A plan for Apple to hit 15 million iPhones
This train of thought came about as a result of a few comments on a recent post.
With the Iphone V2 3G now being almost a certainty Apple are going to have a major problem on its hand with all the early adopters suffering from a large dose of penis envy regarding their friends new 3G iPhone.
The question is how to avoid this and keep those customers happy.
With contract issues with the carriers and people at most 6 months into a new carrier contract this is going to be difficult.
Scott Moritz had a piece this week on the subject of AT&T subsidies on the upcoming device.
“While offering the subsidy would cost AT&T $200 per iPhone user, we estimate the cost would be more than offset if the subsidy results in an increase in the iPhone subscriber base of around 100% - which appears to be a realistic assumption in light of the Razr’s experience,”
So the new device will be $199?
So here is how Apple get extra 5 million devices out globally.
They give a $100 trade in value for the version 1, everyone upgrades to version 2, restart their 18 month contracts and AT&T give away the traded in devices free with a new AT&T contract.
The secondary adopters (the general public) get a totally free iPhone (they are not that pushed on 3G anyway), the early adopters get an upgrade to the new device for $99 and Apple avoid all the negative publicity of people complaining they bought the devices recently and now have an out of date model.
What do you think?
Am I on the wrong track?
To be honest, the people who will do a takeup of the 3G iPhone aren’t in the US. The few early adopters who will are the ones who travel a lot (maybe never even moved to the iPhone from a Crackberry). No one I know in the US is bothered about getting a 3G phone..it’s all people here. I’m gagging for it, but have been sitting on my hands for MONTHS.
It’s a grand idea, and ATT would do well to do it. But I don’t see a huge takeup in it.
Sweet. And green too
For the US market it could make sense. Only question is around the fact that in your model Apple would losing out on chunks of profit from secondary adopters: so both AT&T and Apple are subsidising the model, with only AT&T clearly recovering the cost. Apple would do this in the longer term as the cost of production goes down (as per the ipod or gaming consoles), but that would probably happen anyways. In terms of short term this would be dependant on new V1 users upgrading to V2. So not sure if the economics of the model fully make sense.
Not sure about other markets and the secondary adopters don’t care about 3G assumption. Many in the UK have not jumped on the iphone bandwagon (besides for reasons of cost) for a lack of 3G.
Another idea to throw in the arena: Apple could use the older versions which are traded in for 3G models within emerging markets and developing countries.
Would be cool if there were some element of “changing the world” in Apple’s business model, and it would also make sense given the greater adoption of mobile vs. PCs in many parts of the developing world.
3 things:
Elana is right. No 3G in the US except ATT. Not too attractive to the american consumer. No one understand the need to speed when talking mobile.
Apple cannot sell refurbished like new. 70% of iphones are hacked or scratched. The factory renewal process will be too expensive to do. If there is a trade it will be a carrier decision not Apple’s.
Final and last point Apple applies the Ipod strategy to iPhone. Major difference between iPhone and Ipod is carrier contract. You cannot lock a user for 18 months and renew your device after 12 months. Unless you decide to carry both for a long period of time.
Apple has a problem - they have to make the right decision. Any mistake here will cost them their innovator leadership. Note that competition is also coming back with better devices…Apple has created a solid union between Nokia, Motorola, Samsung and LG. A full industry against them…
Clever idea. I certainly wouldn’t complain if they did this.
But could it set a precedent that Apple might not like to have to keep up? I’ve got a first generation iPhone, iMac and MacBook Air. It hurts when new updates or price cuts land. But isn’t that price an early adopter knowingly pays?
I’m very interested to see what they do.
T-mobile just open 3G this weekend with 20 other markets to follow shortly (www.brighthand.com/default.asp?newsID=14010). If Simable works with iPhone then I know what my hubby wants for Father’s Day!
here in the USA with the exception of a few techie/geeky types of people almost no one has the slightest clue what 3G is. even the sales people at the store are not very educated. they consistently make up things about how the networks they sell service for are 100% 4th generation, etc. to get lots of people to upgrade on for the purpose of 3G they need to spell out exactly the advantages. i do not think AT&T really wants 3G phones to be used for much more than status symbols. the cell tower back haul over here really is not equipped for very high capacities.
of course europe and asia are a totally different story.
Pat, not only are you on the right track — you may be the only telecommunications blogger on the planet who has any connection with reality.
And while I’m at it, could somebody tell me (again) why I should give even a tinker’s damn about 3G?
You have a great company, Pat. Don’t let the other lunatics make you nuts.
REG CROWDER
Freelance Business Journalist
London, UK & Brittany, France
http://www.RegCrowder.com
http://www.journalistdirectory.com/journalist/TgTQ/REG-CROWDER
So…this brilliant idea is….give people iPhones on the cheap…
This is the same sort of argument where people say Apple should do a cheap Mac for people who don’t want to spend more than 50 quid on a computer. It doesn’t compute.
When they release the new iPhone, I will upgrade, of course. But a member of my family will likely get the old one.
Cheaper prices != more buyers
@matt
give people iPhones on the cheap?
yes
more contracts for AT&T
you will find the AT&T have no love for the iPhone its a device to them that allows them to sell contracts to people.
Thats it
Don’t forget that apple is just expanding their markets. They will soon be in Canadian market with the version 1 phone. EU is bound to be expanded later this year too. And not mention China with over 200 million cell phone users. All these collected phones could be sold in other markets.
The other major components of 3G in North America is that it is
a) Not being promoted by the Cell Phone companies
b) Cell phone companies are not utilizing and providing the services that 3G can offer.
It seems it’s a little backward thinking, no?
Palonek
http://www.edward-palonek.com/
@Pat - I’ll just have to disagree and leave it at that. I think it’s a daft idea that wouldn’t sell.
I agree with Edward Palonek that 3G is being horribly badly neglected by the telecoms companies. I tried one of the ‘3G’ dongles offered by Three the other day and managed to get 200 kbps. That’s utter bollocks. Who would want it!