10/7/2009 1:31:00 PM
Operators now face iPhone balancing act
I hate to disappoint anyone expecting broader distribution of the iPhone to lead to a massive price war; it simply cannot fall too sharply for operators to still make money on it. Networks will try to demonstrate to Apple that they should be chosen for exclusivity on the manufacturer’s next new phone in 2010 by bringing the price as low as they can.
We can expect Vodafone and Orange to now mimic the O2 handset strategy of putting all their chips on iPhone and BlackBerry at the top-end to acquire and retain high spending customers. They will be wary of having broad portfolios; keen to keep a tight control of their inventory, but mostly in an attempt to sell as many iPhones as possible to curry favour with Apple.
It begs the question of where does this leave the big manufacturers who have dominated the mobile markets over the last 10 years with largely voice and text-centric products?
Those manufacturers appear obsessed with fighting Apple with ludicrously feature-rich devices – things like four-inch widescreens and 12-megapixel cameras – but only because they haven’t invested in bringing out a strong internet-centric, software driven product to match Apple. Frankly, none of these so called ‘iPhone killers’ have excited enough consumers to make a difference.
The other effect of every operator having the iPhone is that it will become a commodity item, limiting its ability to stand out. It will mean balancing the higher subsidies and looking at the mass market for strong differentiation in brands, experiences and products.
To date, neither consumers nor operators have had a great choice in the mass market handset space. It has been dominated by unattractive phones that have limited functions on the services and features that customers care about. With the exception of the INQ handsets, big applications such as Facebook have been simple browser links on the idle screen in mass market handsets, which fare poorly in comparison to full-featured Facebook apps on iPhone, INQ and BlackBerry.
Most staggering has been the dearth of 3G devices in the mass market. Both the Samsung Tocco Lite and LG Cookie have been among the best selling phones this year, and neither are 3G. They’ve hit a sweet spot, but are largely voice and text phones.
That won’t cut it in the near future, as more consumers refuse to accept slow data speeds or poor internet functionality, and operators demand handsets that make the most of their 3G networks.
The operator is not a dumb pipe. Look at how the BBC and BT have revitalised digital content for the PC – it shows where the opportunities lie for operators.
The market is going through that big upheaval that happens every decade, and we see a fantastic opportunity for new internet driven brands and products in the next few years.