3G iPhone a bigger challenge to competitors

Steven Hartley/Ovum
10 Jun 2008


has finally announced a 3G version of its iPhone device. Supporting HSDPA, it will be available in 22 countries from July 11 and in 70 by the end of this year. The 8Gb version will sell for $199, with the 16Gb version costing $299.

So what's new‾ And what does it mean to the industry's key players‾

Most important to users are the lower prices, which we flagged up as a barrier to uptake in the first version. However, it is important to note that no details of the price plans associated with the 3G device have been revealed. Given that they are 3G rather than EDGE data plans it is likely that they will be more expensive. Therefore, the total cost of ownership of the new iPhone could remain prohibitive to many.

HSPA availability will also prove a massive user benefit, as evidenced by the emphasis placed on it during Apple CEO Steve Jobs launch presentation. However, how it will make existing iPhone users feel to have paid more for a slower device remains to be seen, especially as AT&T customers, at least, will need to sign a new two-year contract. Can they break the existing one‾ Will they get a discount on the upgrade or a rebate, as occurred with the price drop six months ago‾ Unfortunately, such details were missing from the razzmatazz of the announcement.

A new breed of users was also highlighted at the launch - enterprises. Support of Exchange and Cisco's VPN was touted as a way to encourage enterprises to take the iPhone. However, we remain far from convinced that it will be a significant player in this space. We imagine that using iTunes to synchronise enterprise applications would make most IT departments quake with fear! This is in comparison to the wide portfolio of business-optimised devices and managed services that operators can provide.

For Apple the PR machine has gone into overdrive and more headline-grabbing media coverage can be expected for at least the next month. However, it is easy to be cynical. It is important to note that the announcement goes a long way to addressing some of the shortcomings of the original device: 3G, cost, geographic availability and third party applications.

HSPA will certainly help the user experience, as will the promised expansion of third party applications. Nonetheless, from a corporate perspective, the drop in price and dramatic expansion of the (legal) geographic availability of the device will provide a major greater boost to volumes. The geographic expansion is also the only way to ease the revenue leakage caused by the gray market that sprung up around the first iPhone.

For operators with the right to sell the iPhone, they at least get to share in the hype and reap the kudos associated with the device, most notably the operators claiming the largest geographic spread, such as Vodafone and America Movil.

Unfortunately, no details were forthcoming regarding the operator business models this time and what, if any, revenue sharing agreements are in place between Apple and the operators.

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