All Hail the iPhone

One of the longest running rumors in the Apple community is the emergence of an Apple-branded cell phone. Apple has denied the existence of such a product for as long as the world can remember, and up until now, they’ve had legitimate reasons to stay away from the cell phone market. Poor data speeds, poor service, incompatible frequency standards, and lack of profit on handsets have all been cited as reasons to stay away from the cell phone business. With the emergence of several new developments in the cell phone industry, however, it is becoming rapidly clear that Apple is ripe to enter the cell phone market within the extremely near future.

Let’s examine what’s new:

The MVNO Market

As companies like Virgin, AT&T Wireless, and others enter the new MVNO (Mobile Virtual Network Operator) market, it is becoming clear that the key to success in the MVNO realm is branding. For those unfamiliar with MVNOs, they are a relatively new phenonemon in the wireless industry whereby a company like Virgin resells wireless minutes through a provider like Sprint PCS. A customer buys a Virgin-branded phone at a retail location, signs up with service through Virgin, and goes on to use the phone, receiving bills and notices as though everything was coming from Virgin. Behind the scenes, however, Sprint is doing all the heavy lifting. Their network provides the infrastructure for placing and receiving calls, they meter customers’ usage, and just about everything “technical” related to the customers’ use of the phone is handled by them. The deal is a win-win for both companies because Sprint fills up their network with more customers and Virgin’s brand does all the selling. Many MVNO operators have a special differentiating factor to them, and Virgin’s is pre-paid service… perfect for teens.

GSM and CDMA

It used to be impossible to design a phone which would work on most cellular networks. The U.S. market was so splintered with incompatible standards that service providers had to pay handset manufacturers to develop phones for their platform. Well now it’s 2004 and the world seems to have standardized on two basic standards for now — GSM and CDMA. In the U.S., Sprint PCS and Verizon use CDMA and T-Mobile, Cingular, and AT&T Wireless use GSM. What this means is that handset makers need only develop for two platforms to cover 90% of the market. Handspring currently offers its Treo 600 to customers of all five of the providers mentioned above. It is for the most part, an identical unit, save a minor color variance and a few internals.

Profitability in Handsets

Handspring is smiling all the way to the bank with the success of their Treo 600 smartphone. Even with a $600 price (near the top of the cell phone market), Treos are flying off the shelves faster than Handspring can manufacture them. While most people pay under $100 for their phone, or nothing at all, the pent-up demand for a true portable convergence device is so great that Handspring can sell a unit with a fairly low-resolution screen and no bluetooth for crazy prices. There will always be cheap little free phones around to coax customers into signing long-term contracts with service providers, but Handspring has proved with the Treo that the high end of the market is where the profit is.

The Success of the iPod

Apple has enjoyed the same sort of success with the iPod as Handspring has with the Treo. Both are very expensive devices which were eaten up by the public not because they filled niches, but rather because they created niches. There was no clamoring for a $400 portable music player before the iPod and there was no clamoring for a $600 phone before the Treo. Apple has turned the iPod into a cultural phenomenon by giving people all sorts of new freedoms they never had before.

The iPod and the Treo are about the same size, they both play MP3s, and yet the iPod only does a few things better. It has up to 40 gigs of storage, as compared to the 1 gig SD card you can stick in a Treo. That’s about 10,000 songs vs. 250 songs (albeit in removable form). The second thing is does better is provide a dedicated music-centric interface. The Treo’s interface must do 1000 things with the iPod’s does only do a few. And finally, the iPod looks a little better than the Treo, and that is a testament to Apple’s legendary design prowess.

Aside from those three things, however, the Treo dropkicks the iPod right off the playing field. It makes calls, organizes contacts, syncs with PCs and Macs, plays games, runs applications, gets email, surfs the web, checks blogs, has crazy-high battery life, and on and on and on. So if I only have room for one cigarette-pack-sized device in my pants pocket, which one am I going to pick? That’s easy. There is no good reason for portable music players to continue on as standalone units, and Apple, being a smart company, realizes this.

Viable Cellular Data Speeds

The “wireless web” has long been a joke among those of us involved in web design and development. Who wants to develop for tiny screens and sub 14.4kbps speeds? Cellular service providers placed large bets on their data networks early and when the customers failed to come in, the public lost faith in the business. While the 3G speeds companies have been promising for the last several years still aren’t here yet, the data rates on the big five cell networks in the U.S. could now legitimately be considered viable for lite-duty digital communication. Reading e-mail is a snap, syncing contacts takes seconds, and even browsing the web is an acceptable experience if you don’t mind waiting a few seconds here and there. Were Apple to make waves in the cell phone industry, they would make waves on the data side of things, and the state of the industry suggests the timing may finally be right for such a foray.
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