Thoughts on the 3G iPhone announcement

Apple's 3G iPhone announcement today was probably the minimum necessary to please the community. The real news was the things that weren't announced:

--No tablet device (again).
--No major changes to the form factor of the iPhone.
--No other major product announcements.

Apple has made its Macworld and WWDC keynotes into a specialized form of performance art, complete with cleverly-dropped pre-announcement hints, and often some sort of surprise at the end of the speech. Apple's own past successes have now raised the anticipation for the keynotes so high that it's a disappointment if some sort of major surprise doesn't happen.

Check out Engadget's live blog of the speech if you want to see the result (link). It's littered with whining like this:

"We love what you've done here, but we're yawning."
"Man, these demos are crazy boring."
"Man, please let this string of demos end!"
"Another developer demo. Ugh."
"Wow, we heard Apple's stock is down almost $5 since this keynote started. Maybe they should just demo their top three and keep going."
"Someone, wake us when Steve's back."

I didn't actually attend the talk, so I don't know how boring all those demos were. But I think it's fair to remind people that the WWDC is a developer conference. It is traditional to do a fairly large number of app demos at a developer conference, because that's a low-cost way of rewarding your developers.

Apple discussed some other interesting things in the keynote. Here's what stood out to me, with some comments:

The "lower" pricing. This was completely necessary. AT&T claimed in an interview with the New York Times that $199 is a magic price point for smartphones (link). They're right, it is. But as the Times pointed out in another article, the price cut isn't actually as meaningful as it sounds -- AT&T is making up for it by raising the price of the iPhone data plan by $10 a month, with a two year contract requirement that will apparently be rigorously enforced. So to get that $200 discount on the purchase price of the iPhone, you pay an extra $240 over two years.

You're actually losing money in the long run, but now the iPhone is priced in the same way as every other phone on the market, making it more comfortable to buy. That figures to help iPhone sales -- especially in Europe, where the unusual price structure for iPhone caused a lot of complaints.

If they really do enforce the contract, that will probably put an end to the widespread practice of buying iPhones in the US, unlocking them, and shipping them to places like China. But the iPhone is getting much stronger international distribution, with up to 70 countries in the works according to Apple. We have no way of knowing how well the contracts will be enforced around the world. Chances are there will be gray market leakage from somewhere.

Notification vs. background processing. One of the critiques of the iPhone is that it doesn't allow third party applications to run in the background, without being visible to the user. Apple said this is to prevent background applications from hurting performance, the way they do on Windows Mobile. But that's a very disingenuous explanation -- Windows Mobile manages memory very strangely, often leaving things in memory whether they run in the background or not. You could create a very efficient architecture that still allows background processing.

Apple says it has solved the background problem by setting up a notification server that can wake up applications on your iPhone and pass incoming messages to them. I don't know how that looks on screen -- since Apple won't run apps in the background, does that mean they'll suddenly launch on screen and start operating on their own? Creepy. And although notification does some of the things you'd want from the background, it doesn't do them all. For example, some developers want to write background applications that would perform tasks automatically, whether they are pinged by an outside server or not.

All in all, it's interesting that Apple's establishing a messaging server for iPhones. Combine that with Apple's new MobileMe service, and Apple is gradually creating a lot of back end infrastructure for the iPhone. In the long run, Apple could build many innovative new services around that infrastructure.

I wonder if they'll charge developers a fee for passing messages through the Apple infrastructure.

When do the developer limits come off? Apple bragged in the keynote that there were 25,000 applicants to the iPhone developer program, but the company admitted only 4,000. In other words, they seriously pissed off 21,000 developers. Not the sort of thing I would brag about, but this is Apple and they can sometimes operate on a different set of rules.

The question is, when (if ever) do the other 21,000 developers get into the program? As far as I know, Apple was silent on that issue. If they were about to open up the program, you'd think they would have announced that.

The application demos skew toward consumers. Four of the applications demonstrated during the keynote were games, one was a consumer news applications, one was a social network product (Loopt), one was consumer shopping (eBay), one was consumer blogging (TypePad), one was sports information, and two were vertical medical. Although Apple talked about enterprise at the start of the keynote, the apps they chose to demo tell you everything you need to know about who Apple sees as the iPhone's buyers.

What happens next? The iPhone is only a year old, and it generally takes 18 months to design a major new device. So the 3G iPhone we saw today was probably already in early development when the original iPhone was launched. We could see more radical hardware change this fall, but I think it's more likely that would wait for Macworld 2009.

What happens to iPod pricing? I was surprised that the price of the iPod Touch didn't change today. It now looks more expensive than the iPhone, and it lacks GPS. I would not be shocked if the Touch ends up getting a price action this fall.

As for when we'll see the long-rumored larger-screen iPod/iPhone, your guess is as good as mine. Fall is the best time for introducing new products, because it's right before the holiday/new year buying season. If the product exists, that would be the time to announce it.


Anonymous said...

I was very surprised and disappointed that Apple did not include some of the following important improvements to their new iPhone 3G that Palm has had since day one:

- Copy and Paste!!!
- Global Search (at least they added Contacts Search)
- Notes Synching (called Memos on a Palm device)

I would also like to see their Email application support being rotated (like Safari) so the keyboard is in landscape, which makes its keys bigger and easier to type on for people with large fingers.

I am glad Apple added GPS (something Palm should have done years ago, along with Wi-Fi in their Treos!!! and a 320x480 TX sized phone), a Scientific Calculator, and fixed that recessed headphone jack.

I was also disappointed to see how slow the iPhone's 3G internet access was. Again, Wi-Fi's speed is faster. (A few years ago someone asked me at an interview why Wi-Fi is even needed in a cell phone when you have data access over your cell phone's network... A: it's faster and Wi-Fi access is usually FREE, though you often time have to go looking for it... it is amazing how Wi-Fi is still faster, even after all these years!)

Nick said...

To be honest, these constant price drops cause me to hold off buying an iPhone. How do I know they aren't going to drop it again?

There are a few other things I need them to do before I buy an iPhone
- wireless itunes sync (I can't believe this doesn't exist)
- dedicated music buttons on the device (so I can reach into my bag and skip a track if I want to)

Anonymous said...

so will the new model still be sold at apple stores for later activation? if so what price? i would imagine it has to be more since how would they enforce the contract? what about buying the phone and staying on a current contract?

i really thought the no subsidy thing was going in the right direction. especially a high end device i really do not want tied to a contract. i like buying a phone and a service as two separate things.

i am surprised by your mention that the no subsidy thing was a particular problem in europe. in europe lots of people buy full price unsubsidized phone every day of all makes, models, sizes and prices. in USA on the other hand the practice is totally unheard of with the single exception of the iPhone.

Anonymous said...

I'm surprised no one is talking more about the Mobile ME service. It seems cool - until I realized that to use it, I'd have to get a new email address! Bah.

This means Apple is taking on yahoo and gmail in the web-based-email world. Annoying.

Michael Mace said...

Good comments, folks. Thanks!

>>so will the new model still be sold at apple stores for later activation?

I think the answer is no.

>>what about buying the phone and staying on a current contract?

I don't know, but I bet you have to do a new contract at the new rate.

>>i am surprised by your mention that the no subsidy thing was a particular problem in europe. in europe lots of people buy full price unsubsidized phone every day of all makes, models, sizes and prices.

Good point. One of these days I'm going to learn to stop talking about Europe as if it's one place. Sorry about that.

The subsidies situation varies enormously in different European countries, and from user to user. What I was thinking of was the bitter iPhone pricing complaints I've seen from people in some European countries who said they can get a high-end device like the Nokia N95 for about 99 Euros after subsidy. Those folks should be happier with the iPhone's new pricing.

By the way, Andrew over at the Register says iPhone sales in the UK are already improving, based on discounts to the purchase price of the current iPhone (link). I think that implies the move to subsidized pricing will help.

>>I'm surprised no one is talking more about the Mobile ME service. It seems cool - until I realized that to use it, I'd have to get a new email address! Bah.

The service itself doesn't seem all that cool to me, mostly because there are a lot of cloud sync companies out there already. But Apple's going to integrate it very well with its devices, and I'm sure we're going to see a lot more services added over time.

So Apple is raising the stakes for competitors yet again -- now to match them you'll need your own online services suite. Nokia's already doing that, of course. It'll be really interesting to see how well the two suites work over time, and how well they'll integrate with the phones.

By the way, am I the only person who gets bad flashbacks of Windows Me from the name Mobile Me?

Anonymous said...

By the way, am I the only person who gets bad flashbacks of Windows Me from the name Mobile Me?

Evidently not. FakeSteve wrote about this yesterday:

Anonymous said...

As an approved Apple iPhone developer, the announcement and followup this week are just frustrating. The app store will be released in a month. We've been told how we'll add programs, but not anything about the approval process to be in the store, trial versions, sales report, fullfillment, upgrades, discounts, refunds - all of the things that the sales portal should provide. Maybe it's just a model more like game console games and music - someone buys a game or a song, someone else gets paid, and that's the entire relationship - but I don't think that's the best way to sell software.

Anonymous said...

Without background processing, how will Loopt and other iPhone tracking services work? The iPhone must periodically submit its current location.

Perhaps the notification server will keep track of this info and apps will have to query the Apple server to get this info...yet another piece Apple will control!

shoobe01 said...

I literally cannot believe it still does not support MMS.

Tom said...

Guys ....

I was there for the WWDC.

Straight from numerous Apple developers and project managers ... they are trying to get the core systems perfect before branching out. They get fully that things are missing like copy & paste, all apps rotating etc. Hell, interopt messaging is not possible yet - and I'm an enterprise developer. This is key to many apps talking.

They are working really hard to get it all working --- expect more to come; promise.

NOTE that they do have an error / feature request page that you can send these types of requests. It may be open to developers only, but still, post your wants to a blog and a developer is bound to send it in.

I have to say, 2.0 is slick, even with all its shortcomings. The graphics engine and performance focus are amazing. Seriously, little was on the web and mostly on the native development.

Why? Because the user comes first with Apple and they understand we're on-demand people. Waiting sucks, and even 3G is slow with bigger pages. For most apps, you still need native support. Sorry. Just the reality of it all.

Note that they did demo some slick Web 2.0 / WebKit stuff ... so basically, in due time, you'll have the best of both worlds I think. I suspect the PC will come first though.

Give the iPhone some time and it will be hands down be the best PDA out there ... and I've been in this game for way too many years doing Windows Mobile stuff. This platform is just slick. Period.

It's OK to be afraid folks. Change is scary. However, it's just amazing it took this long for a company of influence to change the market as we've just seen it.

It will spark life back into others and drudge up some hot competition. Things have only begun.

Go mobile!

Anonymous said...

Regarding MMS comment: For Apple, the key to the iPhone is the Internet Communicator part, not the phone part, in the sense that they do not care about cellular services like SMS or MMS. It's obvious that dropping SMS was a non-starter, since it's a huge revenue source for the carriers. I think Apple will only implement MMS if they can get other concessions out of the carriers, otherwise, it's strictly unlimited data for the Internet, with email and attachments.

So why'd they call it iPhone? Because the UMPC is such a incredible failure. Only a phone would easily be sold in the market today.


Ed Bomke said...

Hi Michael...I really love your post. Thanks for sharing.