Apple’s iPhone dilemma: Wall Street or customers?

Our conversation with Peter continues as he asks the nuclear question:

“…remember when Apple was about pleasing customers rather than Wall Street?”

Fair enough. So let’s look at some of the assumptions herein. The most ambitious one is that actual iPhone customers are not happy with the current version. ChangeWave Alliance survey for early adopters (geeks who’d likely be most demanding and critical) says otherwise:

“Better than three-in-four (77%) owners report they are Very Satisfied with their Apple iPhone and another 15% say they are Somewhat Satisfied, for a combined 92% Satisfaction Rating – the best we’ve seen for a cellular phone device.”

I’m more often than not skeptical of these kinds of numbers (and there have been a few surveys, including the 94% satisfaction rate cited by Apple) but, no matter how you slice it, it would be unreasonable to declare iPhone customers as not being pleased. Could they be happier? Sure, but that’s technology for you, as Jobs would put it.

What were the compromises Apple made here? The one that bothers Peter the most is the fact that you can’t use your iPhone with any GSM carrier. Would that have been nice? Sure, if the risks were low and the benefits high.

Pretend you’re Steve Jobs. (You know you want to. :-) If, as rumored, you could get $350 from AT&T (and also from other carriers in Europe and Asia) for every iPhone contract via exclusivity, would you feel you have a fiduciary duty to take the money? Money that can allow Apple to grow its mobile business, among others. Money that Wall Street would have severely punished Apple for leaving it on the table.

Was this just playing it “safe,” as Peter puts it? What would a non-suicidal alternative be? We know one thing: the two largest handset manufacturers Nokia and Motorola have for over a decade not done anything like what Apple did in just a few months. They haven’t for instance, challenged operators’ overwhelming dominance in price negotiations, design of device hardware and software, contract terms or service accessibility. They sell hundreds of millions of handsets annually but they haven’t had the wherewithal to realign the business model whereby everything is dictated by the carriers.

So if you wanted to change this business model of orifices, as Jobs described it, would you play it safe, as the Nokias and Motorolas of this industry have been doing for many years, or rewrite some of the key rules, from pricing to UIs, as Apple has done with the iPhone?

Yes, there was a time in the mid-’90s the dysfunctional, beleaguered Apple would do crazy stuff like introduce ‘innovate’ hardware and software without much deep thinking or market-winning strategies and then wonder why they were getting little traction. It nearly killed the company. With the second coming of Jobs, those days are over.

Apple has by far the best fiscal discipline among all computer and CE manufacturers. Jobs says he’s as proud of the products Apple didn’t ship as the ones it did.

Technology packaging is an art of balance, and thus compromise. We can’t fault Apple for compromising; perhaps the only question remaining is if the balance is right. And Peter wonders about that very question:

And no one will ask what could have been…

If the overwhelming majority of iPhone customers are pleased, who are we to judge otherwise?


You may also be interested in this counternotions article:
Nokia N81: Ominous lesson to iPhone from carriers, from which this discussion emanates.

13 thoughts on “Apple’s iPhone dilemma: Wall Street or customers?

  1. My ipod 1G is my main iPod, Personal digital assistant and even more, and also has has been day that I purchased it. It continues to function the up-to-date iPod system software, and any iphone app I might need it to run. I’m using it to post this remark right this moment. I’d point out it can be a lot more as compared to just an “excellent hobbyist system” — it is really an remarkable iPod

  2. Technically, isn’t Wall Street a “customer”?

    Really, the way I see it, Apple could give a crap what anyone that isn’t named Steve Jobs thinks about what it should or should not do. Apple Stock took a hit for the MacBook Air, but I don’t think Apple is too worried about that. They identify a market and go after it. They push innovation (remember, they killed the floppy and everyone cried foul!). What took the place of floppy drives for sneaker net? USB flash. Who saw that coming?

    Get over yourself. Apple does what Steve says. Steve decides who he listens to, and he doesn’t really listen to customers.

  3. Peter your being naive. Apple doesn’t exist ‘only’ to please customers. Apple exist because it can do enough to please customers for them to buy there products in a frequent cycle. Sure Apple can put every feature on it’s iPhone now but that would not give you a reason to buy the next version. Apple adds pieces layer by layer so that you have to continue to give your money to them cause they have been that good for the masses.

  4. “So I’ll ask the question: What does the customer get out of Apple’s partnership with AT&T that they wouldn’t have gotten if Apple had released it unlocked?”

    Quickly, off the top of my head, at least the following:
    1. Simpler activation (not in the store)
    2. Visual voicemail
    3. $20 flat rate unlimited data (with some exceptions) using a “real” browser.
    4. Elimination of the subsidy distortion that hides the true cost and value of the phone, combined with the concept that the phone itself should hold its value for more than 2 years (with continual upgrades).

    “But could competition have done the same thing? Imagine if the iPhone had been sold without a contract. You’d have suddenly had a million people looking for a data contract with either AT&T or T-Mobile. Competition between AT&T and T-Mobile (not to mention some of the small local phone companies) would have given you the same discount.”

    The two companies know that you need a contract, and know that many people are buying it, so why would they necessarily lower their prices? You don’t know that you could’ve gotten the discount.

    But the bigger picture is that for Apple and iPhone to succeed, the carrier needs to succeed. If the carrier doesn’t succeed, no other carrier will copy the model (of unlimited and unlimited access (no walled garden) flat-rate data that includes everything including VoIP), so nothing is changed. So Apple can’t abruptly or radically cut off the carrier’s current source of revenue; Apple will need to demonstrate that it can get the carrier additional revenue through new customers (volume), thus, allowing the business model to change.

    As I noted earlier, this is what is happening in the music download world with regard to DRM; songs and iPods were crippled with DRM. As for your CD burning example, Apple probably pointed to the fact that CDs were already rippable and burnable, and with some steps to inconvenience mass reproduction, burning music downloads would not be a problem. Note also that movies are not burnable, probably because DVDs can’t be ripped except with “legally questionable” software.

    Remember also iTunes was originally only a Mac-only trial; Jobs said the labels would not agree otherwise until they saw that burning wasn’t a problem. And also remember that the iPod is crippled in terms of copying songs back onto the computer; the Wifi music store is the first step that allows controlled movement back. (I know there are computer hacks that break this restriction, but Apple still can’t allow it in iTunes.)

    Finally, let’s see what changes after Leopard gets released, as iPhone is closely connected to it.

  5. “Without this cushion, I’m afraid the iPhone would have amounted to not much more than N81”

    Apple gets lots of criticism for being a bit of a lone wolf; then they partner and take even more flak. Apple’s market position has always been the underdog. MSFT can tap Ted Waite and Micheal Dell to go out and bribe IT departments to get PC sales in; Apple has to go directly the USER, and, unfortunately, the USER is a relatively powerless entity. Before the Apple Stores, Apple had to rely on pimply-faced Doom-addicts in CompUSA to sell Macs– we all know how that worked out. Now, having rescued the music industry from irrelevance, Apple has tried to push the industry into the post-DRM era. The labels, intent, it seems, on self-immolation (to preserve a sense of control– or out of spite) are undercutting THEMSELVES to try to pump up iTunes competitors (AMZN, etc). It’s tough to go against the Windows establishment even when you’ve been offering hands-down better options for over 20 years. But, change is happening, slowly.

  6. Peter: “What does the customer get out of Apple’s partnership with AT&T that they wouldn’t have gotten if Apple had released it unlocked?”

    The very same thing that the customer got when Apple partnered with the big music labels when they introduced the iTunes Music Store: 100+ million iPods, 3 billion songs, a company that passed Dell and HP in market value, without which Apple wouldn’t be around, to say nothing of the iPhone.

    For Apple to take risks and innovate it must be financially successful. Apple doesn’t ship tens of millions of other phones so that it can experiment with the iPhone like Nokia does with N81. If the iPhone were to flop, it would have a colossal impact on AAPL. If N81 flops, Nokia will surely survive. So Apple’s margin of error on the iPhone is razor thin.

    How does strategic design strategy frame the problem here?

    Do you support an endless number of radio standards around the world or GSM? If the answer is GSM, there are really two significant players in the U.S.: AT&T and T-Mobile. Do you select T-Mobile or the largest carrier in the nation to go against Verizon? The choice of AT&T is a no-brainer, once the decision on GSM is made.

    Now remember the activation problems AT&T had during the initial days? This is the nation’s largest carrier after months of preparation for the iPhone launch. Now imagine having many carriers to contend with with an unlocked iPhone. In terms of technical integration (not just Visual Voice Mail) or marketing coordination, that’s problematic for Apple and thus its customers.

    Equally important is the loss of several billion dollars Apple will get from AT&T as a steady revenue stream in the next couple of years alone.

    You see, the AT&T partnership gives Apple a known, steady and lucrative platform to launch a most critical and high-risk product. Just as the big label partnerships did for digital music. Without this cushion, I’m afraid the iPhone would have amounted to not much more than N81, which justifiably you hadn’t heard of. How does that benefit the iPhone customers?

  7. I agree with the matter of balance. The question becomes, of course, how much weight do the partners get versus the customers?

    Example: Ringtones. There’s no way Apple could allow customers to make their own ringtones from music they already own without offending the music labels, right? So you’re saying that Apple came up with a “compromise”–they’ll sell ringtones, but they’ll do it cheaper than everybody else.

    Now let’s flash back to 2001 or so. At the time, the music industry was quite upset over people burning their own CDs. There were various pushes in Congress to make laws to solve this problem (taxes on blank CDs, some sort of hardware copy protection, etc.). Apple was negotiating with the labels. I’m sure they weren’t thrilled with this idea that people could pay 99 cents and burn music to CDs. Apple stood it’s ground and said, “People want to do this. People expect to be able to do this.” They won and people can buy music from the iTunes Store and burn it to CDs.

    Your solution is that Apple should have offered some kind of token payment? “Okay, the songs cost 99 cents each but if you burn it to a CD, you pay an extra penny per track?” You know how well that would have gone over with customers?

    I’m now going to ask for a little explanation here. I’ll highlight where I’m confused.

    “[Motorola and Nokia] haven’t for instance, challenged operators’ overwhelming dominance in price negotiations, design of device hardware and software, contract terms or service accessibility.”

    “Should Apple take into consideration the needs of its carrier partner (AT&T) when deciding what goes into that package? How can it not?”

    These two things don’t seem to go together. How is it that Apple negotiated the ability to control their own product but still has to kowtow to the needs of AT&T?

    Furthermore, AT&T’s 450 minute plan and their unlimited data plan cost $79.98 (39.99 + 39.99). AT&T’s 450 minute plan with unlimited data for the iPhone is $59.99. So I suppose Apple did manage to get a 25% savings.

    But could competition have done the same thing? Imagine if the iPhone had been sold without a contract. You’d have suddenly had a million people looking for a data contract with either AT&T or T-Mobile. Competition between AT&T and T-Mobile (not to mention some of the small local phone companies) would have given you the same discount.

    Remember, all those people were lined up for an iPhone–not for AT&T. Do you think that those people would not have been lined up if the phone was sold unlocked? Why? Because of Nokia? Heck, the first time I’d heard of the Nokia N81 was when you mentioned it. In other words, Nokia certainly hasn’t been advertising it.

    So I’ll ask the question: What does the customer get out of Apple’s partnership with AT&T that they wouldn’t have gotten if Apple had released it unlocked?

  8. Peter, I’ve already granted that the iPhone is crippled. Crippled in the sense that there are no technical reasons for virtually all the features you cite. Apple could easily include them.

    Indeed, Apple could include 100 other features without blinking. But this is version 1.0. There will be many other versions. Other markets. Other demographics. As Apple stated, this is the third leg of revenue for the company, in addition to computers and music. They are building a third of their company anew.

    Contrast the first-gen iPod and the iPod touch of today. Pretty stunning pace of innovation and in only five years. Did Apple cripple, say, the 2nd or 3rd gen iPods because they could have put in Wi-Fi but didn’t? Can we really say that the iPhone is crippled because it doesn’t have 3G or GSM?

    As I keep saying, technology packaging is a matter of balance. Should Apple take into consideration the needs of its carrier partner (AT&T) when deciding what goes into that package? How can it not? Why wouldn’t Apple want to include iChat otherwise? Do you really think Apple is being incompetent or simply contemptuous of its customers?

    The fact of the matter is that Apple has some sort of a business plan over multiple years to gain a significant/leading share of the smartphone/mobile convergence device space. Part of that business model involves subverting the device-maker/carrier landscape. You can do that either by being an outsider or by leveraging your assets to negotiate yourself into a winning position. My assumption here is that the iPhone released with no carrier contract — essentially an iPod touch — would have not managed to alter the alignment in the device-maker/carrier landscape. Just as I’m betting that Nokia N81 won’t either.

    Once again, without crippling the iPod in certain ways that allowed Apple to package its devices and services and secure big label support, there’s absolutely no way we would have seen 100 million units and 3 billion songs sold. That’s the cold, hard reality.

    You’ll never get everything you want from Apple. Or from anybody else. That doesn’t mean that Apple is selling you out.

  9. Okay, I picked up a little time. Let’s see…

    Actually, the satisfaction numbers you mention are pretty real. I think the mistake you make is your assumption that the vast majority of early-adopters of the iPhone are the technical cognescentii.

    I’ve seen three people with iPhones since they came out here in Orange County and Los Angeles. One of them was a former co-worker–a former fashion model. She is certainly not a “geek.” She’s the only one that I know, but I feel pretty comfortable that at least one of the other two was not a “geek” either (I admit–I’m judging by appearance and that’s it).

    Also, let’s face it. For all I may bitch and moan about what’s missing in the iPhone, the reason I’m bitching and moaning is because I want one. I used my former co-worker’s iPhone for about an hour and was ready to go buy one that afternoon. It’s a really great device.

    But most of the people I’ve seen on the web talk about their iPhone say, “I love my iPhone, but I really wish it would do this…” I know I would feel that way if I had an iPhone. But I would probably list myself as “satisfied” or “very satisfied.”

    But here’s a comment you made that stuck in my craw:

    “[Motorola and Nokia] haven’t for instance, challenged operators’ overwhelming dominance in price negotiations, design of device hardware and software, contract terms or service accessibility.”

    Now, maybe I missed something, but I don’t see it. I agree that Nokia and Motorola haven’t done this. But I don’t see that Apple won any great victories either.

    As I’ve speculated in each message here–AT&T is preventing Apple from doing iChat because it would impinge on MMS (text messaging), which AT&T makes money off of. You’ll notice that AT&T’s iPhone plan does not include unlimited text messages. So it sounds like AT&T has some say in the design of the device software.

    Why can’t I use my iPhone as a way to link my MacBook to the Internet via Bluetooth? Because AT&T is charging a flat rate for data and, therefore, does not want you doing potentially bandwidth-intensive things. As we all know, “all you can eat” works fine as long as you don’t eat too much. AT&T wants to ensure that you won’t be costing them money.

    So, once again, it sounds like AT&T has some control over this as well. Same with streaming music and other things.

    Meanwhile, there’s Nokia’s N81–your cautionary tale. Yet here’s Nokia taking a risk. They are trying to sidestep the providers entirely and sell unlocked phones which link to Nokia’s services (sounds like the iPhone to me). To me, this sounds like a good plan. To succeed, though, Nokia is going to have to market it like crazy. One advantage you get going through the network providers is that they’ll sell and promote your phone for you. Not so here–Nokia’s going to have to take that on all by themselves. That means TV, Radio, and Print advertising–something I don’t see them doing.

    So here’s the problem in a nutshell: I don’t see how Apple is “changing the way that the game is played.” It looks like the same-old-same-old to me. Meanwhile, Nokia–who appears to really be trying something new–gets your scorn.

    Furthermore, even assuming that Apple is “changing the way that the game is played,” I have yet to see how this is actually helping the customer. Apple’s negotiations may have helped Apple, Inc. And that may be why Wall Street is cheering. But, once again, where’s the love for the customer?

    Apple has released three new things in the iPhone that weren’t there on launch: YouTube, .Mac integration, and iTunes.

    YouTube? Well, okay, Eric Schmidt sits on Apple’s board.

    .Mac integration? Interestingly, there are only two ways to get photos off of your iPhone. Method 1, hook it to your computer. Method 2, give Apple $99 a year for .Mac. Want to upload your photos to Flickr? Sorry. Using a PC? Well, .Mac won’t do you much good. You’d better go buy a Mac.

    iTunes? Yup, you can now give Apple 99 cents for a song or a ringtone from any WiFi hotspot (once again, note that you can’t use AT&T’s network for this. Bandwidth, bandwidth, bandwidth!)

    So the first things we see from Apple? Ways to give Apple more money! To use a phrase that Wall Street likes–that’s synergy! Maybe it will work out just as well as the synergy within Sony and their various attempts to compete against the iPod…

    Meanwhile, people are asking for things like Keychain support (to hold passwords and such, like on Mac OS X), disk mode, RSS in Safari, call duration, AirTunes, and batch of other feature request that I’ve seen just looking around the web for a few minutes.

    But, then again, where’s the synergy in that? Low priority.

    Now, I’m also going to once again mention that I am speculating on AT&T’s amount of control over the iPhone. It stands to reason, granted, but I have no insider information that tells me it is so.

    Why no iChat for iPhone? It could be AT&T or it could be the simple fact that there’s a whole new “chat architecture” is new in Leopard, allowing third-party developers to leverage iChat. Why port the old iChat when there’s a bunch of new and exciting capabilities in Leopard. So ship them in Leopard before trying to get them onto the iPhone.

    Why no Bluetooth modem support (ie, using your iPhone to attach your laptop to the Internet)? Low priority. Apple implemented and tested enough Bluetooth to get their headset working and that’s it. Trying to do the whole Bluetooth stack would have taken too long.

    Why can’t you use iTunes Store on AT&T? Apple decided that EDGE is too slow.

    So there is another explanation than the one I’m proposing–that AT&T is blocking these things. I’m not sure I believe it, granted, but it could very well be the case (especially with iChat).

  10. Argh! I wrote a missive last night that seems to have gotten lost! I’ll probably be busy today, so I’ll repost it tonight.

  11. One more point: I don’t think Apple pays much attention to Wall Street. Apple’s revenue sharing arrangement is not aimed at getting short-term profit. As it is, Apple is deferring revenue from iPhone. Apple’s arrangement is focused on leverage to be used to effect the strategic change that it believes is necessary to make a great product. iPhone as it is today is far from what Jobs thinks and wants it to be.

    Just like Google, Apple is thinking several moves ahead.

  12. I just posted this at AppleInsider but it’s just as relevant here or on the Nokia N81 post for Peter:

    If you understood the state of cellular carrier industry before Apple, and if you understood what Apple is trying to change, then you’d be willing to live with some of the limitations until such time that the marketplace is changed.

    Let me repeat that but using music and mp3 players: If you understood the state of the music distribution industry (labels) before Apple, and if you understood what Apple was trying to change, then you’d be willing to live with DRM until such time that the marketplace is changed.

    I could repeat it again for broadband IP, but the broadband IP market already changed from the days of closed access via AOL and Earthlink, to the IP bit pipe that is your cable or DSL company. (I’m not saying there aren’t still challenges here, for example, the net neutrality issue.) This is the goal of Apple with regard to the cell phone market; to change it into a mobile IP market where the cell carrier is just a pipe like the cable or DSL company. (And the AppleTV will work a similar plan against the cableTV industry.) The question is how to get there?

    Apple looked at an MVNO (source: Jobs). For what must be economic reasons, an MVNO has always been done with one carrier in an area providing the underlying service. So if Apple was an MVNO, iPhone would be locked to Apple (and its underlying carrier). All the handset revenue would belong to Apple, and the monthly service revenue would be split between Apple and the carrier. Instead of the MVNO, Apple decided to take advantage of the carrier’s nationwide marketing and distribution support (since there are less than 200 Apple stores), making public the underlying carrier as AT&T; get them to revise their activation process, add visual voicemail, and unlimited data (but without VoIP and other limitations) at a reasonable price; and revised the split a bit in favor of the carrier (AT&T).

    Let’s explore what a next step could be. Possibly Apple could get AT&T to allow Voice over the data pipe (VoIP); AT&T could have a plan that charges $100 for unlimited data and VoIP. If AT&T’s equipment could reliably measure VoIP usage, then there could be lower-cost plans with limited VoIP minutes. Of course, all this data will require that AT&T build out a bigger pipe (3G and above) nationwide. (Note: AT&T CEO did say they were working on VoIP.) To encourage AT&T to do this, Apple could reduce their monthly revenue share, possibly even to zero. (Note: You can only reduce your share if you have a share in the first place.)

    There are lots of other possibilities; I don’t presume to know exactly what Apple has in store, but there is much more, and this is just the first step.

    I assume that most of you understand the relationship of this to no 3rd-party apps: no free VoIP, no free SMS/MMS, and related to it: no unlock.

    Apple has to show AT&T that the revenue they get from cell voice and other services can be dramatically increased if they just charge for unlimited data instead. Because there is a huge market currently paying zero for data (and getting no data and just not yet interested in data). But the iPhone will make them interested in data (Web apps, anyone?). Once AT&T is willing to change, the other carriers will follow.

    (Apple has to show the labels that the revenue they get from music downloads can be dramatically increased if they charge a reasonable price for unprotected downloads. Because there is a huge market currently paying zero for digital music. Once a big label is willing to change, the other carriers will follow in time.)

    Again, this is already in place for broadband IP today (lots of people paying $40+/month for cable/DSL/ broadband that paid zero before (or they paid AOL/Earthlink $20/month)).

  13. “[Motorola and Nokia] haven’t for instance, challenged operators’ overwhelming dominance in price negotiations, design of device hardware and software, contract terms or service accessibility.”

    Wait a second! How has Apple done this?

    See, that was point in the comparison with Nokia. Nokia is challenging the phone companies by selling directly to consumers and building a way to support customers who buy their phone–essentially turning the phone companies into a way of moving bits from point A to point B. There’s nothing limiting the Nokia N81, which you mentioned, from doing everything the iPhone can do–and more.

    Of course, I’m sure the interface for doing it is nowhere near as well thought out as the iPhone.

    You then say that Apple is the one pushing the phone companies for more control. However, from the looks of it, AT&T has plenty to say about the capabilities of the iPhone. Where’s iChat? Can’t do it–competes with MMS. Why can’t the iPhone act as a bluetooth modem? Because, with AT&T’s flat-rate pricing plan, people could slurp up lots of bandwidth that they didn’t pay for. Why can’t you buy stuff from the iTunes Store via AT&T’s network? Why can’t you stream Internet Radio? Once again, AT&T doesn’t want to give you the bandwidth for that sort of thing.

    AT&T will let you surf the web and send e-mail for $60.00/month. That’s it.

    Sounds like AT&T got what it wanted in terms of device software and service accessibility.

    “Pretend you’re Steve Jobs. (You know you want to. :-) If, as rumored, you could get $350 from AT&T (and also from other carriers in Europe and Asia) for every iPhone contract via exclusivity, would you feel you have a fiduciary duty to take the money?”

    Hell, as an Apple developer, I have a closetful of black mock-turtlenecks and jeans. Of course, I have considerably more hair than Steve…

    Would I do an exclusivity agreement? That would depend on what my customers would get out of it. So far, all they’ve gotten is Visual Voicemail.

    Personally, as I ventured in the previous post, I’d’ve gone with unlocked phones. Apple has a tremendous marketing department. As I said in my previous post, those people weren’t lined up in front the Apple Store to buy AT&T service–they were there to buy iPhones. And I don’t think there would have been fewer people lined up if the iPhone had been unlocked. Heck, if anything, there’d’ve been more people!

    Also, keep in mind that Apple has to devote time, effort, and resources to keeping people from unlocking their phones. They’re now in a battle with the hacker community who seem to be taking this whole thing personally. So they’re spending some of that money that they’re making from AT&T in order to keep that exclusivity.

    So, in my mind, Apple has played it safe, just like Motorola before them. At the moment, it seems like Nokia is the one that is being the risk taker with their N81, by trying to sell phones and services directly to customers, like Apple.

    Of course, the N81’s open nature means Nokia will have to compete with other services. Not so with the iPhone.

    How do you get pictures off your iPhone? Well, there are two ways to do it. One way is to hook the iPhone to your computer (No Bluetooth pairing, no using WiFi, no disk mode) and download the images. The other method is to pay Apple $99 per year for their dot-Mac service so that you can upload images directly from your iPhone to your dot-Mac account. Want to upload your images from your iPhone to Flickr? Tough luck. Safari doesn’t support it.

    Oh, I’m not sure dot-Mac works very well with Windows. I’m sure alot of the features of dot-Mac require a Macintosh. So you’d probably want to go buy a Macintosh.

    Why, this sounds positively synergistic! Wall Street just loves that kind of synergy! It’s a pity that customers don’t–as I mentioned in the previous post about Sony.

    As an aside, consider the updates that have come from Apple since the iPhone came out. The three biggies are (a) syncing with dot-Mac (inspiring people to pay Apple $99 per year), (b) Buying music and ringtones from the iTunes store (paying Apple 99¢ for each song and ringtone), and (c) YouTube. So two of the three new features have been ways for you to give Apple more money. That’s synerrific! No wonder Apple’s stock price has been going into the stratosphere!

    I mean, hey. Apple could have added, say, the ability to delete multiple messages in Mail. They could have fixed the existing apps to work in landscape mode. They could have added disk mode. They could have added RSS support to Safari.

    But where’s the synergy in all those requests from silly customers?

    “If the overwhelming majority of iPhone customers are pleased, who are we to judge otherwise?”

    Well, first off, the iPhone is a great phone. I sound like I’m bagging on it–and, in some ways I am–but it’s certainly a better phone than my el-cheapo no-name brand flip phone that I use with Verizon. I got a chance to play with my former co-worker’s iPhone for a couple of hours. By the time she claimed it back, I was ready to go buy one.

    Fortunately, I have another co-worker who loves his smartphone. He has an external Bluetooth GPS, turning his phone into a handy car navigation system. He can sit down anywhere with his phone and his laptop and do what he needs to do. He can take any song he wants and use it as ringtone. He can take pictures with his phone and e-mail them to me, send me an SMS message, or upload them to his Flickr account. He can carry around 20 movies on external flash memory cards. He can stream Internet Radio stations.

    So I look at the iPhone with it’s great interface and I say, “Why can’t it do the things that he does?”

    So why are customers satisfied–even very satisfied–with their iPhone? Because, to be honest, it doesn’t suck compared to what most people use. It’s actually pretty dang slick.

    But I think people will eventually begin to realize that there isn’t much there. Some of the complaints when Apple zapped third-party applications in their 1.1.1 update was that people had gotten used to having those capabilities and they were suddenly yanked away. That generated some noise. I think lots of people have a wish list for the iPhone (eg, “I love my iPhone, but I really wish I could e-mail 2 megapixel images”). And I think as time goes by, if Apple doesn’t do those things, you’ll see that satisfaction level drop.

    Apple has promised to give the iPhone more capabilities as time goes on. But Apple hasn’t said what those capabilities will be. If Apple’s recent track record is to be believed, their highest priority seems to be to try to fix bugs and come up with more ways to allow you to buy more stuff from Apple.


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