Apple's wireless effect

Olga Kharif
10 Jan 2007
00:00

In the run-up to Apple Computer's Macworld Conference & Expo, speculation surrounding an expected iTunes phone has gone into overdrive. Debate has centered on the usual questions, including when it will be unveiled, what features it will boast, and what wireless carriers will provide the network coverage.

What is clear is that Apple CEO Steve Jobs intends to introduce a combined wireless phone and MP3 music player sometime in 2007"”even as early as this week's conference.
But contrary to recent speculation, Apple doesn't plan to enter the market by reselling a wireless carrier's service under its own brand, BusinessWeek.com has learned.

More likely, it will unveil partnerships through several wireless carriers, or the company will sell phones through its retail stores and they will be 'unlocked,' meaning the device can work on any of several competing operator networks.

Whatever form the final product takes, a more important issue is what impact Apple's entry will have on the wireless industry. Early signs suggest the computer maker will have a big effect on how cell phones are designed and distributed, shaking up handset makers and the network operators that generate upward of $100 billion a year in service sales.

From nowhere to the big leagues‾

Analysts at UBS estimate that Apple could sell 5 million phones in 2007, grabbing a 0.5% global handset market share. Not bad for an entrant starting from scratch.

According to a recent Solutions Research Group survey of 2,600 US residents, 16% of respondents over 12 years of age say an iPod phone is 'a great idea.' Given that some 20 million Americans already own Apple products, the company could in short order join the ranks of the biggest North American mobile-phone makers, a list that includes Motorola, Nokia, Samsung, and LG, says Kaan Yigit, study director at Solutions Research Group. 'If they have a decent product out there, it could vault Apple from nowhere to the top five very, very quickly,' he says.

Carriers such as AT&T's Cingular and Verizon Wireless, owned by Verizon and Vodafone, have cause for concern, too.
Efforts by the US mobile-phone industry to get subscribers to listen to music on cell phones haven't exactly taken off.

As of November, only 3% of US mobile phone users listened to music on their phones, up from 2% in April, according to surveys of 16,000 users by consultancy NPD.
That accounts for only a sliver of the estimated 32.5% of phones being sold that are capable of playing and downloading music files.

And it's not like mobile music downloads are going great guns. Most carriers won't share download data, though Sprint Nextel, a pioneer in wireless music, says users have downloaded 10 million songs since the service was launched one-and-a-half years ago.

The fact is, many music phones and services aren't yet easy to use or well integrated with PC-based applications, analysts say. 'Consumers aren't satisfied,' says Michael Gartenberg, an analyst with consultancy JupiterResearch. 'Apple will certainly cause the industry to wake up.'

Music prices going down

Indeed, some manufacturers and carriers already have, cutting prices on mobile songs and the phones that play them.

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