paul callahan…mostly common sense

I received the following thoughtful comments on More on the iPhone network goof:

From Robert Boylin:

Dear Paul Callahan,

You have good points; but with a European launch before ’07 is out, and asia in ’08 I think your skepticism over the 10 million in sales is weak. Apple’s contract with some part supplier(s) is for 6 mil. in ’07 with a potential 2 mil. additional. I think Jobs was conservative in giving the 10 million by the end of ’08. With the broadband networks abroad Apple will have more receptive markets. I expect they’ll add features and software along with new models before ’07 is out.

It’s the cooperation of Yahoo and Google along with supporting the PC and Mac platform software that will be essential. These partners, along with demand, will likely persuade service providers to adjust to the platform’s features. If Apple supports PC software syncing for the business customers the phone’s sales will increase further. They have time to do this. The launch has to be managed and AT&T has to get their 3G network completed for full success. I would expect Apple to sell 3G models by the end of ’07.

Just some thoughts that your article prompted.

Thanks, Robert.  That is very good information on Apple’s supplier contracts.  I agree that sync’ing for business customers will help.  In addition, there is an argument that the focus of real-world use will actually be cellphone+iPod (without a lot of web media access).  That application may be good enough to hit your supplier-promised numbers of 6m units.

Carl Howe has a point.  In his note on “Why the iPhone doesn’t do high-speed mobile phone networks”, Carl offers that Apple may be keeping the door open for deals with mobile operators outside of North America. Agreed.

He also argues that Apple probably did not want to embarrass Cingular by shining a spotlight on the inadequacy of the operator’s HSDPA coverage, or hang the iPhone’s success or failure on a half-built network.  Agreed on both points.

But I still don’t see how Apple can hit its numbers (10m units in FY’08).  In fact, I agree with Eric Savitz of Barron’s. Why?

1. Bad surf.  When it comes to web surfing, EDGE will provide nothing but frustration.  Wi-Fi will fill the gap when available.  But outside of the home, Wi-Fi usually suffers from a case of authentication heartburn — messing with credit cards and security keys.  If it can’t handle high-speed access to the Internet, then don’t call it a breakthrough Internet device that can “read a web page while downloading your email in the background over Wi-Fi or EDGE.”
2. Bad price.  Apple’s iPhone pricing is at the high end of even the Treo smartphone range.  Phones in that category are justified by enterprise applications: calendaring, email, contacts, and task lists.  Apple has no such apps on the iPhone.  This is not say they couldn’t offer them.  In fact, Apple would be very smart to get a skinny version of a Microsoft Exchange client on the iPhone as soon as possible.

Full disclosure: No position in AAPL at time of writing

Technorati Tags: | Wireless | WiFi | Wi-Fi | VoIP | EVDO |3G | HSDPA | Nokia | Mobile |Apple |

Let’s face it, Europe is a different market.  But with daily assertions that the-world-is-flat and one big market, I am still struck by regional interpretations of technology.

Take mobile VoIP, for example.  Though it hasn’t rolled out yet, mobile VoIP for the North American market promises: 

• Presence applications.  VoIP-based apps display the state of the user you are trying to reach: I am on the phone, I am in a meeting, don’t bother me, I am on-line.
• Higher average revenue per user (ARPU).  Operators charge more for market-specific applications. Every contractor and warehouse worker needs push-to-talk (PTT) — which has one of the highest ARPUs in the mobile industry.
• Lower infrastructure costs.  Operators save money on all-IP core networks and get higher voice capacity per cell tower.

But in Europe, mobile VoIP means only one thing at the moment:

• Users by-pass long distance, arbitrage mobile minutes, save money. Mobile operators take it in the shorts.

Witness Truphone’s recent round of financing of $24.5m.  Download the Truphone client to your dual-mode Wi-Fi/GSM phone and make free Wi-Fi mobile-to-mobile calls or save a bunch of money on a salad bar of other VoIP-style deals.  Bottom line, Truphone is establishing itself as a by-pass service provider and there is nothing that Euro-operators can do about it.  How can that be? 

Unlike the US market, customers can buy any GSM phone insert their operator-supplied SIM card and they are off to the races.  If the user chooses to buy a dual-mode phone with both GSM and Wi-Fi, the mobile operator has no control over the Wi-Fi portion of the phone. 

Hmm…Then it must stand to reason that Nokia pushing a pile of Wi-Fi/GSM phones could rub the Euro cell operators the wrong way.  So what?  What’s a poor Euro-cellular operator to do?  Not much.  Since GSM SIM cards have nothing to do with Wi-Fi authentication and authorization, there is almost nothing the operator can do to stop Truphone-style mobile VoIP operators from springing up.  I suppose they could try modifying the ancient GSM standard to somehow gain control over the Wi-Fi radio.  But don’t hold your breath on that one.

Is this a permanent trend?  Definitely.  Truphone’s funding will further legitimize the fledgling “software-only network operator.”

On the horizon, I believe Euro-operators will respond with GSM and UMTS-based femtocell base stations for the home, and with UMA-based services over Wi-Fi.  Until then, advantage Truphone.

Technorati Tags: | Wireless | WiFi | Wi-Fi | VoIP | EVDO |3G | HSDPA | Nokia | Mobile |

Apple’s iPhone will clearly change the landscape for mobile phone manufacturers — and consumer handheld devices overall.  My friend, Carl Howe, at Blackfriars has the best analysis on the announcement.  But there is a small gotcha in the device that not many people are talking about.  The network is a problem.

The iPhone is exclusive to Cingular, and as such it uses Cinglular’s data service to connect to the Internet.  But the specification listed on Apple’s web site shows the iPhone supporting something called GSM/EDGE, a horribly slow network that is marginally better than GSM’s ubiquitous GPRS. 

Cingular is in the process of rolling out its higher speed HSDPA network — a wireless data service that typically can support average datarates of 500–700 Kbps on the downlink and peak data rates of 1.8 Mbps.  Surely, by June when the iPhone ships, Apple and Cingular should think about supporting HSDPA.

Apple may have an exclusive with Cingular, but it might want to think about supporting a subsequent version of the iPhone for the Sprint,Verizon, and other EV-DO Rev A networks.  EV-DO Rev A networks offer QoS and 3.1 Mbps peak data rate on the downlink and 1.8 Mbps on the uplink.

Full disclosure: No position in AAPL at time of writing

Directory Tags: | Wireless | WiFi | Wi-Fi | VoIP | EVDO |3G | Verizon | Apple | Sprint | HSDPA | Muni Wi-Fi | Mobile |