Who can beat iPhone 2.0?

With the March 6 unveiling of the SDK and associated announcements, Apple has greatly strengthened its iPhone value proposition to an extent that some have publicly called it game over in the mobile platform wars. Others, including professional Apple haters, AAPL shorters, nitpickers and link-baiters, had a field day trying to find holes in Apple’s new conquest plan.


Before calling Apple’s new position unassailable, let’s first see what the company uniquely brings to the battle field:

1. Design – Nearly half a decade after the introduction of the iPod and over a year after the iPhone unveiling, no other mobile player has caught up with Apple. With its unique position in the industry as the only truly vertically integrated company that can tightly couple its own hardware and software at the OS level, and bolstered by numerous patents, Apple’s industrial design and highly polished multi-touch interface have no peers.

2. Stores – Apple not only has the fastest growing and most profitable physical retail store chain in the U.S., it also offers apple.com, the most visited computer hardware site online; the iTunes Store, the best media download site that has sold over four billion songs; and now, what’s likely to be the best application discovery and download venue, the App Store. For developers that can see past ‘control’ issues, the promise of the iTunes Store-like App Store is genuinely outstanding.

3. Pricing – Unlike its mostly proprietary pre-Intel past, Apple can now leverage its high-volume iPod/Mac businesses to get favorable component prices and has been the industry leader in inventory and supply chain management. Backed with relentless product development, the company has mastered aggressive pricing strategies with its iPod line, offering the best price/value at every product segment. Apple will follow this proven pricing strategy with upcoming iPhone iterations.

4. Games – With a 163 ppi high-resolution 3.5″ screen, Core Animation, H.264 video, SQLite local storage, hardware accelerated OpenGL ES, 3-D OpenAL sound, accelerometer and multi-touch capabilities, the iPhone 2.0 has just become the most capable, nearly console-quality mobile game platform.

5. WebKit – Safari on the iPhone has already captured %71 of the mobile browser market in less than a year. While others like Adobe and Nokia also use the WebKit engine, nowhere does it shine brighter than on the iPhone with its multi-touch gestures and big screen. Apple is also about to let Safari run full-screen (like a native app), go native with JavaScript DOM traversal for huge speed gains and allow JavaScript to access some multi-touch gestures and other iPhone features.

6. Depth – Apple officially announced that it regards the iPod touch as the precursor of a mobile platform. Its multi-touch patent portfolio and gesture library bridges PCs (current Mac notebooks offer multi-touch trackpads) and mobile devices of various sizes/shapes, signaling product possibilities from iTablet to Minority Report-like form factors. Economies of scale, core design competencies like power management and miniaturization and cross-device integration opportunities will give Apple an incontrovertible advantage in product design in the post-PC era.

7. SDK – Cocoa Touch, the marriage of OS X and multi-touch UI, gives developers access to the hardware, multi-touch controls and events, accelerometer, view hierarchy, localization, alerts, web view, people/image picker, camera, etc., in a sophisticated IDE. The development tools in the new SDK, including an emulator and direct iPhone diagnostics, put it at the very top of the mobile development platform pyramid.

8. Enterprise – Under Steve Jobs Apple has never directly targeted the enterprise with any coherency or intent, believing that a frontal attack on Microsoft would be suicidal. The mobile space, however, has no such entrenched competitor that Apple believes it cannot effectively compete against. So, uncharacteristically, it has begun to openly court businesses large and small and, to the extent that it can maintain its momentum and focus, the enterprise world is a new and significant market for the company.

9. Ecosystem – From automobiles to leather cases, Apple has already created the biggest-ever ecosystem around a consumer electronics product line with the iPod. No other player in the mobile space has comparable experience in growing a billion dollar plus ecosystem, which should come in handy with a growing iPhone franchise.

10. Curatorship – Some pundits and developers see Apple-imposed restrictions in the SDK or the App Store as impediments to wider adoption of the iPhone. However, Apple has proven with Mac OS X and the iPod that it can anticipate user needs, trade featuritis for enhanced user experience and carefully distill choices to create coherent and desirable products. User satisfaction surveys consistently prove actual users love their iPhones at rates far above rival devices.

Are there any chinks in Apple’s armor? Certainly. There are real and perceived ‘shortcomings’ that likely won’t change soon: dedicated enterprise sales network, physical keyboard, removable battery, etc. Others may change soon with the iPhone 2.0: video, GPS, Bluetooth A2DP, cut and paste, global search, exposed file system and so on. Some new capabilities like 3G will surely come in a few months.

What was displayed by Apple at the March 6 SDK event and the uniquely competitive factors listed above, however, should overwhelm most if not all its competitors, to echo General Colin Powell’s famous doctrine of attacking adversaries with overwhelming force to ensure victory. Apple’s arsenal is now the widest and deepest in the industry.

Who then can challenge Apple? Not Palm or Motorola (extremely weak and rudderless leadership); not RIM (no OS level hw/sw integration, little UI and very limited consumer market expertise); not Sony, Samsung or LG (no OS level hw/sw integration and limited UI expertise); not Adobe or Google (not much hardware experience). Nokia and Microsoft appear to have had the longest experience, but neither has anything like the ten factors cited above that make Apple such a well rounded competitor in this field.

As the PlaysForSure and Zune debacles have amply demonstrated Microsoft is forever saddled with the inability to choose between the OEM/partnership approach that worked on the desktop and going it alone which hasn’t in the mobile space. No doubt Microsoft will come up with its own mobile/phone hardware device and then try to balance that with its Windows Mobile licensees’ interests. The $44.6 billion question for Microsoft is, can it juggle all this with its impending Yahoo entanglement over the next three years?

Finally, how good a competitor will Nokia be? To its credit the company quickly recognized its weak points in interface development (bought Trolltech), music downloads (opened a UK-based store but it’s IE/Windows only) and online presence (recently started Ovi). Nokia is the volume leader in the mobile industry, but hasn’t really exploited that advantage, as we previously covered. It has to walk a very tight rope in order not to upset its carrier partners.

We thus see no other player that can bring as much to the table as Apple. Clearly, this is Apple’s war to lose.

82 thoughts on “Who can beat iPhone 2.0?

  1. Pingback: Resolved: Apple is right to curate the App Store « counternotions

  2. Pingback: iPhone OS 3: The moat strategy vs. features-fetishism « David's Blog

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  4. I must agree… nobody comes close. Apple is the champion in vertical integration, creating an ecosystem, while changing the rules in the industry. Competitors need to think & work a lot harder.

  5. Pingback: iPhone OS 3: The moat strategy vs. features-fetishism « counternotions

  6. Pingback: iPhone OS 3.0: Refinement or a leap? « counternotions

  7. Great piece.

    “Apple not only has the fastest growing and most profitable physical retail store chain in the U.S., it also offers…”

    Since the time this was written, add WalMart. Inclusion at WalMart makes or breaks other companies. Only for Apple is this just a “nice boost”. Next earnings report we’ll start finding out just HOW nice a boost, but anecotally we already know that Apple has been selling out to the bare walls at WalMart.

  8. Pingback: Strategic shortcomings of Pre in the post-iPhone era « counternotions

  9. Incidentally, who cares any longer about the supposed ability of experimental psychologists to assign quotients to something as epistemologically bankrupt as “intelligence”? I.Q.? A wonderful, longlasting scam on the U.S. military and public. Are we still falling for that crap?

    Trust me; I used to be a Stanford psychometrist under gov’t contract. Paris Hilton has a special intelligence for something, I suspect, and as a certified detective in such matters I’d like to find out, What.

  10. Well Daniel, I’d like to see it superseded, and try, with the help of blogs like this one, to keep current with emerging devices, but so far, no cigar.

  11. Kontra,

    Spoke two days ago with a lineman (please pardon the sexism) for AT&T. Asked him about the spotty cell service here in Metro Atlanta, and about the new, ultra-expensive, Panasonic Toughbooks AT&T recently issued its people in the field. He likes the new laptops better than their semi-ruggedized prececessors, and says that AT&T is working hard to sew up geospatial holes in cell transmission. While he himself is union-secured in his job despite the hard times, he says that AT&T not only has frozen hiring and promotions but plans to lay off, immediately, 12,000 employees including those who do his work without his seniority. Good grief.

    He also said twice that the Apple iPhone 3G has been “a huge money-maker” for his company. Interesting. I mentioned that there had been bad blood between AT&T and Cupertino, owing to AT&T’s under-performance on the initial iPhone contract. He said that AT&T now “will do anything” to hold the lucrative arrangements with Apple, which arrangements are, in his considered opinion, largely holding the company together against all the competition and downsizing.

    Today I visited my truly friendly, truly-neighborhood Verizon store, to check out the new keyboard-less Blackberry. I truly saw no advantages to that device except that it jibes with my Microsoft office suite; so what. If I want more tactility in my iPhone keyboard I’ll get the inexpensive after-market screen applique that used raised silicon nipples to emulate the postitive thumbpadding of one of the older Blackberries and their imitators. Big deal.

    Second-guess me, though, as I’m keen on my Apple but open to changes at any time, provided the trade-offs are there. Times are tight, though, and gadgets are out of the question. I find the iPhone a powerfully useful device. And besides, it’s beautiful. (I believe that mathemeticians, physicists and engineers of all persuasions are right in holding, for so long, that simple elegance is generally a good indication of validity.)

  12. Matt: “mobile users can quickly switch between devices with little thought.”

    The minimum carrier contract price of iPhone is about 10X the price of the handset. That’s true for most smartphone-relevant contracts. So, in fact, the cost of switching is certainly not trivial at all.

  13. While all your points are valid, the real question is whether Apple can create significant barriers to entry in the mobile market. The reason that Apple has been so successful is that the switching costs are so low between devices and providers. So, mobile users can quickly switch between devices with little thought. Apple provides an interesting value proposition via music, video, and apps in itunes. But, the question yet to be answered, is whether the value proviced by this service is enough to prevent its users from jumping to the next shiny device.

  14. Very prescient article. Some of the naysaying comments are kind of funny now.

    Right now I’d say Android has the best chance to compete if it is paired with high quality hardware (which the G1 isn’t). But that’s got to be easier than software. Unfortunately for Google, Android will never be able to compete with its third party software because who wants to write/test for 10 – 20 radically different devices.

    It will also be interesting to see what portion of the Storm bugs are fixable.

    But one point remains right now — the iPhone is now a successful mobile platform and as such doesn’t currently have viable competition.

  15. I’ve got a Mac 512k with system 1.0 that runs very well. It reminds me a lot of where the iphone is today. The 512k will only run 1 app at a time, frequent crashes and is missing a lot. However, it has all the workings of the graphical interface that we have all come to love. I’m waiting for the real iphone 2, but am thankful that there are many willing to buy it as it is. you’re feeding the fire for folks like me.

  16. Hey look, Kontra, your post and this string get more, not less, relevant! The intervening product introductions seem to have transformed the string into a live wire. Guess this is Chapter Two; or, alternatively, “Toward iPhone 2.1”.

    We all know that Jobs is apt to push launches before waiting for due diligence is complete. He’s preached all along the Gospel of “Fustest with the Mustest”. An important new Apple product, it would seem, is like a Chrysler: never buy the first model year.

  17. Paul: “Apple does not seem up to the task!”

    Sorry to hear you had problems with iPhone 2.0.

    We can only generalize these problems into a roll-out catastrophe after we see the sales figures at the end of this quarter. If they sell fewer than 800,000 phones a month until the end of 2008 to surpass their goal of 10 million in 2008, then we know they’ve had customer acceptance problems.

    But they have already sold 1 million during the first weekend and likely another million by now. In a few weeks 20 additional countries will come into the mix. Then there’s the holiday season. Etc. So if they blow past their sales goals would you still consider this a failure?

    No doubt the roll-out could have been better. But Apple is establishing the third mass-market computing platform and changing the cellphone industry at the same on so many fronts, how easy is that?

  18. Was good when you wrote it. It is Apple’s to lose. BUT after watching the terrible rollout of the iPhone 3G and MobileMe, Apple does not seem up to the task!

    The iPhone 2.0 software basically sucks, crashing and bricking iPhones in the hundreds. After almost a month still no fix from Apple. Just take a look at Apple’s own discussion forums and read the problems of quitting apps, crashing phones and stuck Apple logos that users have when their iPhone bricks!

    Mine has bricked 24 times in 24 days! Even after a replaced iPhone still bricks. So far no answer from Apple. Blackberry has nothing to worry about!

  19. Wow. Amazing blog and great comments.

    “…and the SDK won’t do any good unless if you are a hardcore programmer who wants to make some mulah…”

    Tell that to MooCowMusic. :)

    Concerns about the iPhone not selling well in Europe have pretty much been ameliorated with iPhone 2.0. O2 practically had a meltdown of their servers from people reserving and signing up ahead of time. Germany sold their entire stock and won’t see more for maybe a month. In the States only four Apple stores had stock yesterday. And two stores — one of them in Honolulu — had one iPhone each.

    As for Apple’s App Store, I’d say it’s already a big hit with 25 million downloads in less than two weeks. I’ve picked up over $100 in apps so far for my iPod touch. The games are a huge hit with my kids.

    And I’m in the 99% that hasn’t experienced problems with mail on MobileMe. After hiccups opening day with slow access, it’s been fabulous. Even push email to my touch happens in a couple of seconds. Colour me impressed.

  20. Mark, as you know, an Apple product is never the collection of maximum possible number of features. Yes, some people will never buy an iPod because it doesn’t have an AM radio. How did having that feature work out for iPod-killers?

  21. No phone is good at everything, and perhaps if you are looking for a king of the hill for games and iTunes, then the iPhone wins. My concern is will I be willing to give up what Palm, Windows, and perhaps Blackberry gives:
    – Office applications (Word, Excel, Powerpoint, Outlook)
    – Bluetooth for stereo, keyboards, etc.
    – Cut and paste
    – Flash (usable access to most web pages)
    – Keyboard (I challenge you to out-type me)
    – Form factor that fits well in a pocket or belt
    I may be willing to give up all of this, but others will not.

  22. Hello Kontra. Good article, which definitely stimulated discussion. I am posting one I wrote which partly commits my predictions about the imminent Apple WWDC, but more importantly focusses on the system integration which Apple is able to perform. Above and beyond the utility of the iPhone itself, is Apple’s ability to integrate the iPod and PDA functions with Windows and Macs, and further provide development tools integrated with the OS.


  23. Russell Beattie, the first commenter up above, has just shuttered his ‘mobile web’ startup Mowser due to lack of any traffic, resulting in extreme personal financial hardship.

    Here’s the comment I left at TechCruch:

    Mr. Beattie has had an extraordinarily weak appreciation of tech developments and trends.

    A classic example is when he declared ‘game over’ for MS PlaysForSure *competitors* in 2005:

    “I’ve been watching Microsoft’s moves over the past few weeks and I can pretty much say that it’s game over for a lot of Microsoft competitors, though they may not realize it yet.”


    Another one is the leading comment he left at my blog recently, dismissing the impact of the iPhone:

    “The mobile market is huge and worldwide, and Apple is a minnow swimming among the sharks”

    Who can beat iPhone 2.0?

    It’s always sad to see someone down at a personal level, but I always found the attention paid to his tech punditry inexplicable.

  24. @ UK Guy: The iPhone will always lag behind the collective features list of a ‘smartphone’. Apple has never been in the business of jamming as many features as it can in any device it sells. The company does, however, manage to balance them better than any other competitor. So it is with the iPhone.

    In two months, many/most of the items you cite as missing will be added. Upping the pixel count of the camera, just to cite one example, is infinitely easier than building an OS that is also leveraged from desktops, to notebooks, to servers and gives you Core Animation, multi-touch gestures, great media playback, etc. That’s where the iPhone competitors are finding increasingly difficult to compete against Apple. A year and a half later, we still don’t have a single competitor that can challenge the iPhone user experience. Not a single one.

    One reason for comfort for Apple is that building a world-class OS/industrial design integration capability is exceedingly hard, way beyond the reach of most of Apple’s competitors, including Sony, LG, Samsung, etc. While Nokia and Microsoft come closest in this regard, their efforts so far produced nothing to write home about. And it’s far easier for Apple to add corporate email to the iPhone than RIM to match the iPhone’s many other capabilities and overall balance.

  25. I feel this article fails to mention a few important things

    1) whilst the iphone is ahead of the game OS wise it is quite a way behind with hardware compared to a number of phones, e.g. lack of 3g, poor camera with no flash or auto focus, no gps, no video recording, no dvb-h (digital tv)

    2) whilst the article looks into anticipated apple moves, it fails to look into any detail at anticipated rival moves

    3)fails to analyse why the iphone hasnt sold well in europe and what needs to change to alter that

    4) criticises RIM’s lack of consumer knowledge and places it as a negative for RIM, neglecting to mention that Apple are the mirror image and have a lack of knowledge in enterprise, apple entering the enterprise arena is noted as a plus why cant RIM moving toward the consumer market be a game changer for that comnpany too?

    5) fails to analyse the difference in business model for the phones, e.g. problems with being tied to one network also in the UK for example most handsets are free with your contract subsidised by the network operator, the iphone isnt, this makes it unattractive in comparison and is one reason it has not fared too well over here. People when faced with getting a Nokia N82 for free or an iphone for £329 ($600) are choosing the nokia understandably.

    This is not a slag off of apple, im just adding in a number of things that apple fans dont seem to want to talk about, im actually a big fan of the company and despair about microsoft.

  26. hardmanb has a great post. Apple truly has been playing chess whereas most other companies are shooting from the hip. It has been fascinating to watch.

    My company gave me a BB to use, but I fail to see the attraction. The tiny buttons are hard to use, the small letters on the buttons are hard to see and some of the buttons don’t make sense. Why do I press ALT to get a number and the NUM key acts like a shift key? I leave mine in my computer bag and check for voice messages once or twice a day.

    On the other hand the iPhone has been great for me. I find typing on it quite easy. Navigating through a document is less than stellar. I text quite often with my kids (when I can get them to answer their old man) while traveling. Safari is great for browsing. The biggest bottleneck is the internet connection. WiFi is really good. Edge is hit and miss. The phone part of the iPhone works well for me. Yesterday I was at a client’s site and he commented that he was surprised that I was getting calls through as that was a known area of weak signal.

    Apple’s market share has been climbing rapidly the last couple of years. I think they are on the beginning of a long growth curve.

    Apple now is in a great position. As was pointed out above the market is their’s to lose. They have no debt, they have something like $18B in cash, they have cleaned up all their legacy technical issues (PPC, OS9), they have their teams in place for design, engineering and back office operations. And they have Steve Jobs. Steve’s job is to provide focus. He keeps the whole company on the same page. 18 months ago or so Apple killed the best selling iPod mini and replaced it with the iPod nano. No company run by accountants or committees would have done that. Not long before that Apple announced the shift from PPC to Intel processors. By sheer will power Steve moved some 20 or 30 million users from one platform to another. Without a strong force like that you get chaos.

  27. Well, I think there is another point to be made about the Apple advantage: Leopard. Sure, the point is well made that Apple have software experience others lack. Great blog, by the way. Neat set out. But my point is the advances made in Leopard. Most folks don’t even know what they are, because developers have yet to really get to grips with what Leopard allows the developer to do. I speak from experience. I have been developing on Tiger up until last week, cause I am basically to tired and pussy to get in and learn all the new tricks and gizmos one can hook up with the new OS.

    So my point here is that Apple have not just got a great history in software and a great OS. The point is that they have amazing, truly amazing engineers, and none of them, not one, is going to leave. Why would they? At Apple they are high priests and artists. Elsewhere they are nerds and geeks.

    Apple is so far ahead of any other computer software company I can think of and they are not slowing down. They haven’t just got the best tech, they have the best tech makers. It is the people, the minds at Apple who are the real asset that nobody is valuing. Don’t forget, Steve made NEXT and it was that system with which Tim Berner Lee invented the world wide web browser.

    I say Apple at $500 within two years. They have the people, and the people matter.

  28. @MobileAdmin: “…3 years ago what Blackberry was doing”

    I don’t think anyone is claiming that the iPhone has equalled or surpassed any and all enterprise devices on the way to domination.

    What’s undeniable however is the fact that in less than a year the iPhone has already had an unprecedented impact in an industry Apple has never played in. So the trend of the device’s growth and maturity is what’s remarkable.

    In a coupe of months third party apps, including many targeting the enterprise, will begin to appear. These will run, unlike the BlackBerry, on a highly capable OS with an unrivaled UI layer packaged into a sleek unit everybody and his brother is desperately trying to copy.

    So the more interesting question is what happens in a year or two. Will RIM be able to out-innovate Apple? Until now, in this space, RIM has had virtually no effective competition. Well, it’s got one now.

  29. Being an enterprise admin governing mobility for a F100 company I get to play with a lot of gadgets. I get a new mobile device pretty much every week and have had the iphone since before launch and am using one with the latest OS 2.0 build and I’m sorry but what ActiveSync provides is 3 years ago what Blackberry was doing. Yes it works and it was NEEDED to even get adopted in large companies but I’ll be happy having my Blackberry for the bulk of my email, work functions and iphone for web browsing and media .. iphone is really a lifestyle device. It’s an ipod with the internet.

    Whomever said Blackberry can’t do documents I’d like to know if your using a Blackberry Enterprise Server device or a Internet based one? Enterprise has robust attachment support and the new Service Pack 5 due next week brings even more functionality including attachment editing. Your issues are likely not having an active mobility support staff to keep up with this stuff.

    Iphone is slick but the issues noted on here are very glaring to anyone who’s used a blackberry and switched. I’ve passed a few around to the gadget lusters and all have been given back with a nice but I’ll stick with my curve, 8830 etc.

    Might I add that the whole itunes intergration needed for activation and OS updates is just plain god awful compared to full wireless activation with zero software on the user pc compared to what Blackberry has had 2 years?

  30. Great article.

    RIM is the elephant in the room, and it will be difficult to unseat them as such. Large (read: international corps. over 100,000 employees) enterprise users rely on BlackBerries to communicate are going to be hard to convince, as they were when BBs first came on the market.

    But from what I have witnessed in the enterprise (and no, I STILL don’t carry a BB), the number of BB malcontents is rising for some very real reasons:

    1. BB’s have tiny, analog keysets when used (as much as I have seen them used) are going to ruin the thumb tendons of an entire workforce. Watch a person e-mailing with an iPhone and witness the relaxed hand gestures and unfurrowed brow.

    2. BB’s have absolutely crummy document viewing support. It’s not that they lack such support, but its lousy user experience and lack of support for various common formats is the single greatest BB complaint in the enterprise.

    For many managers, remotely reviewing docs, and e-mailing comments to steer teams is what they do. If a device could do this well, fully half the managers out there could virtually end their use of PCs.

  31. Imformative Article, I’ll admitt Im a huge BB Fan, and love the Iphone, but wouldn’t get it for multiple reasons, which is in fact….No carriers…All others Nokia, RIM (BB) etc. , Have multiple carriers, you go with Iphone, your stuck with AT&T…How Bland

  32. Well, here’s the end of my iPhone story. Remember that I’m not a digital native; more of a digital haolie tourist. The device was of course a ripping great media player. Thing is, email and browsing/posting are my handheld meat-and-potatoes uses, whereas the media functions were dessert and the camera was, to me, the ridiculous parsley garnish. I came to the conclusion that the problem is indeed AT&T, not Apple. I should have known, since their landline telephone service is state-of-the art, in ever-changing fee scams, while their high-speed Internet service goes down every time in rains here in the suburbs of Atlanta. And it turned out that of all the provider options in this metropolitan area, AT&T offers the worst reception at the highest price. So every time I’d go to open a new Web page, I’d have to wait a minimum of four minutes for the page to load and open. Bookmarking made no difference. And in about 30 attempts, not once could I get a YouTube clip to play through; half wouldn’t even start. And this after it took almost five hours of cross-country tech support just to get the phone activated, and another hour and a half the next day to get the phone to sync the media I’d downloaded. Throughout all of this, AT&T/Cingular simply was unable to help; it was Apple to the rescue, in three separate calls. It turned out that what was broken was AT&T, insofar as the website used for opening the accounts and initializing the devices has the mumps or the measles or the Boogie Woogie Flu or something, and under the terms of the five-year contract with Apple, the site is the responsibility of AT&T, which, according to the Cupertine monks and nuns, has ignored the problem for weeks. So I went over to Verizon, and asked them about the problem, and the manager there, a neighbor friend of my sister’s, told me that they get a lot of iPhone refugees and that it would be throwing good money after bad to spend still more money on WiFi just to keep a device meant for a younger demographic cohort for whom it’s meant to serve as a kind of prosthesis of neverending jabber and amusement. (Having been shocked by the musicological narrowness of the, to me, surprisingly small iTunes selections, I was predisposed to agree with him that I’m too old and too business oriented for an expensive semi-operational gadget of that sort, pretty and gee-whiz though it may be.) The end of my story is that I returned the iPhone, closed all my AT&T accounts, and got a Blackberry 8830. Cingular offers that model, but then I’d have to go through The Provider from the Black Lagoon, so I got it from Verizon. I came out with $110 in my pocket, and a ten-dollar reduction in monthly costs. I left the Verizon store with the phone already activated, and it browses about as quickly and easily as my desktop does. It’s also markedly more ergonomic and intuitive than the otherwise wondrous iPhone. And no parsley garnish. Apple is a great company, and they performed beautifully throughout. I just wish they’d contracted with Verizon. And so, I understand, does Apple.

    I really want to thank you folks for advising this iceman from the Analog Age. All of you gave me the best advice you could, and everyone’s recommendations, combined, made it possible to make a better decision about how to suit my particular needs. I understand so much more now about what you all are chatting about, and I am more than ever excited about where these devices are going and where they can take us. Let’s all figure out how to put ruggedized ones in the hands of schoolchildren ASAP, please. Klopfer at MIT is experimenting toward that end, and no doubt Negroponte is scoping that prospect too. One Handheld Per Child, anyone?

  33. Pingback: Adventures in home working » I’ve been reading about the future of mobile IT

  34. Go with the Curve, I switched to it from my iPhone and have never regreted it once. Also, a friend has the Pearl from Verizon and really likes it (once they get used to the suretype – bit of a learning curve).

  35. I meant, and should have said, only that it’s slow. It takes minutes to set up this page, for example. (I may be a bit jaundiced, as it took three conversations and several hours to activate the device, and then another hour with support on another day to get it to sync downloads.)

  36. @hughvic:“It’s lousy for browsing…”

    Given the fact that 71% of mobile browser usage is generated by the iPhone, how so?

  37. Well, as I wrote here two weeks ago, I’m in the market. I bought an iPhone last week from the AT&T/Cingular store a couple blocks from here. It’s lousy for browsing, and worse for posting. (It is a beautiful creature, though; I wish you all wouldn’t discount the value of a thing of beauty present in your life, in your hand, daily—granted, it’s not Carmen Electra, but it’s prettier than a brick phone.)

    Should I return this thing, eat the penalty, and get a Blackberry? Which?

  38. Hmmm, you seem to have market information differing from everybody else’s. Care to disclose your sources?

  39. iPhones have a much higher return rate then BB, and the Curve is selling better then the iPhone. This article questions BB ability to sell in the consumer space, yet they have just begun targeting this segment and are already out selling iphone.

    My take on this is (having used both devices), iPhone has some cool features, but like many cool things its more of a trend then anything (its an ipod with a slow broswer and terrible phone). BB offer real tools that make my life easier.

  40. My day job is developing software on Microsoft platforms, we’re a Gold Certified partner at work.

    Yet, my laptop is a MacBook Pro, I use an iPod, and I just recently replaced my crap POS HTC “smartphone” running Windows Mobile with an iPhone.

    What does that tell you? Windows Mobile is about as compelling as picking up a steaming turd barehanded, and Apple’s device convergence rocks.

  41. Pete wrote: “I just wanted to add that blackberry subscribers number around 12 million. I assume that is worldwide since all email traffic has to go through RIM facilities in Canada.”

    There are two recent developments:
    1) Several highly publicized RIM outages
    2) India has questions about Blackberry security

    I think that both are among the top reasons for enterprises to begin scaling back their RIM commitments. And, it appears the iPhone is ready to ascend further.

  42. Pingback: ChangeForge… » Will Apple Eat RIM’s Lunch with the iPhone?

  43. When Apple decided to open physical stores people laughed. They are not laughing now. Soon people will get used to the idea of the online App Store just like that without even thinking. Why would they go to another place on their phone to find what they want to add to their phone? The word on the street will bulid the momentum when people can go in to Apple stores and play with the real new iPhone 2. While Google/OEMs will still depend on the other stores to decide whether they will carry Android hosted phones, how many models, and where to put them in the store. And if the regular store experience is any guide, the demo phone, if you can find it at all, will be a broken dud. If Nokia decides to give away a free model to promote it, it’ll likely have the most hedious design. All potential pitfalls for competitors.

    For Android especially, Linux based OS/apps are even less attractive option corporate-wise than the known BB/Palm/Symb/WinMo options – which are already overwhelming for most IT shops. The only way to push the new Android platform is to make a huge effort like the Razor, which I just don’t see happening for multiple manufacturers all using the same OS – how do you break it into the multiple pricing tiers like traditional handset models when you have a OS meant to be able to add anything for free? So it goes back to the hardware and UI, and there Apple is clearly the leader and others imitators.

  44. @Matt: “The middle of the market, which was the safest place to be, is now dying.”

    Bingo. May I also add to that the all-important framing of the product wrt to the marketplace at its birth, the way, for instance, Jobs did so masterfully at the intro of the iPhone. I covered this in:

    The Hit Parade: Hollywoodization of gadgets

  45. I enjoyed reading the article. I just wanted to add that blackberry subscribers number around 12 million. I assume that is worldwide since all email traffic has to go through RIM facilities in Canada. So BB itself is a rather small platform when compared (as many comments here prefer to do) with the entire cell phone market. Removing the roadblocks of Exchange integration with Notes and others to follow, the gates to enterprise are wide open. Currently, businesses pay for an email plan in addition to their data plan. Switching to iPhone will therefore reduce costs.

    Someone mentioned the physical keyboard as an advantage. Personally, I wouldn’t buy a phone that had one. I’ve had plenty of trouble with keys getting stuck or the label rubbing off.

    I think the most remarkable observation in the article is the new products combing in the future. A tablet-sized iPod touch will be huge. Think about the demand with hospitals, sales, insurance, real estate. Something with the functionality of the Kindle, and the utility of a car entertainment device.No one will care if it doesn’t run windows.

    It liked the comment that linkened Apple to chess player. Since his return, I have been thinking of Steve Jobs as Napoleon. Someone who selects his generals on merit, as opposed to influence, and a brilliant strategist. Let’s hope he doesn’t plan on attacking Russia! The US has shown the best way to defeat it if to let it whither and die on its own.

  46. Great insight, Kontra. At the very least, we will have another major player in the market to help control the rampant customer disregard at Microsoft. Microsoft has made the computer industry what it is, and it has given me a job – so I do love the Microsoft world. What is enticing to me is that Apple stands poised to make the computer industry what it will become, and industry that may finally begin to make our day-to-day world even more efficient.

  47. Correction – I meant to say “pre iPod and OS X”. The iPhone is the marriage between those 2 platforms.

  48. Apple, or more specifically Steve Jobs, have always been incredibly good at marketing. Not in the way that Microsoft is, which led to their domination in the 90’s and the destruction of Lotus, WP, etc…, but in understanding how marketing is changing and the ways they can build a company around that.

    People who have money, which is 100% of the smartphone market, now break their purchasing decisions into 2 categories. If they don’t care how good it is, they want it to be cheap. Really cheap. That’s where Motorola and Nokia and Google are going to wind up making their money. There will always be room for commodity devices in this space. But if consumers do care about how good it is, they don’t care what it costs. They want the best and they are willing to pay for it.

    You can make a lot of money selling lots of phones at small margins. And you can make a lot of money selling a few phones at high prices as long as they are very high quality and perceived to be the best. What you aren’t going to be able to do any more, and this has already started, is sell average goods for average prices and make a lot of money. The middle of the market, which was the safest place to be, is now dying. Read Seth Godin to get a better idea of what’s happening now.

    Apple tried to work this way for 20+ years, even when their products weren’t that good (pre iPhone and OS X), and it nearly killed them several times. But the world has come around to them at exactly the same time they have found 2 killer platforms for their products. I have no doubt they are going to own the top end of the market for a long time, at least as long as Jobs is steering the ship.

    RIM is in an interesting position. They do have the enterprise relationships, but they built those relationships by appealing to the same people who now want iPhones. They have the best mobile email platform, but that may not be enough for them to keep decision makers on board when their products just aren’t as cool and good as Apple’s. I can see them licensing Blackberry tech to Apple (and others) and just getting out of the hardware business in a few years. An iPhone-Blackberry would be nearly untouchable at this point.

  49. @Rip: “All the other companies you named only build one part of the whole.”

    That’s right. However, Google thinks now any handset manufacturer can be as “vertically integrated” as Apple, with their own hardware and Google’s Android OS. Of course, this didn’t quite work out as effectively with Linux in the same mobile market, but it’ll still be interesting to see how a better mobile-specific OS does with the ‘partnership’ model.

  50. Good stuff. I have only one minor critique. You said it but you didn’t say it.

    11. Apple has no competitors. Apple is playing a different game than the rest of the tech world. Apple doesn’t have to beat anyone to win.

    Apple is the only team on the field that builds the “whole widget,” in the words of Steve Jobs. With each new Apple product there has been a rush to market by other companies with iSomething killers.

    Because Apple can modify all the software and hardware in-house they are flexible. Inter-company wrangling is required just to achieve hw/sw changes in the rest of the market. Then the companies must get any necessary approval from the carrier. Apple only needs to negotiate with the carrier.

    All the other companies you named only build one part of the whole. One company must own the entire user experience in order to compete with Apple. This is different from “market domination,” and is unrelated to what you’ve rightly described as the meaningless quantity “market share.”

    Apple owns the market for Apple products and services. It’s growing. That would seem to satisfy their goal.

  51. @Eugene: “Apple has the say on what Apps can run on the iPhone”

    This is true, but certain apps, for example VOIP over EDGE, are still the domain of the carrier. We don’t quite know the extent of this yet. What other category of apps would upset AT&T; could you for instance load an app that circumvented the carrier control of SMS?

  52. Very good write-up but you forgot one very big point that Apple has going for it.

    The carrier deal that Apple got puts them in control. Apple has the say on what Apps can run on the iPhone, not the carriers like RIMM, and Nokia have with all the different carriers they have to depend on.

    Also with all the other smart smart phone companies, its the carriers that sell the Apps not the manufactures.

    That has been the sticking points in the negotiations NOT the revenue sharing that the press talks about.


  53. I really hate PDA…. all the keyboards suck. They need FULL SIZED KEYBOARDS or they will all fail! – NOT!

    I’ll the iPhone keyboard over a Blackberry keyboard anyday… I’ll prob get an iPhone, because it does what it should the way it should. I’m sure its not perfect, but a lot of complaints are simply not valid. I’m sure Apple will work to improve things, they always do, but maybe this will be my first phone/PDA that I dont hate! :)

    The 2.5G isnt bad either… and well with the WIFI I wont mind the slow 2.5G EDGE network. WIFI is a must… if it doesnt have WIFI, there is no point, I’ll just go back to my regular crappy Verizon (Clueless) Wireless phone.

    Business doesnt care about design or even efficiencies – they just care if they can make it work. BB is nice, but I’d rather not have that crappy built-in keyboard, its just more annoyances. So if it works in a crude yet reliable and somwhat predictable manner (that is convoluted), that’s what business wants!

  54. Excellent perception, Kontra.

    Somebody at Apple, Inc. is an excellent chess-player. From manufacturing computers, they looked around, projecting the “next great thing” and analyzing what it would take for development advantages, marketing penetration, product profitability…holistically. Then they began putting the pieces together: iPod, iTunes, Safari, OSX, Apple Stores, OS X and Safari mobile versions, a killer consumer-phone, a carrier relationship, control of activation, powerful mobile interface design, beautiful large touch screen, and WiFi ability. Then introducing the iPod Touch, the iPhone, the MBA, the SDK, and AppStore. We must also remember that Apple can add features and capabilities in hardware, software and useability faster than their competitors, so Apple’s lead may even widen in some areas.

    Just like a master chess player, Apple involved all the pieces of its attack, positioned everything for the blitzkrieg, and unleashed their attack…taking the breath away from competitors, creating shock at the obvious obsolescence of former business models and the carrier’s closed garden, and creating disbelief at their profit margins in all areas of the onslaught, and despair in competitors at satisfaction ratings and web access usage.

    You are absolutely right, that even if the competitors yet realize what has happened (and will continue to happen) to them…none of them are positioned with the package of core competencies to compete with the integrated Apple penetration, control, flexibility and momentum in the new mobile market. We are watching what will be future case studies in technology development and consumer business.

  55. Great writing! To me it seems obvious that Apple has spotted a huge opportunity and attacked it with a solid plan and a half-mile head-start. Someone else may come out with an even greater thing down the line, but I won’t be holding my breath. Rather, I imagine we’ll be seeing the competitors (who survive)playing catch-up for the next 2-3 years…which is when an ichatav-enabled device with camera lense on front and back will take it to a whole new level:)

  56. @nikster: “Business doesn’t care it’s ugly.”

    Perhaps, but they’ll care if it’s shown to be hard(er) to use and more expensive. BlackBerry also pales in comparison with the iPhone when it comes to web browsing and custom app interfaces, both of which are quickly becoming crucial for businesses.

  57. RIM is in a good position because of its leadership in mobile email and entrenched position on the corporate market. It’s a great business tool – efficient at what it does. Business doesn’t care it’s ugly. Good on Apple to attempt to crack the fortress, but this will be a hard fight.

    Nokia is in a good position because it has the absolute supreme leadership in manufacturing and distribution. However, Nokia is severely lacking in software and while Nokia may think they can trolltech their way out of it, I don’t think this will be an easy transition at all. Nokia needs to become a software company in order to compete but all the software they have so far is utter crap. Nokia doesn’t “get” software and that will hurt them for years to come.

    Microsoft will have a hard time competing with the iPhone, it will take years to get Windows Mobile to where it can be a bad imitation of the iPhone interface. And unlike Apple, Microsoft has designed their core OS Vista such that it can never go on a mobile device. Windows 7 is going to correct that mistake but it’s going to take years for that to appear.

    The iPhone is in a very good position and Apple is once again showing the enormous power it has through quality software design. First time was the painless transition to Intel processors, second time the iPhone, the first mobile to run a full-fledged modern operating system. The SDK continues to exploit the software advantage.

    The only way Apple can lose is through its control freakery and greed. And that’s a very real possibility.

  58. the iPhone sucks because it doesn’t have a physical keyboard . . . plain and simple. I do like their laptops and computers, but their iPhone is way too overhyped. . . and the SDK won’t do any good unless if you are a hardcore programmer who wants to make some mulah . . . but if you are the average keeping up with the jones . . . it’s just best getting a normal phone with very good battery life . . . I can live without my wifi on my phone.

  59. Nice post!

    And yeah, Russ IS linkbait.

    It’s funny to hear people who still claim size over efficiency as if it were a good thing. If Apple grabbed a little under 30% of new smartphone sales, then doesn’t that make them a legitimate player right off the bat?

  60. The mobile market is huge and worldwide, and Apple is a minnow swimming among the sharks – if they reach or even surpass their goal of selling 10MM iPhones by the end of the year, they’ll have sold as many phones as Nokia sells in a week.

    Please, Nokia is whale like Microsoft. They impose their will through sheer size. Apple on the other hand is a shark, taking what it wants by the veracity of its attacks. Where’s the iPod killer? It will be no different in the smart-phone market.

    Get a clue. I love the iPhone, it’s a great device. But you could argue that Apple has had most the benefits you listed in the PC world for a while now and they still have a minor share in the PC market, and so it’ll be in the mobile market as well.

    Apple generates 1/3rd the revenue and 1/4th the profits of Microsoft, with only 3% of the worldwide market and 6% of the US market. Sounds like they are big player in the efficient and effective acquisition of profit. Smart-phones is where the profit is and well see how Nokia feels about losing the cream of its profits.

  61. I’m not really an adept, but I am in the market at the moment, and this fine piece and informed discussion could not have come at a better time for me. So, um, thanks.

  62. @NOC: “You underestimate RIM. They are the entrenched enterprise leader.”

    Yes, but the battle is not exclusive to the enterprise. Indeed, we have been witnessing the rapid converging of consumer and business spheres. What used to trickle down from the enterprise now trickles up from consumer electronics, the iPod being the most recent example.

    Clearly, Apple’s enterprise story isn’t as complete. But think about it, in just a few months the iPhone captured nearly a third of the high-profit market, ridiculing the market’s long-time players. Also consider the fact that RIM is just a cellphone manufacturer (with a some service and infrastructure thrown in). As I outlined above, Apple has a much broader spectrum of hw/sw/service competencies, incomparable branding and marketing prowess, the entire Mac/iPod ecosystem, the iTunes empire, etc. RIM has a lot of significant deficiencies in its arsenal.

    “I think RIM and Apple become the mobility version of Coke vs. Pepsi…”

    I’m not sure that happens without RIM proving itself in the consumer sphere, which it really hasn’t accomplished yet. It could be Coke vs. Dr.Pepper. ;-)

  63. You underestimate RIM. They are the entrenched enterprise leader.
    They own the existing enterprise mobility relationships in the F1000. Their solution is the most efficient (very important as wireless networks do not offer unlimited bandwidth.) They manufacturer their own devices and design the BlackBerry OS. They collect monthly service revenue from the carriers just like Apple does. The BlackBerry devices are starting to gain traction in the consumer marketplace. Their solution is easy to use and just plain works (despite 2 limited outages in the last 1.5 years.)

    That being said, the iPhone is a great product that offers some significant differentiators to the current device choices in the mobility space. There is tremendous pent up demand for the iPhone in the enterprises I sell to and it will immediately capture a significant share of the enterprise mobility marketplace when version 2.0 software is released.

    I think RIM and Apple become the mobility version of Coke vs. Pepsi which ultimately is good for all of us.

  64. @John: “Tell that to Wal-Mart.”

    As mark has pointed out, Wal-Mart is not a manufacturer, like Apple. But more importantly, Wal-Mart has been somewhat desperately trying to move upscale to better compete against Target, Kohl’s and JCPenney:

    Leaked Memo Suggests Wal-Mart’s Upscale Strategy May Be Backfiring
    Ad Agency Memo Says Customers Don’t Buy High-End Goods in Low-Cost Retailer

  65. In a few years teenagers will shake their heads in disbelief: “You mean you had DIFFERENT gadgets for surfing the net/listening to music/making a phonecall/paying for traintickets?!?!”

    (In Japan they already have a system where you can charge your phone with money and use it to pay for train tickets or in vending machines.)


  66. I hope, at the very least, I can at least get the ability to sync my To Do list with my iPhone. To think I dropped $499 for it and still have to carry around my Moleskin Diary to keep my To Dos in!

    I am just as optimistic as you are concerning the iPhone’s future and where Jobs has placed them as a major competitor in the business market.

    Great summary and overview of the iPhone’s current position.

  67. The industry Apple is aiming for is not “cell phone” but personal mobile computing, which includes cell, wifi, and other soon-to-arrive communication technologies. We can see it now with the iPhone/iPod Touch coming from one end, and the MBA coming from the other.

    Some analysts expect a stripped down iPhone; I don’t see it. A click-wheel and display was not essential to a music player; the music and headphone are core, so an iPod shuffle could be made. Even though it’s called a phone (“iPhone”), the Internet is core to it (remember the intro: 3 things), so I don’t see the touch display disappearing from it. In today’s lineup, shuffle is a music player, iPod nano/classic is a media player, iPod touch is a media player and Internet device, and iPhone is a media player, Internet device, and cell phone.

    But as technology becomes cheaper, today’s iPhone will someday be what people expect in a low-end “phone”. People will expect to have Internet access all the time. In the meantime, Apple will be making better mobile devices that fit between today’s iPod Touch and MB Air.

    Finally, I don’t think Apple cares if they “dominate”; they simply want to be a major player selling millions of products a year, so they can make even better devices. All these moves and pieces are to ensure being a major player in personal mobile computing; not a marginal player.

  68. Wal-Mart is a middleman, go-between. That’s an entirely different proposition than being a product manufacturer.

    That said, the Apple Store piece is in the same business, and is likely using the same middleman techniques towards all its ecosystem partners, plus it has the advantage of reaping huge profits on Apple’s own products.

  69. “Selling millions of something at a very small margin is dumb business, ask Motorola.”

    Tell that to Wal-Mart.

  70. “You think Apple will somehow end up dominating the industry somehow?”

    No, because Apple’s stated goal is to gain significant share in the ‘smartphone’ market, in which they have become #2 in an astonishingly short amount of time, not to sell the most phones.

    “if they reach or even surpass their goal of selling 10MM iPhones by the end of the year, they’ll have sold as many phones as Nokia sells in a week.”

    What’s this got to do with Apple’s stated goal of competing in the smartphone market? Apple doesn’t sell crap phones and makes more money per iPhone than any other company, certainly including Nokia. Selling millions of something at a very small margin is dumb business, ask Motorola.

    “But you could argue that Apple has had most the benefits you listed in the PC world for a while now and they still have a minor share in the PC market, and so it’ll be in the mobile market as well.”

    This ‘marketshare’ nonsense is such a tired and stupendously misguided argument that I don’t really need to answer, other than to point out that Apple has never had anything remotely resembling the confluence of the 10 competitive factors I cited above in the PC business.

  71. My opinions aren’t linkbait. I could care less if people link to them… do you see ads on my site? Counters?

    As to your point of the above? So what? You think Apple will somehow end up dominating the industry somehow? That’s myopic in the extreme. The mobile market is huge and worldwide, and Apple is a minnow swimming among the sharks – if they reach or even surpass their goal of selling 10MM iPhones by the end of the year, they’ll have sold as many phones as Nokia sells in a week.

    Get a clue. I love the iPhone, it’s a great device. But you could argue that Apple has had most the benefits you listed in the PC world for a while now and they still have a minor share in the PC market, and so it’ll be in the mobile market as well.


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