What’s wrong with cell phones, and why the iPhone might change the game…

Okay, my previous post detailed why I think most criticisms of the iPhone are off target. But what features the iPhone does or doesn’t have are for the most part irrelevent. I think that the iPhone is going to change the cell phone business at its most fundamental levels, and here is why.

The universe of cell phones is oddly split between two industries: the industry which manufactures phones, and the industry that provides the network.

The cell phone manufacturers would love to sell you phones. To do this, they want to add nifty features that people like: cameras, higher resolution screens, Wifi, GPS and the like. They’d love to sell you a new one every year. They’d love to sell you one every six months if they could.

Then there are the service providers. They sell a service to you. They don’t care whether you get new stuff on your phone unless it is somehow tied to a service that they can charge you for. If your phone had wifi, they have a decreased ability to sell you a $60 month data plan. So… your phone probably doesn’t have it. They don’t want you to upload music to your phone (say, by simply dragging music onto it like even the cheapest mp3 player), they want you to buy it from their online music store, likely paying again for a song that you already have. They want to ding you $2 for a ringtone or wallpaper, when making such things should be trivial.

Enter the iPhone. Half a million units sold in the first weekend. Half a million phones out there this week with wifi. With a fairly affordable unlimited data plan. With the ability to sync the music you already bought to your phone. No AT&T store icons. Merely the ability to use the web from your phone in the way you use the web from pretty much every other device.

Apple got AT&T to bite the poisoned apple, and now everyone is going to have to take a bite. Nokia and Motorola are going to ask for similar deals with network owners. Consumers from other networks are going to demand unlimited data and Wifi.

A caveat: the iPhone does come with the same 2 year contract that AT&T screws you with. I wonder how long such a thing will last. Ultimately Apple will have a new upgrade to their phone, and probably in a lot less than 2 years. All 500,000 of their customers will feel the urge to upgrade, but won’t feel that paying AT&T for the privilege of buying a new phone from Apple is reasonable.

It’ll be an interesting new game.

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2 thoughts on “What’s wrong with cell phones, and why the iPhone might change the game…”

  1. A caveat: the iPhone does come with the same 2 year contract that AT&T screws you with.

    <a HREF=”http://digg.com/apple/Want_Prepaid_iPhone_Here_s_How” rel=”nofollow”>There’s a hack for that</a>, but it’s a little obfuscated.

  2. Yes, I was reading that last night. Interesting that by failing a credit check, you can avoid a long contract.

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