iPhone to become subsidized, non-exclusive?

Filed under: iPhoneRBC analyst, Mark Abramsky, says that the iPhone will exceed its projected goal of 10 million devices sold in 2008 -- possibly by selling upwards of 14 million. How is Apple going to get these sales figures? Well, Abramsky suggests that AT&T could subsidize the iPhone by up to $200 for the 8GB model. This would mean the 8GB iPhone could sale for as little as $199 (previously rumored here); and possibly increase sales by 50 to 100 percent. According to Abramsky, this would...

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Why Dan Frommer and Scott Moritz Are Wrong on iPhone Sales

Daniel Eran DilgerSilicon Alley Insider's Dan Frommer says Apple's announcement of reaching its million mark goal in iPhone sales three weeks early is actually bad news for Apple and is convolutedly "below plan." He also says the announcement only props up the speculative conjecture by Scott Moritz of the Street that Apple's iPhones sales are somehow woefully below expectations. They're wrong, here's why.The PremiseFrommer wrote that Apple isn't selling iPhones as fast as planned and is set to only sell around half of its 2008 goal.His premise revolves around the idea that if Apple were selling iPhones at "a constant rate," a million phones in 74 days would be five million per year. However, because it sold over a quarter of those in the opening day and a half at the end of June, Frommer calculates that sales of the remainder in the 72 days since the first of July mean that Apple is only hitting a "3.6 million annual run rate."By the end of 2008, that would only result in 5.8 million units instead of the ten million goal Apple. [Silicon Alley Insider: Apple's iPhone: 1 Million Is Below Plan]Strike One: The Run Rate Myth.The most obvious problem with that idea is the fact that devices don't sell at a constant “run rate." Apple's iPhone sales took off at launch much faster than the original iPod due to the fact that a swell of early adopters were ready to buy it after being convinced over six months of anticipation. At the same time, many potential buyers held off on plans to buy the iPhone until they could read reviews and get a real sense of how it worked. Many were also locked into contracts with Verizon or Sprint. With only six months of advanced notice, it will still be a few more months before the majority of buyers who want an iPhone even get the chance to buy one without having to pay outrageous fees to cancel their existing mobile contract. iPhone sales are also now taking on the network effect of the iPod, as early adopters show their friends. All these factors have difficult to estimate impacts upon sales that make trying to figure a static “run rate�? a very simplistic and pointless exercise.However, there is another factor that simply blows the entire idea of a static “run rate�? out of the water. Last November, I predicted that sales of the Zune would bomb that winter because Microsoft had failed to critically examine Apple's historical sales patterns. Sure enough, the Zune was thrown against the rocks by Apple's riptide. Frommer's idea ignores that same reality by imagining that iPhone sales will schlep along at a linear pace. Had Frommer tried to calculate an "annual run rate" for the iPod based on a portion of third quarter sales at any point over the last half decade, he would never have been close to accurate. That’s because Apple’s iPod sales roughly triple every winter quarter.In 2002, it sold nearly as many iPods in its winter quarter as it did the first three quarters combined: 219,000In 2003, it actually sold more iPods in its winter quarter than in the first three combined: 733,000In 2004, it again sold more iPods in its winter quarter than in the first three: 4,580,000In 2005, it sold more than 4 million units every quarter, but still sold nearly three times as many in the winter: 14,480,000.In 2006, it sold more than 8 million units every quarter, and then sold over 21 million in the winter quarter.In 2007, it has maintained quarterly sales between 10.5 and 9.8 million per quarter.[Strike 3: Why Zune will Bomb this Winter]Strike Two: The Have it Both Ways Myth.One particularly annoying bit of analysts' talk about Apple's expectations is that they can't seem to decide if Apple's projections are bad because they are conservative lowballs, or if they are bad for being overly enthusiastic figures the company won't be able to reach. They often try to describe them as both, loading contempt on both sides of the scale. This makes them look very foolish. Do they think we have no memory, or are they just changing their stories back and forth in sheer desperation?Frommer tried to argue both sides at once in the same article. Recall that Apple only ever gave two iPhone sales goals: one million by the end of the first quarter of sales, and ten million by the end of 2008. In his piece, Frommer suggests Apple will only be able to sell 5.8 million iPhones by the end of 2008, based on that fallacious "run rate." That would be just over half of Apple's ten million goal. However, he then says that Apple's immediate short term goal was an unimpressive low ball, no doubt because Apple reached it three weeks early.Apple's stated goals must be a greatly frustrating logical conundrum for Frommer, because even at a “run rate" of one million in a quarter, Apple could only ever hope to sell six million iPhones by the end of 2008, another five quarters later. No wonder he's faced with trying to say that the immediate goal was too low and the longer term one is too high! Frommer needs to stop trying to pound round facts into square holes just so they can be stacked up like bricks the way he would like them to be.Strike Three: The Market Bearing Price Myth.While Frommer and Moritz are enamored with the idea that iPhone prices could only be cut if sales were in crisis, a variety of obvious market realities don't support that simpleton idea. Between now and the end of 2008, Apple has just two holiday seasons. If it wants to dramatically exploit its historical potential for selling roughly three times as many gadgets during the winter season, it makes sense to trade off unit pricing for volume sales, even if it could perhaps sell fewer at a higher price and make more short term profits doing so.Such a strategy isn't unique. Microsoft and Sony currently lose money on their new game consoles in desperate bids to establish their gaming and HD video playing platforms. Even so, this year they both cut prices again to accelerate volume demand. Nintendo purposely aimed low to capture volume sales using a more attractive price point. Given high demand for the Wii and extremely constrained availability, Nintendo "should" seemingly raise its console price and profiteer. It hasn't. While prices are clearly linked to demand, it is a common fallacy to think that the "right price" is always the highest the market will bear. Jobs' 99 cent pricing in the iTunes store is clearly not the top price consumers will pay for downloads. Music labels are fuming that other licensees such as Verizon will collect $2.50 or more for portions of a song sold as a ringtone. Jobs wants media prices low to induce volume sales and attract buyers to the legitimate market for music and movie downloads. Labels and studios want "market pricing," in part so they can jack up the price of popular music to exploit consumers, and in part so they can exploit artists by threatening to release their work at lower tiered prices and signal to the market that their careers are over.[Universal vs Apple in the iTunes Store Contracts][Nintendo Wii vs Microsoft Xbox 360 and Sony PS3]This All Happened Before.Dial back the clock twenty years, and you'll discover that Steve Jobs also fought with Apple CEO John Sculley over the price of the original Macintosh. The desire to use an expensive but pioneering amount of RAM and a futuristic new processor had inflated the price of the Mac, but the design team was still able to deliver it at a fairly attractive price point of $1,995. Scully determined that the Mac would still sell at $2495, delivering high profits to fund splashy advertising. Nothing on the market was really similar to the Mac apart from Apple's $9,995 Lisa. VisiOn for the PC similarly cost nearly $10,000 and did far less. Sculley thought that the market would bear anything Apple might charge. Andy Hertzfeld recalled on Folklore.org that in October 1983, "Steve Jobs strode into the software area one evening, looking angry. 'You're not going to like this,' he told us, 'but Sculley is insisting that we charge $2495 for the Mac instead of $1995, and use the extra money for a bigger marketing budget. He figures that the early adopters will buy it no matter what the price. He also wants more of a cushion to protect Apple II sales. But don't worry, I'm not going to let him get away with it!'"Jobs fought Sculley over the price increase, but Sculley prevailed. Sure enough, Macs did sell well out of the gate to early adopters at the higher price, but sales then began to stall. While Jobs couldn't cut the price for the original Mac to induce wider adoption in the mid 80s, he could choose to cut the price of the iPhone early and use interest in the iPod Touch to ramp users toward the iPhone. That price cut will dramatically boost sales this winter, just as iPod price cuts and feature refreshes do every year.Apple will earn less profit on individual hardware sales of the iPhone, and may even earn slightly less money overall this quarter than it might have selling the iPhone at $599. However, a $399 iPhone will dramatically boost the company's sustainable subscriber revenues and devastatingly cut into stationary rivals like Palm and the Windows Mobile licensees, giving them little opportunity retool and strike back with copycat products. [Price Fight - Folklore.org][Office Wars 3 - How Microsoft Got Its Office Monopoly]Strike Four: The Myth of Unlimited Availability.Another problem with idea that iPhone sales were in crisis--and that a price cut is a conspiracy to hide the truth--is that Apple sold out of iPhones in many of its retail stores throughout the first three weeks on sale.Carl Howe of Blackfriar's Communications tracked iPhone availability every day through July, and then animated the results in a movie that depicts just how constrained iPhone inventories in Apple's retail stores were. So not only did Apple meet its 94 day goal 20 days early, but it did so despite having no or few iPhones to sell in many of its stores during the first 21 days. Price isn't just related to demand, but also to supply.That also demonstrates the fallacy of Scott Moritz' assertion that Apple secretly planned to sell a million iPhones in a day and a half, and was sorely disappointed after failing to do so. How could Apple have planned on selling a million units in one day when it didn't even have a million units on the shelves of its stores during the first month? Remember, Moritz wasn't saying Apple had a delivery problem in getting enough units to stores as Nintendo is experiencing with its constrained supplies of the Wii. Instead, he tried to suggest that interest in the iPhone was far below Apple's estimates, and buyers were leaving it on the shelf like Windows Vista. The result, he claimed, was that "rivals were rejoicing."The only real rejoicing by rivals was that Moritz was volunteering to repeat the talking points handed to him by Verizon shill Roger Entner of IAG Research. Just hours before Apple announced it had sold a million units, Moritz tried to get some traction out of the idea that Apple had dropped the price in desperation to find another half million or so customers over the next three weeks. Apple isn't the typical tech company being run by visionless bean counters. It it were, it would have continued selling $600 iPhones at least through the end of September and then announced that it had sold its million. Apple had to push out new iPods in early September and fit the iPhone into the price range because next month it will be rolling out Leopard and a series of new software updates. Apple feeds the press in small, consistent, and regular feedings so reporters know what to write. If Apple were a big stupid company such as, say HP, it would parade out a mix of dozens of consumer and business products all together in one big event, and nobody would ever hear about any of it. HP did.[Why a million iPhones in 74 days is better than you think- Blackfriars][HP's marketing this week: fashionable but ineffective - Blackfriars][Unraveling Anti-Apple Panic: the iPhone Launch Success] [More on Scott Moritz and the Jim Cramer Misinformation Engine]Strike Five: It's Too Late to Deny the iPhone.The most comical part of Frommers’ analysis is that he’s trying to stuff a cat back into a bag and explain that there was never really any cat, long after everyone in the room heard the purr and pet the thing. Sorry, but the windows of opportunity to doubt the iPhone have long since closed.Real Windows Enthusiasts were aware of the need to deny the iPhone well before its release. They all chimed in with reasons why the iPhone wouldn't work, wouldn't offer what consumers want, and wouldn't sell well, all hoping that their non-stop misinformation campaigns would act as a self-fulfilling prophesy. They failed miserably.John Dvorak began his smear campaign immediately, appearing on CNBC to say that the iPhone was "trending against what people are really liking in phones nowadays, which are those little keypads.�? He explained, “The BlackJack, the Samsung, the BlackBerry obviously pushes this kind of thing. The Palm, all of these. I guess some of these stocks went down on the Apple announcement, thinking that Apple could do no wrong. But I think Apple can do wrong, and I think this is it." Reader Jim Barrow sent in a link to a MarketWatch article from March, where Dvorak scribed a rambling diatribe entitled "Apple should pull the plug on the iPhone." He offered no factual basis for worrying that the iPhone might not work out apart from the offhanded comment that "there is no likelihood that Apple can be successful in a business this competitive," words which echoed Dvorak's 1984 observation that "the Macintosh uses an experimental pointing device called a 'mouse.' There is no evidence that people want to use these things."In April, Dvorak inflamed his 'pull the plug' rhetoric further in a TWiT podcast, where he reported to an audience of hundreds of thousands that the iPhone only delivered "40 minutes of talk time" and "the interface fouls up constantly.�? Dvorak said that his inside information on the iPhone came from a "guy at Cingular who’s testing the product," adding, "he’s telling me confidentially and I shouldn’t be telling anybody."[John Dvorak: How Wrong Can One Guy Be?][Readers Write: Don't Write About John Dvorak Anymore]It'll Be the Death of You.Dvorak was joined by Rob Enderle, who called the iPhone “damned�? and “not a very good phone�? at every opportunity in the months before its launch, despite not really knowing anything about it, or even ever offering any rational criticism. Instead, Enderle appealed to fantasy fears of sexual assault, murder, and the violent death of children, all of which he suggested might somehow be related to the iPhone. Unaware that a password protected iPhone--or even a unauthorized unit without a configured service plan--can still be used to make emergency phone calls, Enderle wrote about, "an emergency situation where, say, a woman was being raped and couldn’t call for help because she didn’t remember her iPhone password." As I understand, with a Windows Mobile phone, even if the unit crashed while trying to place the call, at least the victim could use it like a brick as a blunt weapon. Enderle also feared that being unable to take out the battery would somehow making recharging it impossible, resulting an a scenario where one might end up on “the wrong side of town�? with a dead iPhone and be murdered because of it. Being on the wrong side of town was apparently the source of most murders prior to the arrival of the cell phone, which somehow made it safe to be in bad neighborhoods. For those who unfazed by the prospect of one's own own grizzly death in relation to the iPhone, Enderle appealed to his readers to please think of the children, particularly the potential for their brutal decapitation in an iPhone-related collision. "If you are buying this phone for a child or another member of your family," Enderle warned, "please emphasize that entering data on this phone while driving is dangerous." In contrast, operating the slide out keyboards of an HTC brick phone, or using both hands to thumb type on a BlackBerry may or may not save your children as they drive off an embankment, but at least you'll know they didn't die at the hands of Apple's "damned" iPhone.[SCO, Linux, and Microsoft in the History of OS: 1970s][Mac OS X vs Linux: Third Party Software and Security]Pure Concentrated Evil with a Multitouch Screen.Brian Lam of Gizmodo published an impassioned plea to boycott the iPhone shortly before its launch, due to the fact that Cingular had purchased the AT&T name, a brand Gizmodo's writer correlated with "monopoly tactics" in the late 70s. Gizmodo hasn't ever called for the boycotting of Verizon Wireless, which is well known for its anti-consumer tactics and which shares just as much blood with the old AT&T as its Baby Bell sibling Cingular, nor has it ever urged the boycott Microsoft products due to "monopoly tactics." Gizmodo also failed to boycott any other GSM phones that are tied to AT&T.Gizmodo's Lam and Enderle then teamed up with Slate's David Sessions in an article purporting to expose Apple's rated battery life for the iPhone. Sessions complained about the attention the iPhone was getting, and tried to dismiss Apple's announcement of a two fold increase in battery life over what was originally advertised. Unbelievably, Sessions and friends could only explain away the iPhone's jump in talk time by crediting its glass screen, saying that "glass transmits light more efficiently than plastic." That and some witchcraft.However, all of these individuals sharply reduced their squirt rate of false information after the iPhone's successful launch. In day and a half, Apple sold 270,000 iPhones compared to the 500,000 Palm OS Treos, 1.03 million RIM BlackBerrys, and 1.51 million Windows Mobile phones that were sold worldwide in the first 90 days of 2007.Apple has since nearly matched highflying RIM in sales during July, despite being limited to a single carrier and only offered for sale in the US. At this point, denying the iPhone is like saying the Earth is flat. It might be fun to do at a Renaissance Faire, but pretending to seriously doubt reality is not a good career move unless you work for the Street--or perhaps Rupert Murdoch, as Dvorak does.[Secret iPhone Details Lost in a Sea of Hype and Hate][iPhone Sales vs Zune, Palm, RIM, Symbian, Windows Mobile]And Now: a Warning.Let it be known that anyone who publishes further misinformation or blows out similar inanity will risk being instantly awarded a Zoon on the spot. No complicated voting, no tedious application process. New Zoon nominees will be rubber stamped with the same effortless fast tracking as the ECMA declaring Microsoft technology as an international standard.In fact, I’m going to totally Zoon Dan Frommer and Scott Moritz right now, as well as John Dvorak, Rob Enderle, Brian Lam, David Sessions, and even Roger Entner. And John Sculley. And while I’m handing out an intellectual property construct that costs me nothing to distribute, I will also award Steve Jobs with a Zoon for the whole two month “just kidding�? iPhone pricing situation, although I might take half of it back if I get a $100 coupon that doesn’t force me to spend $500 to actually use it. So let that be a warning to you out there on the Tubes thinking about how to linkbait an article at the expense of the progress of technology. I have a rapid firing gun full of Zoons and I’m not shy about cranking them out. Be sure to post any nominees.What do you think? I really like to hear from readers. Comment in the Forum or email me with your ideas. Like reading RoughlyDrafted? Share articles with your friends, link from your blog, and subscribe to my podcast! Submit to Reddit or Slashdot, or consider making a small donation supporting this site. Thanks!
10 reasons to pass on the iPad? TUAW fact check

Filed under: iPod Family, Portables, Odds and endsOver at TechRepublic's 10 Things blog, Debra Littlejohn Shinder has posted an article called "10 reasons why I'll be passing on the iPad." Some of her reasoning is sound, but quite a few of her points are easy to refute. It's worth looking at her post and the points it tries to make, because it's indicative of a widespread misunderstanding of not only the iPad's capabilities, but also its intended consumer base. 1. There's no physical keyboard Debra's correct that the iPad has no physical keyboard. But what she fails to account for is that not only will Apple sell a keyboard dock for the iPad, the device can also be paired with any existing Bluetooth keyboard. Apple's reasoning for not including a physical keyboard on the iPad is even more compelling than for the iPhone, because unlike the iPhone, you at least have the option of pairing the iPad with a physical keyboard. In order to put a physical keyboard on the device itself, there'd be two options: keep the iPad the same size and sacrifice a third of the screen's real estate, or increase the iPad's size beyond what some (including Debra) already consider unwieldy in order to include a keyboard. In landscape orientation, the iPad's virtual keyboard is nearly the size of a conventional keyboard, too, so while touch typing is going to be a challenge, it's a fair bet that typing on the iPad will be much faster and easier than the high end of 30 - 35 WPM thumb typing many people (myself included) achieve on the iPhone's far smaller keyboard. The lack of a physical keyboard on the iPhone hasn't measurably affected its sales; the iPad isn't likely to suffer many lost sales from this, either. Check out the other nine points by clicking the Read More link below. 2. One size doesn't fit all Debra claims that if the iPad is supposed to be a niche device positioned between a phone and a netbook, it should have a screen size midway between the two -- in other words, smaller than a 9.7" screen. However, that's not how Steve Jobs positioned the iPad at all during the keynote; Jobs's Keynote slide clearly showed the iPad filling a gap between the iPhone/iPod touch and a 13" MacBook. It's puzzling that in one sentence Debra complains about the iPad being too large to fit in your pocket, while in the next sentence she extols the virtues of Sony's VAIO X netbooks, which are almost exactly the same size - in terms of weight and thickness anyway. The VAIO X has an 11.1" 16:9 display, which actually makes it quite a bit larger than the iPad. One other thing about the VAIO X is quite a bit larger than the iPad: the price, which starts at $1299 -- far more expensive than even the priciest iPad. While it's true the iPad won't fit in your pocket, it's still far more portable than even a MacBook Air. Stephen Colbert even managed to pull one out of his jacket at the Grammys, so while the iPad is larger than an iPhone, it's far from the unwieldy monster many people are trying to claim it is. 3. It runs a phone OS One thing many pundits fail to account for is that the iPhone OS is actually a version of OS X adapted for a touchscreen device. No, there's no Finder, Dock, or menu bar. No, there's no Expos�, Spaces, or Time Machine. But the underpinnings of the iPhone OS are exactly the same as those of the Mac version of OS X. So when people complain the iPad doesn't run OS X, they're really pining for OS X features like the ones I already mentioned -- the Finder, Dock, menu bar, etc. However, none of those OS X features are particularly suited to a touchscreen device, especially one with a 9.7" screen. Tablet PCs running the full version of Windows have already demonstrated the pitfalls of running an OS meant for a larger device with a traditional point-and-click interface, and as a result, almost all of those devices have failed to gain traction in the market. Debra and others also cite the iPad's lack of multitasking as a strike against it. On this point, at least, I agree with them. While iPhone OS already allows for limited multitasking among Apple's own apps -- Phone, Messages, Mail, Safari, and iPod can all run simultaneously in the background -- third-party apps are still restricted to workarounds like push notifications. While restricting multitasking makes a kind of sense on devices like the iPhone 3G, with limited processing power and RAM available, on the iPad those technological limitations don't fly as an excuse. You can argue that not having multitasking on the iPad makes it easier to use for Grandma and other non-techies, but it also limits the device's potential utility. Granted, the iPad isn't positioned as a replacement for a MacBook, but the ability to run even one or two third-party apps in the background would make the device far more versatile. Personally, I would be very surprised if Apple doesn't introduce at least a limited form of multitasking in iPhone OS 4.0. Of course, I also said the same thing last year about iPhone OS 3.0, so who knows. One point bears mentioning, though: despite the introduction of iWork for the iPad, Apple is still pushing the device as a platform for consuming media, not as a productivity platform. To get any serious work done, Apple still expects you'll use your main computer, whether it's a MacBook, iMac, or PC. 4. There's not enough storage The most important question to ask on this point is, "For whom?" Debra says the 64 GB model might have enough capacity for her purposes, but she also grouses about the price of that model, comparing it to cheaper netbooks with "four times the storage." I will say that I'm puzzled at Apple's decision to top out the iPad's capacity at 64 GB, especially considering that's where the iPod touch currently tops out. A 128 GB iPad would have been very tempting indeed; unfortunately, given the price of flash memory, it also would have probably cost more than $1000. But what does 64 GB allow you to store? In my case, a 64 GB iPad would hold my entire 39 GB music library -- 19 days worth of music -- plus my entire iPhoto library of over 7000 photos, which, when optimized for the iPad's screen, would probably take up somewhere in the neighborhood of 5 GB, plus or minus a GB or two. At my most app-crazy I had about 2 GB of apps on my iPhone 3G, and "Other" space, presumably including the OS itself, takes up just over 1 GB. Added up, that equates to 47 out of 64 GB. In my case, that leaves over 15 GB of space for document storage, videos, and so forth. Let's say I store my entire Documents folder on the iPad (I wouldn't -- I use iDisk and Dropbox for that) -- 4300 documents taking up just over 2 GB of space. Now we have 13 GB left over for videos and whatever else. Even if I left myself a 3 GB buffer for whatever reason (including accounting for the GB versus GiB difference), that's still 10 GB of space for videos -- enough to store 10 two-hour films at a decent bitrate, or almost an entire season of an hour-long TV series. Let me break that down again -- a 64 GB iPad would store: -- 19 days of music -- 7000 photos -- Well over 100 apps -- A 2 GB Documents folder with 4300 items -- 20 hours of video -- Around 3 GB of space left over for whatever else (temporary photo storage, e-books, accounting for the difference between binary gigabytes versus decimal gigabytes, etc.) Granted, there are people out there with music and photo libraries larger than mine, but most of my Mac-using friends only have, on average, 1500 items in their iTunes libraries, a thousand or so photos, and maybe three pages of apps on their iPhones. 64 GB may not sound like much on paper, but practically speaking, it lets you pack around a lot of media. Unless you're going to spend weeks at a time away from your main computer, the iPad should be able to carry around enough media to keep almost anyone entertained for days on end. 5. There's no HDMI output or camera Debra claims you can't output the iPad's video to an HDTV without an HDMI connector. That simply isn't true; with a VGA adapter, you can output the iPad's full 1024 x 768 video signal to an HDTV. With a component connector, you can output a 576p PAL signal or a 480p NTSC signal to your TV. Okay, fine, it's not 1080p ultra-high-def video, but where exactly are you going to find video of that resolution anyway (besides Blu-Ray and Bittorrent)? I'll admit that it would have been nice to have at least 1366 x 768 video (1080i, in other words), but I'm betting that the vast majority of consumers aren't going to even bother hooking the iPad up to their TV at all when it's far easier to just put the screen on their laps and watch a movie on the iPad itself instead. Another point Debra brings up is the iPad's 3:4 aspect ratio, which is less than ideal for video. This has been argued all over the internet, including here at TUAW, but as many people have pointed out, the 3:4 aspect ratio is ideally suited to pretty much every other function on the iPad except video: books, documents, web pages, and photos are all laid out far closer to a 3:4 or 4:3 ratio than 16:9. Using a 16:9 ratio on the iPad would not only make the device larger than it already is, it would also leave all other forms of media on the device at a disadvantage compared to video. The iPad's lack of camera is another point Debra and others have brought out against the device, but like multitasking, this is one point on which I agree. A back-facing camera like the iPhone's doesn't make a lot of sense on the iPad -- it would be a bit unwieldy trying to take pictures or video with a device this size, rather like trying to hold up a MacBook Air to take photos with its iSight. Most people probably have a standalone point-and-shoot camera that would take better stills and/or video than the iPad's hypothetical back-facing camera anyway, and you can load those pictures directly onto the device with either the iPad-specific camera connector or SD card reader. But a front-facing camera for video conferencing definitely would have been a killer feature. Apple apparently thought so, too, because it actually included a space in the iPad for exactly such a camera, only to withdraw it for reasons known only to Apple. Whether the company is waiting for the next-gen iPad to introduce a camera or pulling a big switcheroo like it did with the original iPhone -- which was originally supposed to ship with the scratch-prone plastic face of previous iPods, but was replaced with nearly scratch-proof glass in the six months between its announcement and release -- no one can say. 6. There are no USB ports Debra's main complaints against the lack of USB ports are that you can't hook up a flash drive or a USB keyboard. As far as the keyboard goes, I've already mentioned the fact that you can purchase a keyboard dock or use a Bluetooth keyboard. As for not being able to hook up a flash drive? I can see why some people might want to do this -- expanding the iPad's storage, transferring files, etc. But I'm willing to bet that for most people this isn't going to be an issue. While I run the risk of sounding like Bill Gates's infamous "640K should be enough for anyone" by saying so (although Gates never actually said that), 64 GB of space on a device like the iPad really should suit most users' needs -- at least for the next couple of years, anyway. As for transferring files? I can think of a number of existing, cloud-based solutions, the most simplistic of which is e-mail. No, you can't transfer several gigabytes of files at a time through e-mail or "the cloud," but most people don't transfer that much data all at one go even a handful of times with a portable device, much less on a regular basis. I'm not going to go full fanboy and say it's a good thing the iPad doesn't come with USB ports. In fact, I'm kind of with Debra and the others on this one in wishing that Apple included at least one USB port. While I probably wouldn't use the port very often (if at all), it definitely falls into the category of "nice to have." I've been an iPod user for almost five years and an iPhone user for a year, and I can count the number of times I've needed/wanted a USB port on one of those devices on exactly no fingers... but I'll admit that I might sing a different tune with a bigger device like an iPad. But for most of the people who are likely to buy the iPad, i.e., the non-geek, non-techie, "I just want internet and music and movies" folks, they're probably not going to miss USB ports at all. 7. There's no flash memory slot No, the iPad doesn't have a flash memory slot. You can buy an SD card reader attachment, though, although Debra and others rail against the added cost of the connector, claiming that in order to reach "the functional equivalent of a netbook, you may end up spending a bundle." A lot of the same arguments for or against USB apply here as well; most non-geeks aren't going to miss an SD slot at all. Transferring documents via SD cards in 2010 reeks of the "sneakernet" we thought we were abolishing along with dot-matrix printers and 2800 baud modems; let's just say that most users are going to have photos and/or videos on their SD cards, most users are going to wait until they get home to their main computer to upload those files, and most users aren't going to care that the iPad's missing a dedicated SD slot any more than they cared about the iPod missing one. If anything, the argument for an SD slot is far weaker than the argument for USB. 8. The price is not right Debra claims the iPad "costs twice as much as the Kindle and other ebook readers." That's flat-out false. The $499 iPad does cost almost twice as much as the standard Kindle, but compared to every other e-reader out there, the iPad's pricing is extremely competitive once you consider all the things the iPad does that the other readers iDon't. A $489 Kindle DX, for example, while $10 cheaper than the cheapest iPad, doesn't have a color screen, has only 4 GB of storage, doesn't have a touchscreen, doesn't run apps, doesn't have e-mail, music, and so on, and so forth. The iPad's price is the one aspect of the device that few pundits have complained about; in fact, the pricing has Wall Street and other financial analysts doing cartwheels. You don't even have to compare the iPad to other companies' similar products to see how good a deal it is. The 16 GB iPad costs $300 more than an 8 GB iPod touch. That $300 gets you twice the capacity, a much larger and higher-quality screen, a more powerful CPU, better Wi-Fi including 802.11n, vastly improved battery performance, a built-in speaker and microphone, and, eventually, access to a host of apps designed to take advantage of the iPad's larger screen and higher performance. A 32 GB iPad has the same $300 price difference compared to a 32 GB iPod touch, as does the 64 GB model. Once you tack on an additional $130 for 3G wireless the price difference widens, but so does the device's utility -- access to wireless broadband anywhere there's an available 3G network, which, as iPhone users already know, is invaluable. Debra compares the fully kitted-out $829 3G-enabled iPad to "a powerful compact laptop that runs a full-fledged operating system and multi-tasks and that has USB and SD and Ethernet connectors, 4 GB of RAM, and 250 GB of storage." The "full-fledged operating system" she's talking about isn't OS X, however, and the laptop she's talking about definitely isn't manufactured by Apple. That might not make a difference to a lot of people, but if you're already in the "Macs cost too much" camp, it's no wonder the iPad doesn't hold much appeal compared to that Windows Home Edition running, plastic, bargain-bin quality laptop from Dell or HP that's almost certain to stop working in two years or less. Yes, I recognize the extremely fanboyish sound of that sentence. No, I don't apologize for it. Cheap laptops are exactly that: cheap. Call it elitism, fanboyism, Kool-Aid drinking, whatever: I'd much rather put up with the iPad's shortcomings than those of the "powerful" but oh-so-cheapo laptops of other manufacturers. 9. It's locked in "You have to buy your apps from the App Store," Debra notes. Yes, you do: from a store that has over 140,000 apps available, most of them for free, and capable of doing almost anything. Hate the App Store for some reason? Fine. Jailbreak the thing and use Cydia instead. Apple may not want you to do this, and they may go out of their way to prevent it, but if you're of the jailbreaking mindset already, that's not going to stop you, is it? A very vocal minority of people love to complain about "vendor lock-in" when it comes to the iPhone/iPod touch/iPad, even though those same people have likely been playing around with video game systems from Nintendo, Sony, and Microsoft for decades -- all platforms with "vendor lock-in" even more pervasive and insidious than that of Apple's platform. What these people don't seem to realize is that same vendor lock-in is precisely what keeps Apple's portable platforms from being riddled with viruses, malware, and apps made of more crap than code. "Security through obscurity" may be a valid(ish) argument to fall back upon with the Mac, but with 75 million plus people using the iPhone OS, it's a very high-profile target for virus writers. That same "walled garden" that Linux proponents and "open internet" evangelists whine about is what keeps the iPhone platform from being an unusable nightmare. Yes, the App Store approval process has in many cases been a pain in the nether regions, but things are improving -- apps that might have once taken days or weeks to get approved are now getting through the approval process in a matter of hours. Has the App Store's "lock-in" affected sales of the iPhone one iota? No. In fact, sales of the iPhone took way off after the App Store's arrival. Yes, "Apple as gatekeeper" gets the George Orwell fans riled. But someone has to keep the gate, because the instant the iPhone OS becomes a truly "open" platform like some people are espousing, that's the same instant the Russian mafia remote-hijacks your iPhone from a basement in Vladivostok because you just had to download that "Siberian Honeys" app from the dark alleys of the internet. Other aspects of dreaded "lock-in" that Debra's concerned about are riddled with falsehoods. "You can't run Skype to make phone calls," with the iPad, she claims. "We wouldn't want to cut into the iPhone market, after all." Say what? That must be news to the Skype team, who's already investigating an iPad-specific Skype app. It must be news to Apple, too, who no longer restricts the use of VoIP over 3G. "Nor can you download Flash to install on the browser, which means you won't be watching those YouTube videos." Say what again? Since when is the iPhone/iPod touch/iPad incapable of watching YouTube videos? Oh right: since never. No, you can't put Flash on the iPad, but according to our informal poll, 75% of people planning on buying one either don't care or are outright glad Flash isn't making an appearance. What about hardware "lock-in?" Debra says that "you can't even remove and replace the battery yourself," which has been true of every single iPod since 2001 and hasn't stopped people from buying them by the millions. She goes on and says, "if you were flying to Australia and wanted to bring along an extra battery for the extra-long flight, forget about it." Um. A two-second Google search for "iPhone external battery" might have been a good idea. Plus, speaking from personal experience, if you stay awake for a full flight across the Pacific Ocean, you're going to have a lot more pressing issues to worry about than your iPad's battery, like the fact that you're going to feel like you got run over by a truck after the plane lands. Take it from one who knows: Trans-Pacific flights are best spent in blissful unconsciousness. 10. The network Yep, the iPad's 3G connection is only available on AT&T's network... if you live in the United States. If, like me, you live in what's known informally as "the rest of the world," this argument against buying a 3G-enabled iPad holds no water for you. But let's stick to the States for a moment and analyze Debra's argument against AT&T's network. No, AT&T isn't everyone (or possibly even anyone)'s favorite US network, but the pay-as-you-go, completely contract-free plans available for the iPad are very compellingly priced. You can get 250 MB of data for $14.99 (not the $20 Debra claims in her article), which is more than enough for casual data usage. 250 MB doesn't sound like a lot on paper, but that's what my iPhone plan started out at here in New Zealand. I never once went over 100 MB or so of monthly data usage until I started using iPhone tethering, and I'd consider my data usage fairly robust. The "unlimited" AT&T plan at $30 a month is an even better deal, and even if "unlimited" only means 5 GB, you're not going to burn through that much data unless you're using the connection every waking hour of the month. Debra's argument against these plans is that it's another bill to pay on top of your cell phone bill, but that's the beauty of the iPad plans: without a contract to commit to, you can cancel the plan whenever you want. If you start out with the $30/month "unlimited" plan on the iPad, only to find out your usage isn't topping 250 MB, rather than being locked in to that plan for another 23 months, you can downgrade to the $15 plan. If you find that you don't need the 3G coverage at all, you can always buy the Wi-Fi only iPad. "Here's wishing you good luck on finding those Wi-Fi hot spots," Debra says in response to that idea, which sounds about right for us in New Zealand, where free Wi-Fi is about as rare as gold, but makes much less sense in the US, where free Wi-Fi is usually only a library or caf� away. If you absolutely must have 3G on the iPad, absolutely must not use AT&T, and are prepared to spend twice as much for the privilege of going with Verizon, you always have the option of hooking the iPad up to a MiFi (possibly -- we'll have to wait until the iPad's actually released before we know if this will work or not). Additionally, just because the iPad isn't available on Verizon right now (now now NOW) doesn't mean it never will be; Apple and Verizon are reportedly "still talking" about bringing the iPad and/or iPhone over to the network. We've come to the end of Debra's ten points, but not to the end of mine. My final point, the one that sums up all of this: like the Mac, like the iPod, and like the iPhone, the iPad is not for everyone. It's not even for me -- despite all the words I've just spent defending it, I'm not buying an iPad until next year at the earliest, and only if I decide against replacing my current, aging MacBook Pro with the same computer rather than an iMac/iPad combo. The bottom line is that the iPad can't be all things to all people. It's not meant to replace a full-fledged Mac or PC -- it's meant as an ultraportable extension of a larger device, and one with a far simpler and more intuitive interface, a "computer for the rest of us," if you will. And make no mistake: for every Debra Littlejohn Shinder, for every "open internet" geek who screams "vendor lock-in" every time Apple's name is mentioned, for every "no multitasking, no Flash, no sale" techie, for every dismissive pundit who shrugs and says, "It's just a big iPod touch," there's at least one person who has been waiting for a device just like the iPad, and those people are the ones who will make it a success. Whether you like it or hate it, the iPad is indicative of the future direction of computing. But, just for the sake of argument, let's say we can cook up a portable computer far "better" than an iPad, a dream device that has USB, 1080p output, a removable battery, runs the full version of OS X, has a front-facing camera, isn't dependent on AT&T, isn't "locked in" to the App Store, has a physical keyboard, widescreen-formatted display, and has more than 64 GB of storage. What might such a device look like? Oh. Right. TUAW10 reasons to pass on the iPad? TUAW fact check originally appeared on The Unofficial Apple Weblog (TUAW) on Thu, 04 Feb 2010 10:00:00 EST. Please see our terms for use of feeds.Read�|�Permalink�|�Email this�|�Comments Apple - iPhone - Steve Job - IPod Touch - Sony
★ Regarding the Verizon and ‘iPhone Lite’ Rumors

There’s been much speculation this week regarding reports in BusinessWeek and The Wall Street Journal of talks between Apple and Verizon. To wit: that Apple is considering Verizon for a future iPhone and/or its mythical forthcoming tablet. This is not too complicated. Let’s just play “What’s in it for them?” Verizon — Would they want to sell some sort of iPhone model? Yes, of course. The iPhone has undeniably turned into a big deal. Verizon has nothing to do with it, and it is the single best competitive advantage held by AT&T, Verizon’s biggest rival. None of the iPhone rival devices Verizon has offered so far is any good or very popular (cf. the BlackBerry Storm), and the Palm Pre is exclusive to Sprint. AT&T — The iPhone means more to AT&T than any other phone it carries. Most people decide which carrier to buy a phone from, go there, then pick a phone. With the iPhone, people decide they want to buy one, and then they go to AT&T. Some number of iPhone owners switched to AT&T specifically and only because of the iPhone. In fact, there are some who switched to AT&T to get the iPhone despite the fact that, all things considered, they’d prefer to buy a phone from another carrier — often Verizon, which is widely regarded as having the best overall U.S. network coverage. It is very much in AT&T’s interests to keep the iPhone as an exclusive AT&T device for as long as it can. Apple — The iPhone matters to AT&T, but AT&T doesn’t really matter much to Apple. The U.S. is Apple’s (and the iPhone’s) biggest market, but it’s still just one country in a big world. In the just reported quarter, AT&T reported activating 1.6 million iPhones. But Apple reported selling just under 3.8 million total iPhones — so 58 percent were sold outside the U.S. AT&T isn’t Apple’s iPhone partner. They’re just Apple’s iPhone partner in the U.S. I think the U.S. tech press often overlooks this, hence some of knee-jerk skepticism that Apple would even talk to Verizon. Apple wants profit and they want market share. The trick is balancing the two. Surely Apple makes more money per iPhone with an exclusive deal, but they would sell more total devices if iPhones were available on both AT&T and Verizon. Yes, Verizon’s network is CDMA, not GSM, and so it would require Apple to produce different hardware. But there are some number of Verizon customers who won’t switch to AT&T but who would buy an iPhone from Verizon, and my guess is that that number is high enough for Apple to at least consider producing Verizon-compatible hardware. So, even if Apple would prefer to stick with AT&T exclusively, at least for another year, I’d find it surprising if they didn’t at least talk to Verizon just to hear an offer, and perhaps more importantly, to leak the flirtation to the press so as to keep the pressure on AT&T to offer Apple the best possible terms. But as for whether I think an iPhone on Verizon is actually imminent — as in “coming in the next few months” imminent — I doubt it. During Apple’s quarterly finance call last week, analyst Gene Munster asked why Apple has maintained its exclusive agreement with AT&T. COO Tim Cook said: On AT&T, Gene, we view AT&T as a very good partner. We believe that they’re the best wireless provider in the U.S. and we are very happy to be doing business with them. They have done a very good job with iPhone, they’ve put the full force and weight of their company behind it, it’s a major strategic thrust for them and so we’re very happy with the relationship that we have and do not have a plan to change it. And then Cook again, responding to a follow-up question regarding any “technical hurdles”: Well from a technology point of view as you know, Verizon is on CDMA and we’ve shown from the beginning of the iPhone to focus on one phone for the whole of the world and when you do that, you really go down the GSM route, because CDMA doesn’t really have a life to it after a point in time. Steve Jobs, famously, is known for pooh-poohing ideas or features only to turn around months or years later and declare them to be the best ideas or features ever, now that Apple has embraced them. Apple doesn’t announce big changes until it is ready to announce them, direct questions be damned. And so I wouldn’t count on Apple’s “not having a plan to change” the AT&T exclusivity lasting forever.1 But the CDMA comment does not sound like misdirection from a company planning to unveil CDMA phones this summer. That comment was specific, and it wasn’t something along the lines of we’re not going to do CDMA, but rather more along the lines of CDMA is on its way out industry-wide. That’s just not something Cook would say if Apple were planning to announce a CDMA phone in June — and without a CDMA iPhone, there’s no iPhone for Verizon.2 Ask again when Verizon’s next-generation LTE network is running, though. But that’s just the iPhone. If Apple is preparing to soon announce its supposed tablet / mediapad / whatever, and if said tablet / mediapad / whatever is going to support mobile broadband, it could well use EVDO from Verizon without contradicting anything Cook said about CDMA or the iPhone remaining exclusively on AT&T. (Brief Interpolation Regarding the Proper Perspective Regarding Any Rumored New Devices: Keep in mind that these tablet / mediapad / whatever rumors are growing to the point where if the WWDC keynote comes and goes without any mention of this device, the jackass contingent is going to blame Apple for not releasing it rather than blame the rumor reporters for being wrong. BusinessWeek’s report had the most details about purported new devices, but in terms of timing, only said “One of these devices may be introduced as early as this summer.” Point of this interpolation being that if — and this is a very real if — this really is a device Apple is preparing to release, fever-pitched rumors won’t make it appear any sooner than when Apple deems it ready.) Erring on the Side of Increased Market Share It’s my assumption that Apple’s long-term plan for the iPhone platform is patterned after Apple’s long-term plan for the iPod. Apple’s iPod strategy has been phenomenally successful, and there are many obvious parallels. The biggest difference is that the iPhone has succeeded far faster than the iPod did — Apple didn’t release the Windows version of iTunes until two years after the original iPod was released as a Mac-only peripheral. One of the key points in the history of the iPod was the release of the iPod Mini in January 2004. That’s when Apple expanded the iPod from a single product to a family of products, and the Mini proved to be a smash hit. The formula behind the iPod Mini was simple: Apple made a smaller, cheaper device with more or less the same technical specs as the original iPod from October 2001. Apple went on to repeatedly improve upon the iPod in two ways: on the high end by producing new devices with the same shape and price but with new features (additional storage, color screens, larger screens, video, etc.); on the low end by taking the existing features and making them smaller and cheaper. So here’s how I see Apple applying its iPod strategy to the iPhone. At some point the iPhone will expand to two form factors: A high-end iPhone with the same basic size and price as previous iPhones, but with significant new features. Obvious potential new features would be things like more storage space, more RAM, a faster CPU, an improved (and eventually video-capable) camera, 802.11n Wi-Fi, and superior battery technology. A new, lower-priced, smaller, and more adorable iPhone, with more or less the same technical specs as the original iPhone. Given that those specs include the 320 � 480 display, I wouldn’t expect something tiny, but remember that the original iPod Mini was “just” 35 percent smaller by volume than the then-current full-sized iPod. Shrink the iPhone’s forehead and chin and make it thinner — maybe a lot thinner — is what I’m thinking. Existing iPhone apps would run just fine on the new device, as it’d have similar, if not identical, CPU performance and RAM to previous full-sized iPhones. Such an iPhone sounds much like the “iPhone Lite” that BusinessWeek reported its source saw. The only question is when. Could be this year. Could be next year. But put me on the record for predicting it’ll happen before the end of 2010. The reason why Apple did this with the iPod, and why I’m convinced they’ll do it again with the iPhone, is that when it comes to managing the balance between per-unit profit and overall market share, Apple is determined to err on the side of market share. (Not as much with the Mac, however — the difference being that PCs are now a firmly established market.) Most gadget companies, when they have a smash hit on their hands, try to milk it. A typical company that found itself selling millions of $400 hard-drive-based digital music players would try its best to continue selling the same $400 hard-drive-based digital music players for as long as it could. Apple, despite an overwhelming 70 percent market share, aggressively added features and drove down its own prices, year after year after year. I’ve previously quoted the following passage from Steven Levy’s 2004 Newsweek interview with Steve Jobs, but it’s worth repeating here. The topic was the Mac’s long-stagnant (at the time) market share. If that’s so, then why is the Mac market share, even after Apple’s recent revival, sputtering at a measly 5 percent? Jobs has a theory about that, too. Once a company devises a great product, he says, it has a monopoly in that realm, and concentrates less on innovation than protecting its turf. “The Mac user interface was a 10-year monopoly,” says Jobs. “Who ended up running the company? Sales guys. At the critical juncture in the late ’80s, when they should have gone for market share, they went for profits. They made obscene profits for several years. And their products became mediocre. And then their monopoly ended with Windows 95. They behaved like a monopoly, and it came back to bite them, which always happens.” In the near term, Apple could fuel explosive iPhone unit sale growth just by reducing the entry price. But at some point, looking a handful of years down the line, expanding the iPhone’s U.S. market share is going to require going beyond AT&T. The only question is when. Worth a footnote: Munster never mentioned Verizon by name. He simply asked about maintaining exclusivity with AT&T. Cook brought up Verizon on his own.�↩ The CDMA/GSM schism has blocked Verizon users from even unlocked iPhones. I’ve long wondered how much more prevalent iPhone unlocking would be if Verizon had a GSM network.�↩
Will Google's Android Play DOS to Apple's iPhone?

Daniel Eran Dilger Today's broad array of smartphone operating system contenders are offering lots of potential answers to a problem that only requires one. It appears the market has two options ahead: either pool generic hardware makers behind a single operating system and deliver a smartphone marketplace that resembles the Windows PC market, or watch them fall to a dominant leader and have a smartphone market that resembles Apple's iPod ecosystem. This decision isn't going to be made by a class of intellectual elite, or by government mandate. it's going to be made by the market itself. Here are the factors that will influence the outcome, either marginalizing Apple's iPhone into a niche as the company has twice experienced previously at the hands of DOS in 1981 and Windows in 1991, or positioning it as the dominant leader as Apple has achieved for itself with the iPod since 2001. The third segment in this series looks at Google's Android and the Open Handset Alliance as a possible “DOS-attack” against Apple's iPhone. Subsequent segments will look at Nokia's newly opened Symbian and other mobile contenders challenging the iPhone. Will the iPhone Meet its Match from a Modern Day DOS? Will Windows Mobile Play DOS to Apple’s iPhone? Will Google's Android Play DOS to Apple's iPhone? Will Symbian Play DOS to Apple's iPhone? Google Acquires Android. In 2005, Google purchased a startup named Android, which had been in business for nearly two years. The secretive startup was known only to be working on software for mobile phones. It was being run by a who's who of mobile industry veterans, including Andy Rubin, the founder of Danger. Rubin had earlier worked at WebTV along with Chris White and Andy McFadden, both of whom had also joined Android. Richard Miner of Orange and Nick Sears of Tmobile also brought their mobile provider experience to Android. At the time of the acquisition, Google didn't announce any plans for Android and instead only told BusinessWeek, “We acquired Android because of the talented engineers and great technology. We're thrilled to have them here.” It appeared that Google was only going to be expanding its search services for mobile phone users, along the lines of the Google SMS answer system it had recently released. Google Buys Android for Its Mobile Arsenal - BusinessWeek Windows XP Media Center Edition vs Apple TV: The Fall of WebTV The GPhone Myth. As reports began to leak out about talks between Google and hardware makers throughout 2007, rumors began to fly about “the GPhone,” a competitive offering that was supposed to take on the iPhone. Some phone enthusiasts hoped Google would jump in to rescue the struggling OpenMoko project and turn it into a viable project that could attack Apple's new smartphone. In October 2007, I printed the Great Google GPhone Myth, taking apart the idea that Google would be directly competing against the iPhone, and describing that Google was really working on a free alternative to Windows Mobile as a conduit for getting its search and related services on a broader variety of mobiles. Google's services were already on the iPhone. In November, Google played its hand: it had organized a consortium of companies called the Open Handset Alliance to develop open standards for mobiles. The first product from the group would be Android, a mobile operating system built on the Linux kernel. Google wasn't getting into the phone handset business at all; it was only making sure that its mobile search products would not risk being marginalized by the threat of Windows Mobile on phones in the same way Microsoft had been working to leverage its PC monopoly to push Google search off the Windows desktop. The Great Google gPhone Myth Introducing Android: Leader of Linux. Two weeks later, Google released an early version of the Android software. On top of a Linux kernel, Android uses a specialized version of a Java Virtual Machine that takes Java language code and turns it into what Google calls “Dalvik bytecode” rather than Java bytecode as a standard JVM would. This allows Google to leverage existing and familiar Java language tools without paying Sun for a Java license. Like Mac OS X and its fraternal iPhone OS, Android includes a variety of open source libraries, including SQLite and WebKit. On top of that, Google developed a series of frameworks that handle the tasks Cocoa Touch does on the iPhone. Android also bundles a set of applications. While Apple adapted its existing Mac OS X to work in a mobile environment to create the iPhone OS, Android is more like a customized Java environment running on a specialized mobile Linux variant: elements of maturity in an otherwise experimental new platform. What is Android? -Google Android was by no means the first mobile OS using Linux. Both Palm and its amputated ACCESS software arm have Linux-based mobile platforms. Nokia has Maemo, which it uses in its Internet Tablets, and also recently acquired Trolltech and its Qtopia mobile Linux platform. Motorola has teamed up with MontaVista Software to use its Mobilinux. Intel created the Moblin project for mobile Linux, aimed at Internet devices. Google's OHA also isn't the first consortium to attempt to standardize a mobile Linux platform. The OSDL started the Mobile Linux Initiative to define requirements for hardware; the Consumer Electronics Linux Forum (CELF) then worked to define various phone profiles aimed at the Japanese market; the Linux Phone Standard (LiPS) Forum tried to do the same thing in Europe. In 2007, LiPS was folded into the new LiMo Foundation, along with the OSDL. All of these committees have had some overlap and some complementary features. Several of Google's OHA partners are also LiMo members, including NTT DoCoMo, Wind River, and Motorola. So why didn't Google just join LiMo? “LiMo, very candidly, wasn't moving fast enough,” OHA board member John Bruggeman told CNET. Google hopes to herd the Linux cats into a progressive, structured platform that can battle against Symbian and Windows Mobile to succeed as the new DOS of smartphones. Will Google fracture or unify mobile Linux? The Presumption of the Necessity of DOS. The previous segment examining Windows Mobile pointed out how the PC industry as a whole assumed that Microsoft's desktop Windows monopoly would easily take over dominance in the MP3 player market, pushing Apple into a niche position. This was expected because DOS had pushed Apple's early computers into a reduced role starting in 1981, and Microsoft had repeated this again in 1991 when the DOS world migrated to Windows, effectively pruning Apple's Macintosh into a Bonsai platform. The inability of one company to dominate any product category has been frequently repeated by PC industry pundits as a given, despite the fact that history is full of examples of this happening. Sony dominated personal music players for two decades under the Walkman brand even while equally large competitors tried to push it from this position; Nintendo has similarly owned handheld gaming despite ill-fated efforts to grab a piece of its pie by products running a generic platform such as Microsoft's WinCE (Gizmondo), Linux (GP32), and Symbian (N-Gage). In fact, outside of the Windows/DOS PC, there are actually few examples of a generic platform taking over an industry. Nearly every other consumer-facing product uses proprietary platforms: car makers, stereo equipment, appliances and so on typically all use designs custom to their maker. The paradox of the Windows PC market has been that Microsoft's broadly licensed software supposedly saves hardware makers from investing in software development while ensuring compatibility, when in reality it adds significant costs to PC makers while limiting their ability to differentiate themselves. That explains why PC makers have been perpetually merging together and going out of business while Microosft has rolled in money over the last two decades. Parallel efforts to copy Microsoft in broadly licensing an operating system have regularly failed: IBM's OS/2, Apple's Mac OS, Palm's PDA OS, even Microsoft's own efforts to duplicate Windows dominance in other markets, from copy machines to PDAs to smartphones to SPOT watches to music players. The closest copy may be Symbian, but its customers are partners, not simply consumers of a generic third party's operating system as Windows licensees are. That indicates it is not necessary to duplicate the dominance exercised by Microsoft over the PC industry in the smartphone market. Google's Android and Symbian exist more as technology sharing pacts among manufacturers, but both aspire to take Microsoft's DOS role among smartphones. However, the idea that Apple's iPhone must be dethroned by a modern-day DOS, whether Windows Mobile, Android, or Symbian, is not just debatable, but does not sync with the reality of more recent events. Apple's recent history of the iPod further refutes the idea that a software analog to Microsoft is needed. The iPod Emergence: Apple & Pixo vs IBM & Microsoft. Apple's iPod in 2001 made no effort to clone the DOS business model; it actually did the opposite. When Apple entered the market, there were a number of existing MP3 devices using custom software, hardware designs, and DRM codecs. The iPod used off the shelf components to deliver a custom MP3 player using third party software, but Apple also added its own technologies: easy to use sync with iTunes, a fast Firewire interface that made uploading music far faster than the prevailing USB 1.0, and an attractive industrial design. With the iPod, Apple played the role of IBM in 1981, using Pixo's embedded operating system to enter the market quickly, just as IBM had used DOS. The difference was that Apple didn't direct any market attention toward Pixo and added a lot of value on top of that core embedded OS. A modern day Compaq couldn't simply clone the hardware and license Pixo to run on it in order to compete against the iPod, because the iPod was much more than just generic hardware running Pixo software. As the iPod developed, Pixo's role diminished and was eventually displaced. Just like IBM, Apple jumped into a new market just as demand was beginning to explode. Apple made MP3 players far more attractive to a general audience by delivering greater playback capacity than most entry level devices offered, along with an ease of use that encouraged buyers to jump in at the higher end of the market. That left Apple with not only the lion's share of the market, but also by far the most profitable segments of the market. Two decades prior, IBM badly fumbled its play with the early PC and ended up irrelevant in the PC world by the late 80s, sideswiped by Microsoft's DOS and the cloners who were licensing it in parallel, notably Compaq and later HP and Dell. Steve Jobs had witnessed that happen, and was determined to not let it happen again to Apple. Rather than being manipulated by a software middleware vendor as IBM had, Apple worked to incrementally develop the iPod market itself. After consuming the hard drive-based player market, Apple took on the Flash RAM-based market with a tiny hard drive system used in the iPod Mini, and followed up with Flash-based devices of its own in the Nano and Shuffle. This allowed Apple to progressively serve an increasingly wider market, incrementally growing upon an established foundation. With the iPod, Apple became, in effect, an IBM with its own internal Microsoft. Microsoft's Failure Despite Features. In contrast, Microsoft entered the music player market by promoting music player hardware reference designs around WinCE. However, it was unable to ship a finished design until the iPod had become firmly established around 2005. Later branded as PlaysForSure, the devices were sold by various hardware makers and all purported to support the same DRM and the same music subscription services while also offering a broader array of hardware that presented video before the iPod did, supported wireless before the iPod, and so on. Despite these unique features, all of those PFS designs still failed. Microsoft blamed the failure of PFS upon its music store and hardware partners and decided to take Apple on itself in 2006. It relaunched a Toshiba PFS player as its own device under the Zune brand, adding WiFi music sharing features and a larger display than the current Pods had. It failed dramatically as well. Did Microsoft's attempts to float a new DOS among music players fail because of Apple's success, or due to Microsoft's own problems? The failure of the Zune, which followed the iPod model rather than the DOS model, seems to suggest that Microsoft itself was to blame. Consider too that Microsoft's Windows Mobile phones, which use the same underlying operating system as its failed PlaysForSure music players and the Zune, had similarly flopped even before Apple could release a charismatic phone equivalent to the iPod. Of course, when the iPhone was released, it hit Windows Mobile hardest. The iPhone made Windows Mobile Smartphones look ridiculous and underpowered, and made Windows Mobile Pocket PC phones look clumsy and awkward, despite the fact that they both supported a variety of features the iPhone didn't, including the ability to edit documents, capture video, send MMS, and so on. Simply adding on features did not enable Microsoft to compete against Apple. The only conclusion that can be drawn from all this is that competing against Apple requires more than just having a feature arsenal. Microsoft's failures in themselves do not necessarily mean that Google's Android will fail in its attempts to float its own smartphone platform. Why Microsoft’s Zune is Still Failing Microsoft’s Zune, Vista, and Windows Mobile 7 Strategy vs the iPhone Will Google Succeed where Microsoft Failed? Microsoft's demonstrated inability to successfully enter consumer markets for MP3 players and smartphones has given observers little faith that the company will somehow turn things around in late 2009 when its next generation of devices are expected to be released. However, prior to that the first fruits of Google's efforts to build its own smartphone operating environment will arrive. Will Google's Android take over Microsoft's crown as the “DOS vendor” among smartphones? Supporters of Google's Android project point to some parallels between Android for smartphones and Windows on the PC: Android will allow hardware makers to differentiate in ways that can offer features Apple can't (or doesn't want to); it should allow software developers to offer features Apple does not allow on the iPhone; it embraces open, hobbyist experimentation in ways that Apple currently isn't; and it opens the potential for content providers that Apple is not interested in allowing. Openness is Android's key competitive feature. Will all this openness allow Google to unseat the iPhone to become the primary platform developers want to participate in, and subsequently soak up the market for third party hardware makers that Windows Mobile serves? While Google currently has no market share due to the fact that no Android phones have yet shipped, it does have broad vocal support from a variety of the same kinds of hardware manufacturers that supported DOS and Windows and helped to make those platforms successful in the desktop PC market. HTC and Android. The first Android phone is expected to be the HTC Dream; Taiwan's HTC (High Tech Computer) also manufactures Palm's Treo Pro phone as well as many of the most visible Windows Mobile devices. In addition to models produced under its own name, HTC also sells Windows Mobile devices under the Dopod brand, as well as no-name phones branded by providers, such as AT&T, Orange, Sprint, T-Mobile, Verizon Wireless, Vodafone, and others. HTC will also be building the XPERIA X1 Windows Mobile phone for Sony Ericsson. HTC was quick to throw its support behind Android despite its long term alliance with Windows Mobile. Why would it so enthusiastically support an unproven platform from a company that has no experience in consumer hardware platforms? One can only assume that HTC is not happy with the current state of Windows Mobile, and desperately wants another “DOS” to succeed where Microsoft's has so spectacularly failed. As an Original Design Manufacturer for Palm, HTC watched as Palm adopted Windows Mobile in place of the Palm OS and subsequently fell even deeper into crisis. Palm's only successful phone since has been its Palm OS-based Centro. HTC undoubtedly sees Android as its ticket to becoming the next Dell, but without a similar dependance upon Microsoft. Android for mobile phones is essentially playing the role of Linux for PCs, except that it has the backing of a major company behind it. Can Android Take on the iPhone with Openness as its Feature? As great as this sounds, it's important to consider that Linux on the desktop has made no significant progress in eating into Windows dominance after a decade of trying. Being open, free, flexible, and decentralized hasn't been enough of an advantage to get consumers to migrate from Windows to Linux in any fraction of significance. Similarly, in the music business, Linux-based MP3 players have had no impact on the iPod, despite offering more features, flexibility, support for additional codecs, and so on. In the mobile phone area, Linux enjoys a sizable portion of the smartphone market, but this is almost entirely due to phones sold by Motorola in China, where the advantages of Linux' openness are void. Motorola's Linux phones offer nothing to users in terms of openness or flexibility, and are really no different in terms of features than other appliance 'feature phones' based upon closed operating systems. And again, a key problem with assaulting Apple in a feature war is that neither the iPod nor the iPhone became popular by being “highly featured.” They both delivered perhaps 80% of the functionality found in all other devices in the market. Rather than trying to match every feature and cater to every niche as Microsoft had with Windows Mobile, Apple's devices did a few things very well at launch, and incrementally developed into full featured devices that still lack some of the more unique features of their competitors. Further, in terms of openness, the demographic that embraces Linux' characteristic freedoms is not the same as the demographic that buys smartphones in quantity and then pays for data service. This is a critical fact to consider because a big part of the iPhone's success stems from the fact that it is being pushed by mobile providers who want to capture the cream of the market willing to pay a premium for data services. The Frankenphone. Combining the fractured aesthetic of HTC's Windows Mobile phone hardware with Android's software, based upon Linux' perpetually unfinished DIY openness and Google's Java-like development platform, will not result in a product similar to the iPhone. Instead, it will look a lot like phones that have already failed in the market. Apple's advantage comes from slick hardware designs with a close attention to detail, combined with software that purposely does less so that it can do what it does better. Even Apple's own conservative attempts to broaden its software capabilities with iPhone 2.0 have resulted in instability problems that can be blamed upon both Apple's early releases of its phone operating system and software from inexperienced third party developers new to the platform. Would the current frustrations with iPhone 2.0 be somehow mitigated by additional openness that also embraced all kinds of variables from different hardware makers with less quality control than Apple, a loose committee of additional cooks working to serve up operating system features targeted at every possible conceived need, and a wider third party software group with fewer constraints on illegal behaviors? The Failure of Open. While it is politically unpopular to criticize the well meaning efforts of open source contributors, the failure of Linux on the desktop, the failure of the vaporware Indrema game console, and the failure of the OpenMoko project to deliver a workable phone within a year of its deadline all underline the serious problems open development faces in the world of consumer oriented devices. Open has simply failed to deliver on its promises in the world of consumer hardware. OpenMoko was supposed to release its first mobile phone to consumers for $250 several months in advance of the iPhone. When the iPhone shipped, the group then announced new plans to get its phone out by the end of 2007. Instead, this spring the group announced new plans to move to an entirely different development platform, and ship its phone mid year for $400 with limited functionality and incomplete software outside of basic GSM phone features. Linux's notable successes, from Motorola's Linux phones to the Tivo DVR to Linksys Routers, have often come without any associated openness or freedom, and were instead delivered simply to provide their manufacturer with a free kernel to build upon. This indicates that while Linux may find its way into an increasing number of smartphones, it will likely not be accompanied by the glorious freedom of an open development environment Google has said it would offer with Android. Apple iPhone vs the FIC Neo1973 OpenMoko Linux Smartphone Can Google Succeed Where Open Has Previously Failed? Despite “openness” being Android's strongest competitive feature compared to Apple's iPhone, Google recently revealed that its wide-open development model is intentionally gravitating towards a closed association of top tier partners due to practical considerations. In July, Google accidentally sent out a notice that revealed that it had been seeding private SDK updates to only a subset of its contributors, angering those who believed that Android would be as open as Linux on the desktop or the OpenMoko project. Further, Google has restricted initial development to higher level APIs just as Apple did, further indicating that Google itself realizes that being wildly open to impress a minority of hobbyists will not result in the commercial success of its new platform. That serves to neuter Android's primary advantage over the iPhone. Without delivering on the premise of being wide open, Android is really just a less mature set of Java libraries used to create a specialized binary that runs on a Linux foundation. Unlike Apple's iPhone, Android phones won't have a slick user interface developed by professional artists, nor the iPhone's legacy of mature software development frameworks crafted over the last thirty years, nor the iPhone's tightly integrated hardware with award winning industrial design, nor its marketing power tied into the iPod and Apple's retail stores. Android won't be an open iPhone, it will only be a Windows Mobile phone with a better kernel that runs specialized Java software instead of Win32 or .NET code. Don't expect consumers to be impressed by that. The Biggest Missing Feature. There is one remaining factor that strangles to death any last remaining hope that Android might assassinate the iPhone and assume the crown of the “DOS of smartphones.” That is: Android delivers zero price advantage to consumers. In 1981 and 1991, consumers who wanted Apple computers faced the sticker shock of a somewhat arrogant price tag. Apple sold its computers, as it still does, at the higher end of the market, but there was simply far more range in prices available. In 1981, that meant the Apple II was $2600 and the new Apple III was $3500, even before you added a monitor. On the low end, Commodore sold its far less powerful, but “still a computer” Vic-20 for $300, while IBM entered the market with the IBM PC at $3000. Over the next few years, Apple focused on delivering additional sophistication at the same price, releasing the $10,000 Lisa and then the $2,500 Macintosh. IBM continued selling PCs in the same $3,000 to $10,000 range, but other DOS PC vendors began selling machines at prices that ranged as low as $1500. That left Apple with a roughly $1000 price premium over low end PCs. The products weren't really comparable, but consumers only saw the huge price difference. In 1991, Apple was still selling moderate to high-end Macintoshes for $3,800 to $10,000; the crippled Mac LC was $2500, and obsolete-at-birth Mac Classic ranged from $999 to $1500. Windows allowed PC makers to ship a functional $1500 PC and claim a rough approximation to Apple's $2500 entry level system, maintaining that apparent $1000 price premium. Today, pundits are lucky to find a Dell or HP system that is even a couple hundred dollars less than a comparable Mac. However, in the smartphone business, the iPhone 3G is now the same price, if not less, than generic competing phones on the market. Even more significant is the fact that the price of the phone hardware is nearly nothing compared to the cost of the service plan. This fact simply eases any price premium that could cause buyers to flock to a smartphone running a generic operating system over buying the iPhone 3G, regardless of whether it runs Windows Mobile or Android. 1990-1995: Planting Software Seeds Android Partners Have Already Failed. That same pricing principle similarly prevented buyers from considering many of the alternatives to the iPod. While Apple's original iPod models were more expensive than many of the first MP3 players on the market, they were price competitive with models offering similar features. By 2004, it was Apple who was undercutting MP3 competitors on price. Microsoft offered zero price advantage when it began selling the Zune, a major factor in its failure, but Microsoft simply couldn't out-price the iPod; it was already losing money offering the Zune at the same price as the iPod. Apple now has tremendous market power in buying RAM and other components that will prevent any competitors from being able to offer a huge discount over the iPhone's $199 price tag. Even if competitors were to give their phones away, they would only offer a $200 discount to users who would then still need to pay the same mobile fees to use the phone. Android's other partners, including Samsung and LG, have already failed to capture any significant market share in the music player market. Are they going to maintain their position as smartphone makers now that they face similar competition from Apple, its iPod ecosystem, its iTunes Music and Apps Store, Apple's retail store experience, and other factors that are pushing the iPhone? If they can, it is not obvious how partnering with Android will help. Other Problems for Android. Android was announced in early November 2007 and was followed with an early preview SDK within a couple weeks, a month ahead of Apple's initial announcement of the iPhone 2.0 SDK. However, between March and July 2008, Apple delivered nine progressive releases of its SDK, opened its App Store, and sold 60 million apps, raising $30 million to support iPhone software development in just the first month. It has since released three more SDK updates to developers related to iPhone 2.1, which is expected next month. Android just published its first open SDK beta update earlier this week, warning developers that “applications developed with it may not quite be compatible with devices running the final Android 1.0.” Additionally, Android still has no phones available. By the time the HTC Dream is expected to launch, Apple will have an installed base of around ten million iPhone (and iPod touch) users supporting software development through iTunes. The business model for selling Android apps is no better than that for selling jailbreak iPhone apps: there is no iTunes Apps Store to promote them, so users will have to track them down on their own. Android developers also have no real freedom that jailbreak iPhone developers lack. The only difference is that there are ten million iPhones to sell jailbreak apps to, and currently zero Android phones. If selling a jailbreak iPhone app sounds like more trouble than its worth, imagine trying to sell Android apps to a non-existant audience. Now add the official iPhone App Store into the mix, where publicity, promotion and profits are booming. What platform is going to have the most applications? How many users will flock to a smartphone platform with no apps? The wisdom of releasing a desirable phone and achieving a significant installed base before releasing an SDK makes a lot more sense in retrospect. Additionally, while Apple has a decade of experience in shipping regular updates to Mac OS X and its Xcode developer tools, Google has only shipped a random assortment of web-oriented SDKs (a number of which have been abandoned) as a tangent to its core business of selling advertisements. When the Android SDK 1.0 is finished later this year, developers will not only lack an installed base to sell their apps to, but will also have no high profile market for selling their apps in, and subsequently no financial incentive to develop applications that add value to the Android platform, just like Linux on the PC desktop. Around the same time, possibly within the next month, Apple will be shipping its second major OS release: iPhone 2.1. Apple will also be upgrading its entire user base to the new software so that developers will have a cohesive platform to target. This mirrors the efforts Apple has taken to upgrade its Mac OS X users to the same reference release. Mobile developers will be seeing money pouring in via iTunes while crickets chirp in the Android section of various mobile online stores. Apple’s iPhone Vs. Other Mobile Hardware Makers: 5 Revenue Engines Same Same, But Different: DOS Model Problems. Android developers will also have a series of other problems to manage. Like Windows Mobile, Android is intended to support everything, from BlackBerry-style keypad phones with a small touchscreen to the simple Windows Mobile Smartphone form factor lacking a touch screen to iPhone-like full size touch screens. Also like Windows Mobile, Android phone makers will have the option to leave off Bluetooth, WiFi, GPS location services, graphics hardware acceleration, and so on. Each Android phone will also have unique camera hardware, support for different video and audio codecs, and varied support for other differentiating proprietary services demanded by mobile operators. This will force developers to to make complex decisions regarding the lowest common denominator they choose to support. So while the iPhone will have a cohesive feature set, a managed software environment, and a functional market, Android will be a loose federation of hardware makers selling the same random features found on Windows Mobile today, with a chaotic development environment that lacks any central market for users or developers. And it will be run as an experiment by a company with no experience in consumer hardware or platform development. The Missing Tap. One specific example of the “DOS model problem” is that Android currently does not support multitouch. It's not touched on in the API, and Google quietly tap dances around its omission. Why no multitouch? Because multitouch screens are expensive, and most OHA hardware members are more interested in making a profit in a competitive phone market rather than impressing consumers as Apple did with the iPhone. Most existing smartphones, even those trying to directly rival the iPhone, use a stylus driven, pressure sensitive tap screen or a simpler, cheaper touch technology that lacks support for sensing multitouch. The iPhone's screen can actually sense up to five fingers at once, but the primary feature multitouch offers on the iPhone is the two fingered tapping and the pinching effects everyone associates with it. Android could certainly support multitouch if there were a demand for it, but that's the point: Google knows that its hardware partners are cheap and unlikely to put out hardware that actually competes with the iPhone. Instead of using expensive technologies that deliver clever yet largely invisible functionality, OHA members, just like PC makers, are far more likely to add flashy, impractical gadgety fluff that's cheap to tack on, such as slide out keyboards, neon tubes, and scratch and sniff stickers. That's how you impress gullible nerds on the cheap. Google itself is blowing smoke and erecting mirrors to distract from the reality that it being a “DOS vendor” means supporting bargain basement hardware from penny pinching duplicators. Android has been demonstrating some “wow” features such as a Street Maps app that pans around based on an internal compass in the demonstration phone. The problem is that that kind of thing only makes for a fun demo. Nobody needs to twirl around their phone in the air to see a view of the other side of the street, but everyone who has used an iPhone will wonder why they can't pinch to zoom out. Even worse, most Android phones aren't going to have a compass built into them, so Google is demonstrating features most Android users won't be able to use. That Sounds Like Microsoft… Google's design decisions are beginning to look a lot like Windows Vista; rather than actually working to make laptops boot faster, Microsoft came up with the idea of adding a small screen to the back of Vista laptops so users could check their email without having to wake the system up. But this was a stupid idea for a number of reasons, the most obvious being that most users just want a laptop that boots up quickly. Few laptops got the mini screen, but every user who tries Vista on their laptop will wonder why it doesn't boot up as fast as Mac OS X Leopard. In the same way, Google is advertising features for Android that most users won't ever see in their actual phones while ignoring things people will expect based on their exposure to the iPhone. Android is simply selecting the wrong features. Android will offer the advantages of supporting MMS, recording video, and the list of other features Windows Mobile already supplies. Those features didn't stop Apple from firing past Microsoft in the smartphone arena however, just as the Zune's highly touted WiFi and screen didn't phase iPod buyers. Incidentally, just months after the Zune, Apple had not only demonstrated a larger display but a higher definition multitouch screen, and not only WiFi, but functional WiFi that could be used to browse the web or check email. This suggests that Apple, with its faster release schedule, won't stay behind any of the leading features potentially offered by Android for very long. Android partners, however, will find it as difficult to catch up with Apple's unique features, just as Microsoft has been stymied to keep up with Mac OS X, the iPod, and the iPhone. The underlying reason: both Google and Microosft are tasked with maintaing support for a huge variety of hardware options demanded by all their partners. Apple has the unique circumstances to do only what it needs to do itself. Android in Windows Mobile's Shoes. Like Windows Mobile, Android faces a difficult market. In the US, it competes against the popular BlackBerry in corporate markets and the iPhone among consumers. Worldwide, it competes against entrenched market leader Nokia. The difference is that Google, unlike Microsoft, has no in. Windows Mobile was adopted by Windows-bound IT shops despite its weaknesses. Nobody has any preexisting reason to try an Android phone apart from hobbyists and open software enthusiasts, a demographic that has done little to move Linux on the PC desktop. Google also lacks Microsoft's installed base; it's starting from zero. The smartphone industry initially doubted Apple's chances of making much progress with the iPhone, despite the company having the Mac platform, the iPod, retail stores, platform development experience, marketing savvy, industrial design prowess, and so on. Google doesn't have any of those things. Mobile Providers vs Android. Apple also started with an exclusive partnership with AT&T, a three legged race that demanded effort from both. Google is hoping that hardware makers handle the hardware details and that mobile providers will be excited to sell its Android phones. While hardware makers such as HTC clearly appreciate having found a free alternative to Windows Mobile, it's not obvious why providers would be excited about Android, as it promises an openness that most mobile providers strongly oppose. AT&T took a big risk in getting behind the iPhone, as the phone encouraged users to use email rather than fee-based SMS and MMS, it supported WiFi for data access, and it bypassed AT&T's MEdia Net services to plug into iTunes instead. Verizon refused to parter with Apple and grant it those kinds of concessions. Is AT&T going to take a similar risk to partner with a phone that is not exclusive to it, and is Verizon now going to open its arms to support phones that do not exclusively support BREW, VCast and its other proprietary services? While Android may well eat into Microsoft's Windows Mobile business by stealing away its hardware makers, it seems unlikely that Android will ever serve as more than free alternative to Windows Mobile in a market where Windows Mobile is increasingly irrelevant. Android may have the dubious distinction of swallowing Microsoft's mobile business the same way Microsoft ate up the Palm OS, but even if it accomplishes that goal, Google will likely find itself unsustainably hungry immediately afterward. It will also find itself swimming in a shark tank of hungry rivals, including Nokia's Symbian, RIM's BlackBerry, and Apple's iPhone. Symbian is the final generic platform vying for the opportunity to play DOS in the smartphone market. The next article will examine Nokia's chances in its bid to match Microsoft's PC dominance in the mobile market while setting out in a new venture to copy Android's open software model. Did you like this article? Let me know. Comment here, in the Forum, or email me with your ideas. Like reading RoughlyDrafted? Share articles with your friends, link from your blog, and subscribe to my podcast (oh wait, I have to fix that first). It's also cool to submit my articles to Digg, Reddit, or Slashdot where more people will see them. Consider making a small donation supporting this site. Thanks!
Why the iPhone Platform is Still the Best Game in Town

How quickly we forget our very recent history. On January 9, 2007 Steve Jobs announced the iPhone at the Macworld convention. The original iPhone was to be serviced exclusively by Cingular. Also in January of 2007 we learned that Cingular, originally a joint venture between SBC and BellSouth, would be re-branded as AT&T. We then slowly learned as the iPhone's official release date drew closer, that the iPhone would continue to be exclusive to AT&T, would not be subsidized by AT&T, and you could purchase phones directly from Apple Retail Stores. As the layers of this onion were pealed back even further, we learned that Cingular (or was that AT&T?) agreed to pay Apple nearly eighteen dollars per month per subscriber for the privilege of being exclusive. Apple was also in control of the activation process which required an iTunes account. Moving forward Apple was also responsible for distributing all updates to the iPhone, not the carrier, not AT&T. Apple was completely in charge, completely. Oh, and there was one more thing, no third-party native apps, only web apps. In fact, Steve Jobs was at that time quite adamant that there would never be natively developed applications for the iPhone and that web 2.0 applications would be all that developers would ever need. Who Owns the Relationship with the Customer? What this fundamentally did was change the dynamics of whose customers were they first. The carrier's or the device manufacture's? A question that, until this point in time, was never asked. The point that Apple was making, was that consumers would choose Apple products before they would choose a cell phone carrier. And Apple was right. For the first time, a device manufacturer was in control of the relationship with the customer ahead of the carrier. If you owned an iPhone, you belonged to Apple first, then perhaps to the cell phone carrier. This change in the fundamental relationship with the consumer was cemented by large numbers. Very large numbers. Some of the largest numbers in the history of mobile computing. Then it happened, the App Store opened on July 10, 2008 and the next day the iPhone 3G was launched with iPhone OS 2.0. All existing iPhones and iPod touches were able to update to iPhone OS 2.0 as well. A new player was introduced into the equation, the third-party developer. Apple may have won the battle with the carrier in establishing its position with the customer, there was no question there. Apple came first in that relationship. But where does this third wheel fit in? A distant fourth place in line would be the manufactures of development tools and technologies that third-party developers choose to use. Companies like Adobe that manufacture these tools and technologies are even further removed from the mobile customer. Their focus is on making life easier for developers, not better products for mobile customers. It only makes sense since their customers are the developers. But just how important would this new iPhone development platform be to third-party developers and companies that build solutions that these third-party developers use? As only time would tell, and that all depended on what was at stake. And in the beginning, what was at stake was not yet known. That is, not until the numbers started rolling in. Quarter over quarter record-breaking sales of iPhones and iPod touches, and quarter over quarter record-breaking sales of Apps and unimaginable download statistics. Now everyone wants to own the customer. The only player that was clearly out of the race was the carrier, they were just along for the ride. This is all well and good for the device manufacturer, cellular carrier, and third-party developers. But there was another quite player out there whose battle was already over. The music and movie industries. What everyone seems to have missed was that the explosion of the iPhone into the hands of consumers was more of a play of convergence than its ability to surf the web, respond to e-mail and play games. A cell phone, and an iPod in one device (not just a phone with iTunes installed). Forget everything else. Everyone had a cell phone, and everyone had an iPod. And in June of 2009, when the price dropped to $99, absolutely everyone started thinking about using their iPod to answer phone calls. This is an important factor to consider. Everyone who had (or still has) an iPod is utilizing iTunes to manage and even purchase their music. Once you have a sizable music library in iTunes, and you have grown accustomed to purchasing musing from the iTunes Music Store, you are pretty much hooked. And the numbers on this side of the equation are not too shabby either. In April of 2008, Apple finally passed Walmart and iTunes became the #1 Music retailer currently representing more than 25 percent of all music sales in the U.S. Consumers have a relationship with their music, not their device and certainly not their cellular carrier. What has always defined the relationship has been the music. And Apple was and still is in control of that. It really had nothing to do with how great the iPhone was or was not. The fact that the iPhone is great only strengthens the bond, but it did not create the bond. That bond between consumers and Apple began with the iPod and remains intact due to the consumers owning and maintaining sizable music libraries via Apple’s software, hardware and online services. Every so often the music industry has tried to wrestle control of the customers away from Apple, but has thus far been unsuccessful. So now we can come to understand why developers are flocking to the iPhone platform and developing applications for Apple’s iPhone. There is a huge install base of customers purchasing apps that seems to increase quarter over quarter. And these customers have proven time and time again that they are willing to pay for music, movies, apps and connectivity. Focusing on the Apps, for the most part, since its debut on the market, Apple has maintained a single platform. The variations between the iPod touch and iPhone has remained subtle. Each being able to host the latest version of the iPhone SDK. Making the current total of units an astounding 50 million units. 50 million units all on basically the same device, running basically the same OS, and all able to access the same software from the same App Store. With the device manufacturer owning the relationship, and in control of software updates and distribution of third-party applications. What's more is the length of time that this particular situation has been stable. Three years running on a stable platform (which also includes iPod touch devices) to a growing number of users that now totals 85 million customers. Never before has such a consistent mobile platform been available to as many users for this length of time. Multi-Platform Investment That brings us to the value proposition. There is a cost associated with supporting additional platforms when developing mobile applications. And that cost will be balanced against the total opportunity there is to be gained. Each splinter in the platform, be it screen resolution, device capabilities, of operating system difference all increase the cost of targeting and maintaining software on that platform. These costs are not only related to writing code specific to each platform. The way that a Blackberry user expects to interact with an application is different from that of an Android user and different again from an iPhone user. Each platform has its own Human Interface Guidelines. This requires modifications in the design of the application as well as the support of variations in the testing cycle. And depending on how great the variances between devices are within a given platform, the approach to on device quality testing may vary as well. Looking at the current competition, RIM may still outnumber based on the total number of units sold to date, but if one takes a closer look, one will quickly discover not only a seriously fragmented collection of device profiles to test against, but also some rather low numbers of individuals downloading and using third-party applications. The “Crackberry” does one thing better than any other device on the market, and that is e-mail. The problem is that times change and most consumers are not utilizing e-mail as their primary means of electronic communication. Twitter and Facebook are replacing SMS and e-mail. So much so that in a recent survey, 40 percent of all existing Blackberry owners claim that they will switch over to iPhone when they replace their current device. What would be interesting to know is how many of those same Blackberry customers already have an iPod and an established iTunes music library. RIM’s only fault is that they have been a player for a long time. And over time, a device manufacture’s will ultimately start to splinter, and their customer base will fragment making the maintenance of applications for third-party develops across all fragments more and more expensive. Then there is Android. Can anyone honestly deny that Google will help Android become the dominate licensed operating system across portable devices? The problem that third-party developers face is that right out of the gate Google fragmented the market. With the OS divided into almost equal thirds presently (1.5, 1.6 and 2.1), the number of new Androids coming to market is mind numbing. Buyers remorse with a locked in two-year contract has become par for the course. The support costs for third-party developers on the barley one year only Android platform is that it is actually in worse condition than Blackberry. The number of variances based on-screen resolution, device capabilities and operating system versions is a nightmare to manage. And at the rate to which new devices are coming out, it is impossible to test on device across all variations, simply impossible. What is worse still is that each device manufacture can decide whether or not to include the “Google Experience” with their device, and decide on their own when to provide updates for the carrier to push out to the carrier's customers. This will prove to be problematic for those responsible for identifying testing scenarios, budgeting time, and scheduling regression tests to ensure consistent quality. Android Platform Versions Return on Investment What will the ongoing development costs be and what is the potential gain? For iPhone the overall support costs are currently low as the platform is not too terribly fragmented. Another thing that Apple has going for it is the predictably in which it operates. Almost like clockwork year after year. Original iPhone released June 2007, iPhone OS 2.0 announced March 2008, iPhone 3G released June 2008, iPhone OS 3.0 announced March 2009, iPhone 3GS released June 2009, iPhone OS 4.0 announced April 2010. Developers can plan for it, and business investors that fund third-party development can budget for it. A very stable platform with extremely predictable release cycles. Can the same be said for Android after just one year? Who knows when the next device will be making its way to consumer, what version of the OS it will have on it, and which manufacture will produce it. We don’t even know if it will be a phone or a television set! Not only does Google not own the relationship with Android customers, neither does the device manufacture. The carrier is still in control of the relationship following the old school paradigm of cell phone carriers. With RIM, the majority of users are hanging on to older devices that are not capable of running a modern mobile application. Certainly nothing on par to what can be developed on the most recent Blackberry OS, or even on Android or iPhone. And will RIM have its Blackberry 5.0 out of beta and on enough devices long enough for any sort of return on investment before Blackberry 6.0 is released? While RIM may in fact have a model more closely resembling Apple in the fact that they own the customer relationship first, not the carriers, RIM suffers from its long running legacy. Conclusion The point being is that the iPhone is a very well-managed, barely fragmented (as of today) platform with a huge customer base that can’t seem to get enough apps to satisfy their need to make mico-purchases at the app store. The iPhone has effectively replaced the candy rack at the checkout aisle for impulse purchases. Under the guidance of Steve Jobs, and since October 2001 with the introduction of the iPod, Apple has been earning its right to own outright the relationship it has with its customers. Through rigorous engineering best practices, and the ability to deliver a quality product like clockwork year after year, the consistent stability of the platform has made the iPhone a safe haven for third-party developers. Developers that are interested in developing high quality solutions to a well-groomed customer base that is willing to pay for that experience. What could possibly be a justifiable reason for the government to step in and take all that away?
What's Next from Apple: New iPods Sept 22, iPhone OS 2.1, iTunes 8.0

Daniel Eran Dilger Kevin Rose has been trying his hand at making broad sweeping generalizations about the next generation of iPods, but sorry, no digg. Most of his predictions are not even original, and those that are are so vague that they're really just worthless. Here's what you can really expect. Rose likes to suggest what's next from Apple, but his guesses only approach reality when they're based on leaks that occur days prior to an announcement. His flat out guesswork tends to be yet far further removed from reality, indicating that he has no special inside track on things at Apple, nor much of an imagination tempered by realistic appraisal. A month before the iPhone was unveiled, Rose predicted it would be available from CDMA providers, have a pull out keyboard, and sport two batteries, one for music and one for the phone. Of course, splitting a battery in half is not really a brilliant solution to prevent music playback from running down your phone, but the simple fact that Rose didn't know about the exclusive deal with Cingular (come on, it was Apple's only mobile partner to date) and the unlikelihood of Apple tacking on an HTC-esque keyboard makes his guesswork easy to dismiss. I had imagineered the iPhone as a web browsing iPod (“based on Nokia’s mobile contributions to Safari”) with SMS messaging features, contacts, calendar, and a camera… six months earlier. And CDMA? I recommended Apple “leave Verizon alone and partner with Cingular, TMobile, and MetroPCS using GSM technology.” The difference between my ideas and those from Rose, apart from mine being six months earlier, is that I presented mine as only reasonable ideas with some rationale behind them; Rose insisted he had special knowledge from reliable sources. Generation 6 iPods An iPhone Worth Talking About The Real iPod touch Deets. Now he's predicting new iPods. The iPod touch is supposed to get “fairly large price drops to distance itself from the $199 iPhone.” Sorry, wrong. The iPhone is only $199 in the minds of consumers. It gets a subsidy from AT&T, which is why you can't just buy one for $199 and walk out the door without signing a phone contract. The iPhone's $2,000 service contract offers plenty of distance between it and the iPod touch. The iPod touch is not possibly going to get cheaper than the iPhone for a couple reasons. First, obviously, it costs nearly as much to make. The lack of a subsidy pretty much balances out its lack of mobile radio components. Second, Apple isn't desperately trying to sell the iPod touch. It exists as a product to sell to users who can't or won't buy an iPhone because they're tied to Verizon or don't want a phone. Rose worries that the iPhone is “cannibalizing sales of the iPod,” but there's nothing more Apple would like to do than to feed every iPod user an iPhone. Sure the bonehead analysts will have another field day complaining about how there's only minor growth among iPod sales while they ignore iPhone numbers, but these guys aren't easy to reach with basic facts. Apple has been giving away the $300 iPod touch to students buying a laptop; that looks like an effort to broaden the iPhone platform. Apple wants college kids playing iPhone games and interested in creating their own iPhone software. Left to their own devices, most kids would buy the old hard drive iPod Classic because they think they need to walk around with their entire torrent library of stolen music. (Get off my lawn!) In any case, we all knew the iPod refresh was coming. I'm pretty sure they're coming on September 22. I'm also pretty sure that the 8GB iPod touch is going away, making the 16GB model the new $199 version. That outrageous price drop, facilitated by today's cheaper Flash RAM, would kill the remaining market for the hard drive-based iPod Classic, converting Apple's entire lineup to Flash RAM. Additionally, it would migrate even more iPod buyers into the installed base of iPhone App Store users and hasten the cannibalization food chain that leads toward the iPhone. The 16GB iPod touch will be sold next to the existing 32GB model, which was just released earlier this year. For that reason, I don't see a larger capacity model being introduced now. I don't see tremendous demand for carrying 64GB of music from people who are also ready to pay for 64GB of Flash. Nano 4: Zune 2007? Rose says the Nano will get a redesign that makes it look like last year's Flash RAM Zune; iLounge already predicted this a month ago, although Rose embellished his version with the idea that “the actual plastic on the outside will be curved,” presumably like a TV from the 80s. How nostalgic! I miss having a wildly distorted tube picture, almost as much as a scratchable plastic iPod screen. Oh the good ol' days. Will Apple expend significant resources to make the Nano 4 into a widescreen tall/long player and define a new 4GB hardware model to fit into a niche that is only $50 less than the new 16GB $199 iPod touch? How much room for differentiation is there under $200? Seems more likely that Apple will instead only release a cheaper version of the existing 4GB Nano that's closer to $99, leaving room for a $149 8GB Nano in between. That will pull Shuffle buyers up into splurging on a full video Nano. If you want to watch video sideways, you can get an iPod touch for $199. What kind of widescreen cinematic experience can you get with a long/tall Nano/Zune? When I reviewed the Flash Zune, one of the complaints was that half (but only half) of the controls reconfigure when you hold it sideways. Plus, existing iPod Games wouldn't work in the widescreen orientation; both the display and the controls would be messed up. On top of that, regular video playback would be forced to play back wide, and/or look bad because its stretched. Microsoft has no qualms with playing video in an odd aspect radio, but the iPod is made by Apple, which has some aesthetic boundaries that constrain its behavior. Winter 2007 Buyer’s Guide: Microsoft Zune 8 vs iPod Nano iPhone 2.1 Rose says Apple will also release “iPod touch 2.1 software, iPhone to get update very soon after.” We already all knew the iPhone 2.1 update was coming, and that it's going to be significant, and that it is due for release around the same time as the new iPods. Whether the new iPod touch will ship with it in advance of the iPhone would depend on whether iPhone-only features in the release hold it up, but Rose doesn't suggest any special knowledge or rationale behind this claim. iPhone 2.1 is supposed to usher in new GPS features and the push Notification system, but the real demand for downloading it will be that it fixes a major problem that currently causes third party iPhone apps to crash on launch and randomly when running. Apple needs to get this out quick before it blows the reputation of iPhone software stability in the minds of users. That's reason to believe that iPhone 2.1 might ship even before the new iPods, rather than the other way around. Because software developed using the iPhone 2.1 SDK won't run on iPhone 2.0.x, expect everyone to need to update their software to download a new generation of 2.1-only apps. This will be free for iPhone users, but might incur a nominal fee for iPod touch users due to accounting rules. Myths of Snow Leopard 3: Mac Sidelined for iPhone Ten Big New Features in Mac OS X Snow Leopard iTunes 8.0 Rose says iTunes 8.0 “it's a big update with new features,” but doesn't say what they are. He also says it will be “a real point upgrade” deserving the 8.0 name. However, there is little rhyme or reason to Apple's iTunes version numbering, and no real correlation between the amount features introduced and the version number increment. iTunes 2.0 added iPod support after ten months of iTunes 1.0, but iTunes 3.0 only added minor features the next year. It was replaced by iTunes 4.0 a year later, which added the Music Store and AAC support. Two years later, iTunes 5 introduced some cosmetic changes and was immediately replaced with iTunes 6.0 only a month later, without any major new features. Another year later, iTunes 7.0 arrived with a new look, video game support, and Coverflow. It has since seen loads of new features, from support for Apple TV to the iPhone to new iPods and new movie rentals, all of which were only numbered as minor updates. We've had iTunes 7.x for two years now, so iTunes 8.0 is not really ballsy prediction at this point. Of course, Apple is just as likely to skip ahead and release iTunes X. And if iTunes X isn't ready, we can might even get iTunes 7.8 and 7.9 over the next couple years. Oh my sides. With the likelihood of entirely new iPod touch or Nano models being quite low (after all, the Zune isn't going to get a refresh until late next year, and Apple isn't facing any tough competition at the moment), Apple's iPod announcement might end up more about a new iTunes than the iPod. Rose doesn't make any iTunes 8.0 feature predictions, instead jumping ahead to suggest that Apple is working to make sure Mac OS X 10.5.6 will provide support for Sony's BluRay, the competition to iTunes that nobody cares about. Hmm. Steve Jobs has so little regard for optical discs that he basically shunned iDVD last year when showing off iLife 08, but now he's going to resurrect BluRay and excite customers by including it on the company's laptops, where any resolution advantage it offers over DVD would be nearly invisible? Oh ho ho my sides. iTunes Unlimited? The rumor mill is talking about subscription music in the next iTunes. Steve Jobs has opposed subscription music since iTunes got started. He worked for years to convince the labels to let go of the dream of billing users to essentially listen to the radio. Subscription music has always revolved around outrageous DRM that requires the (historically Microsoft PlaysForSure) player to sync up and check in every month or lose its music. I've written up lots of reasons why subscription music was an awful idea that wouldn't fly. I doubt Apple will actually float it as rumored (“iTunes Unlimited” for $129 sounds awful). However, enough has changed in the last two years to reconsider how subscription music could be delivered. For starters, the iPhone and iPod touch are now wireless, so they can both stream and verify exploding media DRM. Apple's iTunes, modern iPods, Apple TV, and the iPhone also now already handle exploding DRM for movie rentals, which blew over last year without any complaint, although it doesn't look like iTunes' movie rentals have had a massive impact on the world due to their relatively high price point. Offering movie rentals appeared to be a requisite concession leading up to convincing the movie studios to agree to movie sales in iTunes. Apple could sell access to subscription music directly from the iPhone and iPod touch that worked similar to movie rentals, and the labels might even allow users to freely copy rental tracks between computers linked to the same iTunes account. Such an arrangement hasn't found mainstream popularity elsewhere, but nobody else had been able to sell music prior to iTunes either. While the rumors suggest there could be a discount for MobileMe users, it would be a lot smarter to make it part of MobileMe instead. That would limit subscribers to Apple's loyal base, easing in the system rather than exposing a brand new subscription service to ten million handheld users and 150 million iTunes users and all but promising another meltdown. At least by making it part of MobileMe, Apple could add lots of subscribers and upgrade existing subscribers to a $99 “unlimited music” additional fee. Keep in mind that all this is highly speculative. I doubt “unlimited iTunes” will fly, as the idea was not leaked but rather simply invented. How Apple Could Deliver Workable iTunes Rentals The Online Music and Movie Rental Myth Rise of the iTunes Killers Myth As Long As We're Speculating… If Apple does convert its entire iPod line to Flash players, it would make sense to incorporate a new audio codec setting that maximized the amount of songs you could copy into an 8GB player. For years, Apple's major selling point on the iPod what that it offered massive hard drive storage capacity. Now it's migrating to Flash, which is more expensive but considerably more shock resistant and suitable for a handheld computer device like the iPod touch. Working to cram more music into tighter spaces would allow Apple to make the iPod touch and iPhone more competitive against a hard drive player. AAC is already optimized for low-bitrate playback. Apple also needs to add remote functionality for controlling Apple TV to iTunes, just as you can already do via the free iPhone app. And how about direct streaming of content between iTunes, Apple TV, and the iPhone, such as for movie rentals. Currently, to get a rented movie from an iPhone to Apple TV you have to do two syncs involving a middleman iTunes PC. iTunes also needs to expand on the options for syncing media to the iPod and iPhone. In addition to syncing specific playlists, it should be able to automatically sync over a smart “Party Shuffle” mix of music that fills a specific proportion of the device, such as 50% music, 10% podcasts, and then the specific movies, TV, and audio books the user selects. Then shuffle out the listened to tracks and add new music every time it's synced. Allow users to hide songs from iTunes just as you can hide photos from your iPhoto album to simplify the view without deleting anything. Add Time Machine support so you can go back to see earlier play counts and browse your media library as it appeared in the past. Add integrated support for viewing PDFs and other QuickView document types, so you could use iTunes as a metadata-rich document browser with search and playlist features. Or give Preview an iTunes metadata document database interface. More Music Deals. Add other corporate sponsors to the Starbucks deal, so you can discover their playing music and buy tunes over their WiFi link. And isn't it about time Apple and AT&T got together and hammered out that plan to open iPhones to AT&T's hotspots? I'd debit a 99 cent WiFi access fee from my iTunes account if it were necessary. What's the point of setting up $8 per hour WiFi services for the zero people who use them? And on that tangent, how about rolling out my Ubiquitous WiFi idea for allowing other mobile users to borrow your AirPort's WiFi signal? I'd also like to see Apple get AT&T to allow users to place calls over their WiFi link as a concession for not having a functional 3G network in place yet. I also think AT&T should sell or rent AirPort base stations to its millions of broadband users, with all of them open to WiFi sharing so that iPhone users could place a freaking call and access the web at faster than EDGE speeds between now and whenever AT&T actually gets 3G rolled out. Apple also really needs to deliver some sort of central media server, possibly tacked onto Apple TV. Just add a USB hard drive and have it serve up the contents as a Bonjour-discoverable iTunes library to your local network. This would allows users to dump all the media off their laptop. And then allow WiFi sync to optionally copy fresh media to the iPhone from the central media server library. There's plenty that could be tacked onto iTunes, but the biggest new thing in the iPod announcement actually might be something entirely different than last year's iPods for cheaper and a new rev to iTunes. I'll spill that in the next article. Ten Big Predictions for Apple in 2008 Did you like this article? Let me know. Comment here, in the Forum, or email me with your ideas. Like reading RoughlyDrafted? Share articles with your friends, link from your blog, and subscribe to my podcast (oh wait, I have to fix that first). It's also cool to submit my articles to Digg, Reddit, or Slashdot where more people will see them. Consider making a small donation supporting this site. Thanks!
Seeking Alpha: Logicians need not apply.

Seeking Alpha's Todd Sullivan really doesn't like Apple's exclusive agreement with AT&T (tip o' the antlers to John Gruber). His dislike of it is so intense, as a matter of fact, that his "analysis" of the deal has burst free of the restraining coil of our so-called "Earth logic" and taken flight to a wondrous world of imagination. [Note for editor: is there a Doug Henning tag?] The latest estimates have "unlocked" iPhones costing Apple over $1 billion in lost revenue the next 3 years. Wow! $1 billion sounds like a lot. How did you come up with that number, Todd? Apple's (AAPL) AT&T (T) tie-up in the US is for another 4 years, meaning the company will continue to not realize monthly revenue, estimated at $120 annually per subscriber from phones "unlocked" for use on other carriers. OK, so Todd won't tell us where, exactly, he got that number -- you stupid Earth logicians would ask such a question! -- but doing the math he's apparently figuring that there are about 2.1 million unlocked iPhones "in the wild". That's a lot more than other estimates, but the number of iPhones and the grand total are pretty irrelevant once you see how inherently flawed the premise is. Because this $1 billion is magical fairy money that you can only see when it's reflected in the shiny dew on the Blingo-tree leaves in the virgin wood of the elven kingdom of Willywindle, across the Chocolate River. And then only during the month of Februtuesrarey, which comes once in a 1,000 years, when the snow falls from clear skies and the IRS agents give fabulous deductions for non-asset transactions conducted in previous fiscal quarters. [Note for editor: this could probably use some tightening up.] Well, anyway, the point is that opportunity cost is only relevant if there is, in fact, an actual opportunity, not some imaginary scenario you just pulled out of your butt. For Apple to be "foregoing" this huge chunk of change, you'd have to buy into the jacktastic assumption that it could negotiate the same $120/year revenue sharing with every other cellular provider in the world. Not only that, Sullivan glosses over the fact that his "math" assumes a situation where AT&T exclusivity is in effect globally. However, here on Earth, 300 light years from planet Jackass, many if not most of the unlocked iPhones are being used in other countries, particularly countries where Apple doesn't currently have a deal with a cellular provider. Just the other day the lovely and talented Tom Krazit pointed to a report indicating there are 400,000 unlocked iPhones in China alone. Why does Apple not have a deal in China? Because it's trying to do something craaaazy like negotiate one of them sweet revenue sharing schemes, that's why. Todd, maybe you should be taking some notes or... Well, whatever. That's fine. Apple has stood by its "10 million phones sold by the end of 2008" goal, but recent news that they have dramatically cut back on component orders can only mean sales growth has slowed. If you click through to the link, it's really not clear exactly what that component cut report was all about. First of all, Apple already said in its quarterly conference call that it expected the first quarter to be slower than normal. Go one link further and you'll see CNBC's Jim Goldman calling the report much ado about nothing. At any rate, Apple's already sold more than 3.7 million iPhones. With the release of a 16GB version last week, more international rollouts coming and a 3G version sometime later in the year, does anyone really think they aren't going to make 10 million by the end of the year? Anyone who doesn't cry out for the creation of a Doug Henning tag, that is? I did a post in May of last year that said AT&T would be the big winner of the iPhone deal and to date they have been. Yes. Surely, with iPhone sales perfectly aligned with expectations, Apple has taken it in the shorts. Huh? And since when did this relationship become a zero sum game? What's so interesting about that link is that it's to a post where Sullivan just references a previous post about the iPhone and then pulls a big long quote from another blog. Why would that be? Possibly because his opinions about the iPhone have been so fantastically wrong? Like this one where he seems oblivious to the presence of the rest of the world: This also means that the 10 million units Apple plans to have sold by the end of 2008 will be done to 47 million AT&T subscribers meaning 1 in 5 will have one? Doubt it. Well, you were right to doubt it! Because you were wrong! Or this one which the Macalope dispatched with his characteristic aplomb here. Todd, honey, after all this time maybe you should just drop this particular subject. Because you still don't seem to be getting it. Back to the current piece: When you also consider we have not seen what Research in Motion (RIMM), the Blackberry maker and clear "smart phone" leader has planned, Apple may face even more headwinds. How, exactly, is one to consider what one has not seen? And doesn't this idiotic game work both ways? Shouldn't we also consider what we haven't seen from Apple? Or from Nokia? Or from space aliens? None of this even takes into account the specter of Google's (GOOG) gPhone expected later this year. Again, we have current Apple products forced to compete against future products from someone else. Why does Steve Jobs even get up in the morning?! And when did the linearity of time get revoked without the Macalope noticing it? But let's look at some the market share analysis for a minute. "When you consider that it launched part way through the year, with limited operator and country coverage, and essentially just one product, Apple has shown very clearly that it can make a difference and has sent a wakeup call to the market leaders," said Pete Cunningham, Canalys senior analyst. Phew. After reading Sullivan, that voice of sanity is like a soothing liniment applied to a festering rash, isn't it? Not that the Macalope would know what that's like. The horny one is a little confused at Sullivan's definition of the term "leader", though, as Nokia is #1 in market share, not RIM. And Apple, while at #3, clearly has the buzz, as manufacturers are scrambling to come up with an "iPhone killer". But actual figures and logic be damned! Right, Todd? [Note to editor: can you write the Macalope a prescription for a pain killer?] Instead of having a product that all carriers were glad to carry and sell, he created an atmosphere in which they embarked on a quest to compete directly with him and his product. Todd, the Macalope just doesn't know how many other ways to say this but that is simply one busted-ass 2007 Nissan Premise you're driving there. Exclusivity is a condition for the revenue sharing agreement. That's how Apple gets the revenue sharing. You can't say Apple's somehow foregoing $1 billion in revenue sharing that it could never possibly get. I think Apple devotees may find themselves in the future wondering "what could have been" if only Jobs had not started out this process so adversarially. Yeah, well, the Macalope thinks you will find yourself in the future ignoring the uncomfortable fact that you ever wrote this piece in the first place.
Todd Sullivan: Round 2

On his own site now, Todd Sullivan fires back at the Macalope, asking Is That The Best You Got? Well, the Macalope doesn't know about "the best". It was OK, he supposes. Good for a Wednesday night. But "best"? Hmm. That's kind of asking a lot, Todd. It's not like yours was very good. Why should the Macalope have to do all the work? But if you want to go another round, the Macalope's got the time. His nightly frolic with the nymphs doesn't start for another hour. Sullivan's site, incidentally, has those awesome keyword ads that everyone loves so much that pop up all over the place like whack-a-moles that just hit a vein of underground crack. As Merlin Mann has noted, they are really useful for first-time visitors to the site because they're a quick way of knowing you won't ever be back. So, now it is CNET taking swipes at yours truly for having the audacity to doubt all things Apple (AAPL). Actually, CNet takes no responsibility for the Macalope's writings. They were really clear about that! So, the Macalope's words are his own. As for doubting all things Apple, please note that the Macalope has been known to agree with criticism of the fine folks in Cupertino from time to time. He just asks that it make sense. This one is priceless..... Well, thanks, Todd. That's really nice. He then cherry picks sentences from the post to make the math seem impossible. The Macalope's not sure how that would be possible as you didn't actually do the math in your post. More to the point, though, what he said was that the particulars of the math didn't even really matter, because the underlying premise stinks. Where did the number come from? Apparently he has never heard of these little publications called the New York Times, or CNN or MSN Money? Too bad because had he even attempted to read them, he would have found the sources of the numbers and save a whole lot of typing and embarrassment. Uh, yeah, see the thing is, Todd, if you click through to those links you provide, they don't show the math either. Or even name a name. The New York Times: For Apple, the booming overseas market for iPhones is both a sign of its marketing prowess and a blow to a business model that could be coming undone, costing the company as much as $1 billion over the next three years, according to some analysts. "Some analysts". Hmm. Well, that's not terribly elucidating. How about CNN? The growing usage of unlocked phones could cost Apple $1 billion in lost revenue over three years, analysts said. "Analysts". Huh. OK. MSN Money? This could cost the company about $1 billion in lost revenue over the next three years, analysts estimate. Yeah, OK, starting to see a trend here. Well, "analysts", whoever you are, as the Macalope's 9th grade chemistry teacher Mr. Robinson was fond of saying, "Please show your work. Because it's bound to be pretty funny." It is unfortunate but he based the whole article (rant) on the flawed assumption I made the number up. Todd, Todd, Todd, Todd, Todd, Todd, Todd! The Macalope did not. He based the whole article (rant) on the assumption that the number is based on crappy assumptions. You didn't make it up, you just took it at face value because it fit this preconceived idea you've been humping for the last year. Let's move on: Yes, let's. Responding to the Macalope's example of unlocked phones in China, Sullivan says: Well, or maybe China mobile has figured they can put 400,000 iPhones on their network without paying Apple a dime, why negotiate a deal and start paying them now? Todd, this actually proves the Macalope's point, not yours. If there's no way they can get the favorable revenue sharing they get from AT&T then how is Apple supposedly forgoing it? Is this thing on? Test. One, two. Check. Check. Check. Then he moves on to question (mock) my thought that Apple's cutting back on component orders can only mean sales are going to slow. Can we be clear on what the Macalope was questioning (mocking)? He was questioning (mocking) the implication that this is somehow surprising. The first quarter is always slower than the fourth quarter and, yes, Apple has cut that already lowered estimate even further. Of course, you can't tell how much of that is because of iPods and how much is because of iPhones, but the Macalope fully admits that iPhone orders might be lower than hoped for in the first quarter. It's not exactly like the economy and/or the tech sector is going gangbusters. Timing is everything in life and had he waited 2 more days to post, he would have again saved himself the inevitable embarrassment of this being affirmed on Thursday. See, you're still acting like this is "news". It's not. Again, this recent report confirms the previous report which confirms what Apple said in its conference call with investors in January. To quote: "Apple has slashed its 2008 NAND order forecast significantly and has informed suppliers that its demand growth will slow in 2008." OUCH... Yeah, and that's all got to be the iPhone, right? It's not like Apple makes anything else that uses flash memory. He then goes into some wandering diatribe about Research in Motion (RIMM) or Google (GOOG) coming out with new products somehow does not matter or should be dismissed? I can't figure out what the point was. The point is, Apple will also come out with new products. Everyone will come out with new products. The fact that one phone maker will come out with a new product means nothing unless you know something about those future products that makes them inherently better than the other company's future products. And, as you admit, you know nothing. As for the gPhone which you spookily allude to, the Macalope will just quote Panic Software's Steven Frank: Hm, a 34-company committee overseeing an open-source suite of mobile software. What could possibly go wrong. Now, some of the Macalope's antler scratching over Todd's "analysis" probably stems from the fact that he says he was only considering the U.S. market. Frankly, the Macalope didn't catch that assumption, probably because it's not spelled out anywhere. It does explain why he said RIM was #1 and it conveniently allows him to dodge the embarrassment of having to explain why he thought all 10 million iPhones had to be sold to existing AT&T customers. (And even then, he got the number of AT&T cellular customers wrong, saying it was 47 million in May of last year. At the end of April of 2007, AT&T had 62 million wireless customers. But that's really beside the point.) Comparing Apple sales that until recently were only in the US would have been unfair. And you certainly wouldn't want to be that! The irony here is that had I done a post that claimed Apple was a distant third in market share, I am sure his response would have been to attack me for an unfair comparison. See, the Macalope used to take a somewhat U.S.-centric view and a number of readers outside the States wrote in and said "Hey! Goober! What are we, chopped liver?!" And the Macalope said, "No, indeed, dear international readers. You are not chopped liver. You are fois gras." And they said "That's better!" Then a couple of days later they wrote back and said "Hey, that's just a fancy way of saying 'chopped liver'!" And then we all had a good laugh. Ha-ha! But, anyway, Todd, the fact of the matter is, the Macalope can't ignore the rest of the world, scary numbers or not. And your contention that while the Macalope pointed out that Apple was third he would have said it was unfair if you had done so really doesn't hold any water. Because, you know, it was the Macalope who pointed it out. See? Is there something wrong with selling phones in only a handful of countries and still being third in the world? That sounds pretty darn good. Why is the horny one supposed to have some kind of problem with that? All cell providers have revenue share agreements. They have them with software developers, providers, wireless companies etc.. it is the way the industry functions. It is the degree of the revenue share that dictates the exclusivity in Apple's case. The Macalope knows that other firms get revenue sharing, but that's not even the point. The point is, as you note, that Apple gets more revenue sharing because of exclusivity. What the Macalope is saying is that the $1 billion figure is simply a bogus multiplication of the revenue Apple gets from AT&T times the number of unlocked phones times the number of years. You can't do that. If you open the phone up to multiple carriers in a single market, the revenue sharing number is going to drop like a rock. If there's another way to come up with such a ridiculously large number, the Macalope is all ears and antlers. If only we could track down "some analysts"... There are two ways to play this game. One is to open up your phone to every provider, sell a mess of them but get very little extra per phone sold. The other is to lock it to one provider, sell fewer phones but get a whole lot extra per phone. Apple's predilection when entering a market is lower volume and higher margin. And when you're a company that puts emphasis on selling products that "just work" (or, at least, "just work" better than your competitors' products), starting with one provider makes more sense. None of this discussion takes into account the changes AT&T needed to make to enable visual voicemail and, more importantly, the control over the user experience it ceded to Apple (activation alone was a huge sea change -- moving it from the store to the customer's home). Other carriers were reportedly not willing to make such concessions, but it was critical for Apple because ease of use is one of its primary differentiators. One last thing... he has not mentioned in any of his "posts" that my call before the first phone was sold on the need to drop the price of it was DEAD ON.... Well, the Macalope wasn't aware it was his job to run around patting you on the back for your brilliance. Why is he supposed to keep track of all of your posts when you clearly don't keep track of his? See, you wrote: A $599 phone will not gain mass acceptance no matter what it does... To which the Macalope responded: Like a monkey typing on a keyboard, you've finally typed something that's true. Looks like the Macalope actually agreed with you on that particular point! Yay! We both win! High fives all the way around! Long-time readers may remember that as the post you're referencing as the one where you also said that no one wanted an all-in-one device and that you wanted to be able to drive your family down the highway, listen to music and talk on the phone all at the same time. Yeesh. Are you sure you really want to call attention to that particular oeuvre?
The gutsy marketing and strategy behind Apple's iPhone price cut

The iPhone price cut appears to be the story that will never die. Leander Kahney at Wired News and I had a great discussion yesterday about the what and why behind the iPhone price cut. Some of what we discussed ended up in the Wired article here, titled, The Perils of Taking the IPhone Mainstream. But there was actually some background and analysis that Leander didn't use, so I thought I would fill in that back story here.First, here's one of my quotes from the article:According to Howe, Apple initially priced the 8-GB iPhone at $600 not to milk early adopters, but to purposely constrain demand. While production ramped up at its Asian factories, Apple wanted to restrict buyers to the relative few happy to pay $600 for the phone. Nonetheless, Apple went on to sell a million iPhones in the first two months –- a clear indication of the device's popularity.Then, as it became clear there was enough factory capacity to produce millions of them in time for the crucial holiday season – when sales explode -- Apple dropped the price to take the gadget mainstream.With Tuesday's launch of the iPhone in Europe, it's clear that Apple is confident it can satisfy demand in multiple countries."(Apple) said they'd like more time before dropping the price," says Howe, "but you can't move the holidays. Clearly, Apple's gearing up for a big holiday season."Apple has good reason to be gearing up for this holiday season based upon its experience with the iPod. Steve Jobs made an incredibly gutsy call last year in the spring when he told manufacturing to gear up to make more than 20 million iPods to sell over the holidays. Why was it gutsy? Because Apple had never sold more than 14 million iPods in a quarter before. Yet the decision had to be made, and Jobs and his team made it. And it is sounding like Jobs has recently made that same decision with the iPhone by doubling iPhone production for this holiday season too.But back to the price cut. One London analyst firm has asserted that next year's average selling price for the iPhone will be $200:"In our projection, we believe there will be about 18 million iPhones sold next year at an average selling price of about $200, and that means a very sizable portion of total handset revenues will move from other manufacturers to Apple. (It) will be in the vicinity of 5 percent that Apple will steal from incumbents."Not to be outdone, the New York Times asserts that the price might go to zero:"The iPhone could have an overall impact on the economics of the phone industry. It has put a hardware manufacturer in a highly unusual position of strength relative to the carriers (Verizon, AT&T, etc.). They’re accustomed to calling the shots about what devices get access to their network; not so with the iPhone. It carries its own weight with consumers.Mr. Saccanaghi, after discussing the issue with various players in the mobile phone ecosystem, estimates that AT&T could afford to pay Apple $15 a month over the lifetime of a two-year contract. That adds up to $360 in payments. And that’s considerably more than the $200 to $350 that AT&T pays other retailers (like Best Buy, Radio Shack) for customer sign ups, Saccanaghi writes.What does it mean?Apple could conceivably sell the iPhone hardware at a substantial loss while still generating greater profit per iPhone than it does from the highest-end iPod.Sounds like a good deal for Apple, with a caveat. If Jobs decides to drop the price of the iPhone, he might consider offering a rebate to existing customers beforehand."So with production ramped up for the holidays, is Apple going to follow Motorola into the downward price spiral of death?Oh sure. And it will happen right after Steve Jobs attends an ice skating party in hell with bad Musak.What people don't get is that Apple is waging a marketing war to reshape the value chain for the mobile phone industry. Everyone is trying to figure out which trench Apple is occupying, when Jobs is flying in jet fighters for surgical strikes.Consumers value what they pay for. They don't value things the perceive as free. And that's the marketing blunder the US mobile phone market has bought into over the last 10 to 15 years. By bundling "free" and generic phones with cell phone service, mobile carriers have devalued both the brand values of the handset makers and their own services. The handset makers are hurt because the low values that carriers will pay for free phones eliminates the incentive for those manufacturers to do anything but cut costs. The carriers are hurt because they have to pay subsidy fees to the handset makers of anywhere between $150 and $250 over a two-year contract to actually buy those free handsets. You've heard of a win-win deal? This is a lose-lose deal.What Apple has done is inverted the value proposition. It has created a phone that consumers see as sexy and desirable, so desirable in fact that they will actually pay $400 to $600 for one (depending on geography). And because the device is desirable, Apple can demand exclusive deals with carriers, which creates valuable differentiation for those carriers that have iPhones and disadvantages for those that don't (yes, I'm talking about you, Verizon and Vodaphone). Because Apple is providing valuable carrier differentiation, Apple can then capture the subsidy revenue stream that the carrier would have normally paid to the handset manufacturers anyway for "free" (and undesirable) phones.Now, if Apple were to cut the iPhone price to zero, would any of this be happening? Not a chance. So Apple is going to use its iPod playbook all over again. The original 5 gigabyte iPod went on sale for $399 in 2001. Today, a 16 gigabyte iPod touch sells for -- you guessed it -- $399. Apple chose the price points based on consumer demand and interest. A constant set of features will move down the price scale to more value-oriented price points, but Apple will introduce new and even more desirable products at the old price points. And so long as it can keep that engine going, it will make money hand over fist. And the rest of the handset makers will bang their heads against the wall trying to figure out how they do it.Don Reisinger at CNET's Crave recently recently asked the question, "Is Steve Jobs really smarter than anyone else?" in this way:"In the United States, GSM carriers are not the only option, and more often than not, people are willing to go with Verizon Wireless or Sprint Nextel, regardless of the inability to easily switch between the aforementioned companies.But in the U.K., the economical landscape is much different. In fact, most Britons are more than happy to change carriers and are keenly aware of the terms 'unlocking' and 'SIM cards.' In fact, many people in the U.K. have already purchased an iPhone in the States, brought it home, unlocked it and added it to their own carrier.Steve Jobs knew that the U.K. is rife with unlocked phones and exclusively GSM coverage. And by looking like the best friend to O2, he's effectively pulling the same trick out of his bag: tell everyone they can only have an iPhone on one carrier, ignore unlocking, take the revenue from O2, and enjoy higher hardware sales due to simple unlocking procedures. Once completed, head to France and Germany, rinse and repeat.It's amazing to me just how much control one device wields all over the world. Can you think of any other product that could command such respect from a massive cell phone carrier and create a whole new way of doing business in the cell phone industry? I certainly can't.I can't either. That's because Apple combines award-winning designs with some of the best strategy and marketing in the world. And as long as the press and Apple's competitors keep focusing on the price cuts instead of the strategy and consumer desires, it will continue to reshape the mobile phone industry to its own advantage -- and in the process make its investors a lot more money than anyone wedded to the old mobile phone business expects.Full disclosure: the author owns Apple stock.Technorati Tags:Apple, ATT, Brand, Customer experience, iPhone, iPod, iPod touch, Marketing, New York Times, Price cut
★ 4

The first thing you notice is that the iPhone 4 feels smaller in hand — the decrease in width, even more so than thickness, is quite noticeable. It feels tight. Then you turn it on, and you see the screen. Apple seems very confident about the precise size and dimensions of the iPhone display: 3.5 inches, with a 3:2 aspect ratio. Not 3 inches. Not 4 inches. In fact, Apple seems very confident regarding everything it decided for the original 2007 iPhone. There are no new buttons, or even moved buttons. The Retina Display is emblematic of the iPhone 4 as a whole, both hardware and software: the same fundamental idea as the original iPhone, but clarified. It hasn’t really changed so much as improved — like the same picture in increasingly sharper focus. As I wrote after examining Apple’s iPhone 4 demo units after the WWDC keynote, the Retina Display’s overall effect is like that of high-end glossy magazine print — except that it updates live. It’s living breathing print. I don’t recall ever having seen motion graphics of this resolution, anywhere. And (again as noted previously) it’s more than just the pixel resolution — it’s that the LCD is so much closer to the surface of the glass. Like pixels on glass rather than pixels under glass. This is the result of a new manufacturing process Apple has pioneered. No other company gives a shit about things like this. The iPhone 4 feels like a major step toward an idealized iPhone form factor. What defines the iPhone, physically, is the 3.5-inch diagonal screen. The iPhone 4, in terms of width, seems about as narrow as you could possibly want it to be without reducing the size of the display itself. There’s just enough of a bezel around the sides to avoid inadvertent touches from fingers holding the phone by the edge. My older iPhones now feel swollen along their rounded edges. And yet somehow, despite making the form factor noticeably smaller, Apple made room internally for the battery to be bigger. In my review of the iPhone 3G two years ago, I wrote: The home button on the 3G seems to require a more forceful push. The clickiness of my original iPhone’s home button is better. On the other hand, the clickiness of the 3G’s volume and sleep buttons is better. Apple sometimes seems to be the lone consumer electronics company that pays any attention at all to the tactile response of buttons. The iPhone 4’s buttons are improved all around. The Home button restores the clickiness of the original iPhone’s. The new volume buttons, silence toggle, and power button all have a better feel than ever before. Apple is so good at making buttons, it’s almost enough to make one wish they made button-laden devices. The overall build quality seems impossibly good. The iPhone 4 is beautiful to behold and feels like a valuable artifact. It’s like a love letter to Dieter Rams. The Flat Sides The flat sides make it feel much more like a real camera — a decidedly thin camera, but a camera nonetheless — while taking pictures. This improvement is equally noticeable when holding the camera horizontally for any reason — like, say, to watch video. When you’re holding a phone vertically, you’re typically cupping it in the palm of one hand. But when holding a phone horizontally, you typically pinch it between your forefinger and thumb. The iPhone 4’s flat sides make this grip far more secure. Performance The iPhone 4 is definitely faster than the 3GS, but it doesn’t feel to me as though the difference is as noticeable as last year’s leap from the 3G to 3GS. This video on YouTube, which compares the startup time for Plants vs. Zombies on an iPhone 4, iPhone 3GS, and original iPhone, feels exactly right to me: the 4 is noticeably faster than the 3GS, which in turn is way faster than the original iPhone (and the 3G, which performance-wise was nearly identical to the original). The big win for Apple’s A4 system-on-a-chip, I suspect, is not raw performance (even though it is faster), but rather performance-per-watt. It’s an even better balance between speed and power consumption. And, on a related point, the A4 system is physically smaller, which has enabled Apple to reduce the size of the iPhone form factor and still include a bigger battery. Battery life seems a tad better on the iPhone 4 than the 3GS, which is saying something, given that the CPU is faster and the Retina Display packs four times as many pixels, is brighter, and offers a better contrast ratio. Typing on the iPhone 4 keyboard seems better than ever. The increase in performance has made the iPhone 4 more responsive to touch events, and for me this is most evident while using the keyboard. The increase in RAM from 256 to 512 MB is, no surprise, welcome. More web pages remain in memory in MobileSafari, and more apps remain resident in memory for fast app switching. The combination of more RAM and iOS 4’s new fast app switching makes the process of switching between a handful of apps feel like an all-new experience compared to older iPhones running OS 3. The Glass Back Both aesthetically and tactilely, the iPhone 4’s glass back is very pleasing. It has a 2001-monolith-like symmetry. But as a heavy iPhone user since day one, I’m finding it slightly disconcerting. I’ve always carried my iPhone the same way: front right pants pocket, with the glass toward my body, so that if my leg hits something or something hits my leg, the back of the iPhone would take the impact, not the glass. Now it’s glass on both sides, and what keeps happening is that I reach into my pocket to take it out, my fingers feel the smooth glass facing out, and I think, “Shit, I pocketed my iPhone wrong last time.” I’ll get used to it shortly, I suppose, but there’s really no way to distinguish the front from the back by touch other than to find the Home button or speaker. And, for obvious reasons, the glass back raises concerns about the iPhone 4’s droppability. With previous iPhones, it was liking dropping a piece of buttered toast — there was a lucky and unlucky side on which it could land. With the iPhone 4, it’s like dropping a piece of toast that’s been buttered on both sides. FaceTime I don’t really talk on the phone that much, but I’ve had fun trying out FaceTime with a few iPhone 4-enabled friends. It truly is delightfully easy to initiate, whether by starting with a voice call or not. The video quality is far smoother than anything I’ve ever gotten using Skype or over AIM with iChat — better resolution, far fewer compression artifacts, and almost no pauses or lag. It’s early in the game, but so far FaceTime seems best-of-breed technically. Audio quality over FaceTime is excellent. This is particularly noticeable with calls that start using voice. The difference is so stark that it makes me wish FaceTime could kick in for audio-only calls between FaceTime-capable phones. AT&T should be ashamed. Portrait orientation looks perfectly natural for FaceTime, for the obvious reason that it frames the face like — duh — a portrait. When you initiate a FaceTime call directly — by clicking the “FaceTime” button on a contact — you get an iChat-sounding “ringer” sound while waiting for the recipient to accept the call. If the recipient is not available for FaceTime (e.g. if their device is not currently connected to Wi-Fi), they will get a “missed FaceTime” notification pretty much just like what you get when you miss a phone call. This includes a notification alert on the lock screen, and an increase to the number in the Phone app’s red badge. Voicemail would be great for these missed FaceTime-only calls, but it’s not there. (“Facemail”?) When you switch to the home screen or another app during a FaceTime call, the video pauses, but the audio continues. Once you switch a call to FaceTime, you can’t switch back to voice-only, but switching to another app while the call continues effectively turns FaceTime into voice-only. That FaceTime goes through the Phone app, rather than a dedicated FaceTime app, makes me wonder what Apple will do if I’m right that this year’s upcoming new iPod Touches will be FaceTime-capable. My guess is that it’ll be sort of like with the iPhone’s “iPod” app, which on the iPod Touch is split into separate Music and Video apps: on the iPhone, FaceTime is subsumed by the Phone app, but on the iPod Touch, it could be its own standalone app. It’s no surprise that FaceTime, not the Retina Display, is apparently going to be the centerpiece of Apple’s TV ads for the iPhone 4. It is instantly compelling. It’s also the sort of thing that drives critics of Apple products nuts. “Look at these stupid people who think Apple invented video chat, or even mobile video chat.” Right? What they’re overlooking, and will always overlook, is the value of the “It just works” factor. Normal people aren’t just going to use FaceTime — they’re going to love it. And if it really takes off, it’ll turn FaceTime into a de facto social network. People will buy iPhone 4’s (or other future FaceTime devices) because two or more of their friends have them and they feel like they’re missing out. Mark these words: FaceTime goes down as one of the most important things Apple has ever introduced. Helvetica Neue It’s a subtle change, but Apple has changed the system font for the iPhone 4, from Helvetica to Helvetica Neue. The change is specific to the iPhone 4 hardware (or more specifically, the Retina Display), not iOS 4. On older iPhone hardware, iOS 4 still uses Helvetica as the system font. If you think it’s hard to tell Helvetica apart from Arial, this one’s going to shoot right over your head. Helvetica Neue isn’t so much a different typeface as a “reworked” version of the same face. Here’s an overview of Helvetica’s history from U&LC. (And a pronunciation thread on Typophile.) Says my friend and fellow Helvetica aficionado Mike Monteiro,1 “In comparison to Helvetica Neue, Helvetica looks ungainly. It’s 95 percent there. Neue took it the other 5 percent.” In general, where Helvetica Neue differs from regular Helvetica, its glyphs are slightly wider and rounder. The most telling difference, to my eyes, is the uppercase bold M: A good place to spot the difference, side-by-side with an older iPhone or iPod Touch, is the “AM/PM” in the status bar. On the iPhone 4, it’s clearly Helvetica Neue (with the wider M), and on an iPhone 3GS running iOS 4.0, it is regular Helvetica. Aesthetically, this change is a win. Helvetica is a great typeface; long-time DF readers know I’m a huge fan of it, and the choice to use it for the iPhone’s system font is one of my favorite decisions in Apple history. But Helvetica Neue, subtle though its differences are, is a nice improvement. It is a more Helvetica-y Helvetica. Why change only on the iPhone 4, though? I suspect it’s because Apple’s digital version of Helvetica is better hinted for on-screen rasterization than Apple’s Helvetica Neue, which makes it look slightly sturdier on the relatively crude pre-Retina Display iPhone screen. I.e., Helvetica looks better than Helvetica Neue on older iPhones, but Helvetica Neue looks better on the truly-print-caliber Retina Display. In the old days, there was print (high resolution) and screen (low resolution), and a wide resolution gap between them. The iPhone, and devices with similar pixel density, introduced a sort of middle ground — many print fonts that never looked good on screens before looked good on the iPhone. The iPhone 4, however, offers type rendering that is legitimately print quality. That Apple pays so much attention to the details as to pick a different version of Helvetica for different classes of displays is emblematic of what makes the iPhone the iPhone — software and hardware that are designed in tandem as parts of a single whole. Helvetica Neue’s Missing Italics There is, however, one problem with Helvetica Neue in iOS 4.0: it doesn’t include italics. You can see this for yourself on this web page I’ve created that specifies Helvetica and Helvetica Neue alongside each other, including spans of bold, italic, and bold italics. Here’s how that test page renders in the following browsers: Safari 5 on Mac OS X 10.6.4 iPad running iOS 3.2 iPhone 3GS running iOS 4.0 iPhone 4 running iOS 4.0 It renders correctly on the Mac and iPad, but on both iPhones, the italic and bold italic variants of Helvetica Neue are not available, and render as non-italic. I can only assume this is an oversight on Apple’s part. It affects iPhone developers who use the italic system font in their applications — in all previous versions of iOS (née iPhone OS), [UIFont italicSystemFontOfSize:] returned an italic font; in iOS 4.0 it does not. The iPhone’s OS has long included several non-italic weights of Helvetica Neue. The iPad’s OS (version 3.2) was the first to include the italics. But iOS 4 only includes the same non-italic weights of Helvetica Neue from OS 3.1 and earlier. (Yet another sign of the divergence between the iPad’s and iPhone’s software.)2 I’ve filed a radar on the issue, requesting that Apple add the italic weights of Helvetica Neue to a near-future iOS update. The iPhone should include all the same fonts as the iPad. (Those of you with Apple developer accounts who agree should file duplicate radars.) Camera I thought last year’s 3GS provided a nice improvement to the iPhone camera, with superior still photos and the addition of video. The new (primary) camera in the iPhone 4 is a bigger improvement. Still photos are of the quality of a low-end dedicated point-and-shoot camera, and the 720p video is surprisingly good. Here are a handful of stills and a video I took over the weekend — none of them post-processed in any way. The iPhone 4 adds a flash to the main camera. I suppose that’s nice, for when you absolutely can’t get a decent exposure in low light without it, but the new camera is sensitive enough that you can take pretty good photos in relatively low light without it. I’ve turned the flash on mine off, and don’t expect to turn it on more than a handful of times. Is the video quality just as good as a dedicated 720p video camera like the Flip HD? I say yes. And at the very least, it is very close. Most impressively, video shot with the iPhone 4 doesn’t seem to suffer from any sort of lag or stuttering, even while panning or walking around. Playback, needless to say, is silky smooth. More importantly, Flip-class cameras don’t offer online connectivity, and don’t offer on-device editing like the iPhone 4 does with iMovie. Flip’s not dead yet, because you can get an HD Flip for about $120. One can imagine sending a class of six-graders out armed with a few school-owned Flips; that’s not going to happen with $499 iPhones. But my guess is that we’re going to see a similar camera in this year’s new $299 iPod Touch, which will be next year’s $199 iPod Touch. I think Apple is going to be able to get the price on such an iPod Touch below $200 before Cisco is going to create iMovie-like editing software for the Flip. It’s hard to overstate just how many wildly variant devices the iPhone and iPod Touch compete with. Phones and handheld audio/video players, yes, obviously. But now also cameras and handheld game consoles. It’s an old adage that the best camera is the one you have with you. It’s getting to the point now where the iPhone camera isn’t just good because it’s with you, but good because it’s actually pretty good. The Reception and Proximity Sensor Problems There are two widely-reported problems with the iPhone 4. First is the issue surrounding 3G reception and hand placement on the device. There’s no doubt that this is an issue for many — but I think a minority — of iPhone 4 owners. I haven’t been able to duplicate the problem on mine, though. Sometimes, but rarely, I can make it drop a single bar, but I can’t duplicate the drop to “No Signal” that many others can. Best as I can tell, based on the reports I’ve read, including many emails from DF readers, the problem is multivariate. It definitely seems related to signal coverage (or cell tower proximity, or something like that). I’ve received many emails (and a few tweets) from DF readers who can reproduce the problem at will in one location, but can’t in another. Not much help, though, when the problematic location is, say, your home or workplace. But I’ve also heard from a few readers with fellow iPhone 4-owning friends and colleagues, who’ve been able to test several units side-by-side. Some iPhone 4 units seem more susceptible to the problem than others — which makes me question whether this is something a software update can address. I think it’s like a combination of software and manufacturing. The other issue regards the proximity sensor — the sensor which turns off the touchscreen when you hold the phone to your head for a call. The proximity sensor on the iPhone 4 seems far more sensitive than on previous iPhones, such that minor movements away from your head during a call re-enable the touchscreen, which then leads to your cheek inadvertently engaging the Mute or End Call buttons. Here’s a description of the problem at EverythingiCafe; and here’s a 24-page (!) thread about it on Apple’s discussion forum. This problem, I have seen myself. My cheek invoked the End Call button during a call yesterday, something that I don’t recall ever having happened in the three years I’ve been using iPhones. Garrett Murray is afflicted by both these problems. It’ll be interesting to see whether Apple is able to address either or both of these problems via a software update. And, if so, when? The iPad was released in April and still hasn’t seen a single software update. (Perhaps the iPad is an exception, and Apple has decided against a 3.2.1 iPad update to devote all of its iPad OS development time on iOS 4.1.) The proximity sensor issue strikes me as more likely to be fixable via software. As for the reception issues, I can see this playing out three ways: Best case: It’s fixable, or at least improvable, via software changes alone. OK case: It’s a manufacturing issue that Apple can address going forward, with future production runs. Apple has sold a lot of iPhone 4’s already, but most of the iPhone 4’s they’ll eventually sell haven’t yet been made. They might take a small hit on exchanges from existing iPhone 4 users who are seeing the problem. Worst case: It’s inherent to the design of the iPhone 4’s novel external antennas, and all iPhone 4 units will be susceptible to the problem. As I stated before, some people seeing the problem can’t reproduce it (or at least see lower amounts of signal loss) when they try using a different iPhone 4 unit in the same location. That suggests it’s fixable, but perhaps only in manufacturing, not in software for existing units. And even in the worst case scenario, it only seems to be a problem when holding the phone in certain ways while in areas of marginal signal strength. That’s not to pass the blame from Apple to AT&T, but only to say it’s far from catastrophic. It may wind up being more of a publicity problem than a technical one. At the very least it isn’t going to help the iPhone’s perception as a great device but weak phone. Monteiro uses Helvetica Neue in this excellent series of paintings.�↩ Also goes to show that iOS developers should be specifying the font for UI elements via API calls for the “system font”, rather than hard-coding for “Helvetica”. But according to the Apple’s iOS 4.0 release notes, “References to the Helvetica font in nib files will be decoded as the system font on these newer devices.” That said, I’ve noticed a few spots in iOS 4 where you still see Helvetica rather than Helvetica Neue; e.g. the “All Contacts” list in the Contacts and Phone apps, and the Phone app’s Recent calls list. (The Phone app’s Favorites list, however, uses Helvetica Neue.)�↩

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