iPhones unlocked or on shelves? Both bad for Apple

Stan Beer
Sunday, 27 January 2008 06:45

Business IT - Technology

The most likely answer is that sales were slower than expected. Apple through Jobs had told the world that the company would capture 1% of the 1 billion unit (now 1.25 billion) a year mobile phones market by the end of 2008. Even with all the hype and its loyal fan base, it obviously became clear to Apple very quickly that it would never achieve this with a $599 locked iPhone.

However, the price cut may not be enough to keep the iPhone on track to meet Apple's ambitious sales target. According to a report in the Digitimes, Apple's iPhone component suppliers in Taiwan have indicated that Apple has cut its projected shipments for the quarter ending March 28 from 2 million to between 1 million and 1.2 million. 

Assuming that report is true - and there is no reason to believe otherwise  - then Apple needs something more than what it is has already given the market to get the iPhone moving. Analysts suggest that a 3G version earmarked for release in the June quarter, the arrival of more third party software through the soon to be released iPhone SDK and the release of iPhone to new markets should do the trick.

That may be the case. However, Apple still has to contend with the problem that many mobile phone consumers do not like to be forced into a relationship with a particular carrier, regardless of who the handset vendor is.

The old folkloric adage that people hate their phone company stems from the days when in each country around the world there was just one generally government-owned phone monopoly. In the US, Apple has gone exclusively with AT&T, the offspring of that country's monopoly. In the UK, it is O2, formerly BT and now owned by former Spanish monopoly Telefónica. In Germany it is T-mobile owned by Deutsche Telekom. In France, it is Orange, owned by France Telecom.

All the afore-mentioned phone companies are leaders in their respective markets, with the exception perhaps of O2, which has a battle on its hands with Vodafone in the UK. However, in the mobile space especially consumers want choice. They want the ability to swap providers if they are not happy with the service they get. Apple, by locking itself to exclusive mobile carriers in each region iPhone is sold risks tarring its product with the same brush of that carrier in the minds of consumers.

Being the new kid on the block in the mobile phones space, Apple may feel that it has little choice but to continue with its exclusive carrier business model. However, so long as it does, we may continue to see both a proliferation of unprofitable unlocked iPhones and/or a slowdown in sales. For Apple, both outcomes would be equally disastrous.