use plateau. They've brought us not only a phone; they've brought us a glimpse of what the future could hold for computing going smaller scale. One only has to look back on a part of Apple's past that brought us to this point with the iPhone - the Newton. It was revolutionary for lots of reasons but failed to grab the masses. The iPhone may be the redemption of the failed Newton.

The touch screen interface will undoubtedly find it's way to the iPod, and looking down the road, perhaps to Macs as well. Just imagine the possibilities....

Perhaps I will look back on my initial predictions of the iPhone and laugh. The only thing I take issue with is the way Apple has the rules set right now. I hope this will change in the near future so the iPhone can pave the way for a revolution that will rival - and perhaps even surpass p the introduction of the Macintosh in 1984.