The iPhone Will Save Nothing

This article suggests that the iPhone might “get US buyers savvy to the idea of buying full priced unlocked phones” instead of getting subsidized phones. This could “Save the Handset Business” (from the carriers).

It’s an interesting subject and I don’t believe that any handset manufacturer has been waiting for Apple to think about selling unlocked phones for cheap (btw, selling for cheap is pretty much the business model of any Chinese company). In fact, Handset manufacturers already sell unlocked phones – for as cheap as they can. And yes, people aren’t buying these phones in mass and I’ll tell you why:

1/The temptation to get a free/discounted phone from a carrier is very strong – even if the phone is cheap, it can’t be cheaper than “free”. It’s hard to think that US buyers will –in mass- like the idea of buying a “full priced-anything” without a very compelling reason.

2/ Unlocked phones are not properly configured to work will all the wireless networks. It’s not fun to configure one “by hand” and customers don’t want to bother with these kind of problems – at all. A phone coming from a carrier is pre-configured and works right out of the box.

I think that problem #2 is a real problem. It would be very easy for operators to obstruct the success of any device, if they wanted to. Yes, I know, there are dreams of “anything-wide” WiFi that would free us all but the reality is: I can’t find a WiFi spot when I *really* need one.

Low prices phone are definitely not the key to break free from wireless carriers. The proof: wireless carriers are giving away tons of cheap phones. We’re back to problem #1. Also, no handset manufacturer wants to go into a low-margin business. For that matter I don’t consider the iPod shuffle to be a “cheap” MP3 player for its performance. It is rather a high margin business given that its technology dates from right after the Bronze Age…almost.

In the end, the (hypothetic) iPhone might succeed, but if it does, it will be because of the “Apple factor”: their ability to leverage brand, usability and platform. It’s a multi-faceted initiative that no-one has been able to replicate in the MP3 world so far.

There's a reason why handset manufacturers did not rejoice about the iPhone rumor: if it works, it will only work for Apple. The rest of the industry will still have the carriers breathing on their neck, but they will also have a new formidable competitor. I guess that life could be better…