Can Apple revolutionize the cell phone industry?
by BorisIf there’s any company that can be a catalyst for changing an entire industry’s dynamics, it’s Apple (as demonstrated most recently by the iPod). And contrary to popular perception, handset manufacturers (Nokia, Moto, LG, etc.) might actually *benefit* from Apple’s success (as opposed to suffer because Apple becomes a competitor).
Cell phone manufacturers, in general, have been hurt by declining margins because consumers (in the US especially) don’t view phones as a valuable product in their own right. For years now, the network providers have been giving away phones for free or at deep discount as an incentive device. So, while true that the RAZR has done Moto well financially, the networks still control pricing power, not the phone manufacturers. And as a result, the public perception of value is more squarely placed on the network than the phone itself.
Apple is arguably the only company with enough brand cache and product design savvy to turn the cards on the networks and both change how people view a cell phone and alter their purchasing behavior.
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January 5th, 2007 at 12:02 pm
Device manufacturers have been chasing the iPod’s form factor for several years now. How many white phones have entered the market in recent years? How many preemptive iPhone knockoffs have already been blogged? One need only look at Verizon’s Chocolate, Sprint’s Fusiq, or Helio’s KickFlip to see examples that have gained mainstream traction in the last 12 months.
Both the carriers and OEMs are trying to figure out how to create a device that generates the level of allegiance, enthusiasm and evangelism that Apple seems to create with every product release. When was the last time someone loved their phone so much that they insisted you hold it, try it, then get one for yourself?
User experience has only recently been getting lip service from the mobile industry as they recognize that it becomes the differentiator in a crowded marketplace where the competitive choices are so similar. Suddenly we’re hearing mobile executives talking about it openly at the conferences. The rumor of an Apple phone has much of the industry on guard as Apple has proven to be a company who truly “gets” user experience and have leveraged that knowledge to create unparalleled loyalty.
As mobile user sophistication has grown, the demand to tear down the walled garden has increased.
If we put our optimistic-colored glasses on, what we’re possibly about to see is a paradigm shift. If OEMs follow Apple’s lead and begin to actively market “cool” handsets directly to all consumers across networks, we could see the precipitation of a sea change where users choose the handsets they want, then activate service on it. The next natural step would be to allow users to select their preferred content then send it to their handsets rather the current model of accessing carrier-curated content via their handset, with each handset getting a unique set of choices.
Carriers maintain an iron grip on all facets of the experience from handset to network to content. Simply put, they call all the shots, and they make considerable revenue from every facet. Until there is a critical mass of users who are sophisticated enough to understand how to acquire & activate their own handsets and access/sideload content to their phones, I’m skeptical (but hopeful) that the carriers will loosen that grip to bring down their walled gardens. However, there will always be those mainstream users who see nothing broken with the model of accessing content via their handsets and have no desire to take technical matters into their own hands.
Carriers will hook entry customers with free handsets, but ultimately want customers to have the cool new handsets. Cool new handset UIs encourage adoption of high-margin data services, so it’s common to want to keep mobile users on an upgrade path. If the rumors are true that Apple’s phone may have an increased focus on data services (ie. texting, web browsing) then it’s in the carrier’s interest to encourage adoption of an Apple phone.
Will Apple sell their phone unlocked in their retail stores? I wouldn’t be surprised. But then the burden will be on the customer to contact their service provider to activate service on their new phone. Not an ideal customer experience. I’m curious to see how Apple addresses this one.
Will Apple’s debut lead to dedicated OEM retail stores popping up all over, capitalizing on a new public-interest in cool new handsets? No.
Will it raise public awareness of mobile user experience and it’s place in the mobile space? Absolutely.
January 5th, 2007 at 1:16 pm
The current model of carriers and OEMs partnering to create a compelling music phone has had pretty limited success — for example, even though the ROKR brought in iTunes and was marketed in unprecedented ways. That carrier/OEM dynamic is possibly what’s at stake if Apple succeeds.
Consider this: with ringtone sales on the decline (which is a first in the US), carriers are the ones who stand to lose on the R&D spent developing a music phone offering (since they won’t get paid from data and music sales). Echoing what Jared said, the handset manufacturers serve the carriers, and it’s the OEMs who stand to gain from a hot handset that could deliver a compelling music experience.
I think that’s precisely why everybody is holding their breath for Apple to get on the scene. Apple has a proven track record for combining great hardware and software engineering, plus the critical user insight needed, to get it right. Also, with iTunes/iPod they have also figured out that an open system — one that accepts standard music formats, accepts standard headphones, syncs with any PC — is much better than the closed one consumers are used to accessing on their handsets.