Putting Your Head in a Vise

As Apple gets ready to ship iPads with 3G wireless, it is interesting to go back and see what we can piece together about the most recent negotiations between Apple and AT&T.  It looks like they concluded their latest deal right before the January iPad announce as Verizon rumors were still rampant right up to the event (I now believe any unsourced Apple rumor in the New York Times or the Wall Street Journal comes directly from Apple).

I wrote a little about this when the iPad was announced:

The Dumb Pipe

Even though it was greeted with derision, Apple’s deal with AT&T for 3G data service is significant.  No doubt part of a broader negotiation between the two companies, the iPad data plans set a bar for other operators to meet or beat on price, quota and lack of contractual commitment.  AT&T, along with other operators around the world, end up more removed from the customer and one step closer to being not just a dumb pipe, but an invisible dumb pipe.  It will be interesting to see the terms and conditions and to what degree AT&T gets brand awareness.

I now surmise that AT&T got:

  • To keep iPhone exclusivity in the US for some unknown period of time.  AT&T really doesn’t have a choice here as iPhone is a huge driver for their wireless business and they risk losing millions of customers the day iPhone is available from other US operators.  So they want to string out exclusivity and do what they can to enhance their network in the meantime.  The Wall Street guys continue to speculate on what it would mean for AT&T and Verizon if AT&T lost exclusivity.
  • The opportunity to spend billions to bolster their network with Apple generously applauding AT&T’s big investments.  AT&T offset this expenditure on their balance sheet with a sly hint that Apple shares some of the blame for the iPhone’s bad network experience.
  • The “right” to offer iPad users free use of AT&T’s Wi-Fi to mitigate the hit on their network.  AT&T continues to state that they believe iPad is mostly a home/Wifi device, but I have seen a bunch of them on airplanes (but then there are people who live on planes…).

Meanwhile, Apple got (in addition to the last two points above):

  • No changes to iPhone “all you can eat” data plans (AT&T would love to charge for usage – I have heard iPhones are driving over 65% of all wireless data traffic in the US)
  • Sweet pricing and terms for iPad 3G service that sets a great precedent for other operators in the US and beyond (could their resistance to these terms be contributing to the slip in international availability?), including
    • A choice of a low price plan ($14.99) and an unlimited plan ($29.99) that really is unlimited (“unlimited” usually means limited in the Orwellian doublespeak used to describe most mobile data plans).  UPDATE: the bandwidth may be unlimited, but it seems there is traffic shaping of streams going on.  AT&T is implying Apple is to blame.  Some of this may just require app updates and/or the v4.0 OS.
    • No contract  – you can cancel at any time
    • On-the-fly provisioning from the device
    • No AT&T branding in the experience?  Could it become non-exclusive at some point and let you choose from multiple operators in the future?  UPDATE: Looks like there is a token AT&T logo on a the billing page.
    • No word on whether AT&T is sharing service revenue back with Apple.  My guess is not.
  • Coincidently, the VOIP over 3G restrictions in the App Store disappeared about the same time.  Given you still have to buy a voice plan with an iPhone, this doesn’t help much (yet), but it presumably also applies to the iPad.

Guy Kawasaki once likened competing with Microsoft to putting your head in a vise.  That may be a more apt description of competing with his alma mater Apple today.  And based on the AT&T negotiations, it may be even worse to be an Apple partner. 

Apple and to a lesser extent Google really are doing a phenomenal job changing the dynamics of the telecom industry – for the better.  For all the (valid) complaints about Apple’s heavy-handed control, it is still an improvement over the operator-controlled world of yore.  The only downside of all this is operators around the world are pissed off as their dumb pipe nightmare comes to pass and in the absence of being able to get the better of Apple, they’re taking it out on other companies.

iPad Observations

Quick thoughts:

It is a Big iPhone

Looks nice, but more evolutionary than revolutionary.  Price better than expected, but still won’t be racing out to buy one. Expectations were impossible to meet, but Apple gets a lot of blame for setting them so high.

hat tip Engadget

Flash in the Pan?

I thought after inadvertently showing that Flash didn’t work on the Time web site (above), they were setting up a reconciliation with Adobe.  Guess not.  Was this an intentional nose-thumbing at Adobe or is Jobs less scripted in demos than we all assume?

The Dumb Pipe

Even though it was greeted with derision, Apple’s deal with AT&T for 3G data service is significant.  No doubt part of a broader negotiation between the two companies, the iPad data plans set a bar for other operators to meet or beat on price, quota and lack of contractual commitment.  AT&T, along with other operators around the world, end up more removed from the customer and one step closer to being not just a dumb pipe, but an invisible dumb pipe.  It will be interesting to see the terms and conditions and to what degree AT&T gets brand awareness.

Rumors of Kindle’s Death Greatly Exaggerated

Apple seemed a little faint-hearted in their commitment to iBook – they threw it out there but seem ready to do an AppleTV-style “its just a hobby” repudiation if it doesn’t pan out.  Kindle is first and foremost a bookstore and available across an ever increasing number of devices, including the iPad from the day it ships.  Publishers used Apple to get Amazon to drop their cut to 30% but Amazon still has way more leverage over publishers than Apple does (assuming publishers still care about selling those ink on paper books).  And Apple seems to have conceded consistent pricing, which of course was fundamental to iTunes’ success.  The publishers will get greedy and undermine the platform.

And I wouldn’t write off Kindle as a device.  It has a price advantage, the screen is easier on the eyes and it has a huge advantage in battery life – I can fly to Asia and back for a week on a single charge.  And I’ll bet we get a new one for the holidays this year.

Media Salvation

Much false hope has been raised on this front – newspapers and magazines, you still have your work cut out for you.  There is also some weirdness in Apple’s iBook store with what looks like a New York Times icon built in (below).  Strange choice as it makes enemies and given the New York Times’ business savvy (or lack thereof), their deep embrace is a bearish indicator for the device.

Hat tip Engadget

Apple’s Cloud Strategy Still Missing in Action

USB sync?  Color me underwhelmed but am sure they are working furiously on this.

What else did I miss?

I Went to China and All I Got Was This Lousy iPhone

ShanghaiApple is getting grief for what appears to be an underwhelming launch of the iPhone in China.

It is not really a surprise – China is awash in fake and gray market iPhones.  When you walk down the street, the street hawkers greet you with “Watch, DVD, iPhone”.

Why settle for the WiFi-less plain old iPhone sold by China Unicom when you can choose from the much wider variety of iPhones available in China?

There are flip iPhones:

China August 2009 031Fake phones

Mini iPhones:

image

A “Lengthened edition”:

image

Additional colors:

China August 2009 028

The hardware quality is very good – the straight knockoffs are pretty much indistinguishable from the real thing.  But what is really cool is there are multiple fake iPhone software loads that are evolving quickly: 

China August 2009 025 China August 2009 024

Note the Finder, Windows Media and Firefox icons (the Firefox icon launches Opera).