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May 31, 2008



Hmm. I use both thumbs to type. At about 50 words a minute.

Dave Birch

"So where you can find the typical high-end Nokia or SonyEricsson or Samsung sold also in third party stores like Carphone Warehouse in Europe - often a fifth of even a quarter of all phones are sold through these independent dealers - the iPhone must be sold through the operator stores only"

I was in Carphone Warehouse yesterday and they were selling iPhones.

Paul Jardine

I'm pretty convinced it will have GPS and I'm pretty convinced that location-based services will start to come into their own in the next few years.
I would expect a better camera and more music capabilities, this will require Apple to get some agreements with the networks and they might be better creating a global MVNO, rather than trying to go the exclusivity route (how much did O2 make out of the iPhone??? a lot of them were unlocked within hours of purchase)
The only way MMS will ever be successful is if they make it the same, or very similar, cost to SMS. With 3G, I could just as easily send an email, especially if the operator or Apple create an email address on activation (see MVNO)
One thing is for sure, it will be in high demand and it will increase the uptake of Apple's online services (iTunes etc) substantially. What will the operators get out of it? Well, that is up to Apple...and that is the key point and why this market is now changing forever!

david cushman

Thing is Tomi, you know that apple will build it from the user perspective first. I'm sold on it with 3G. Next week we'll know for sure.

Tomi T Ahonen

Hi Wills, Dave, Paul and David

Thank you for the comments.

Wills - good point, and yes, you can type fast with thumbs. But those "who know" (not me, I'm not going back to non-3G phones, ha-ha I'm already into 3.5G, so I'm waiting for the next iPhone, this first flawed iPhone is not for me) claim that it is faster to un-learn the thumbing, and revert to "pointing" with the index fingers. Why don't you try it? Let us know if it got faster still? But like I said, I'm not a user, so I cannot advise you from personal experience..

Dave - good point, but even then, Carphone Warehouse can only sell you an iPhone on the O2 network..

Paul - many good points, let me deal with them each separately.

You expect GPS, better camera, better music.. I am not so sure about GPS, but agree about camera, and yes, probably also better for music.

You said you expect Location-Based Services to take off with GPS on the iPhone. I am 95% certain that they will not. Here is why - we don't have a regular daily need for location info. On a regular day, most of us, do our regular routine. We go to work (or school) in the morning - same route, same vehicle, same destination; no reason to "become lost" and need guidance. I am not talking about some exotic workers like a global telecoms consultant like me, who is almost every time going to a different location in a different country, ha-ha; I mean 95% of all people, whose daily work/school routine is the same 21 out of 22 weekdays every month.

At work or school, we are not lost and have no need for GPS-assisted guidance. The office is the same building, our work cubicle is the same today as yesterday, the lunch is served in the cafeteria which is the same as last week, etc.

Same for the trip coming home. Here we have far more variety, we might go somewhere shopping on our way home (groceries, etc); or visit with a friend, go to a bar or restaurant after work etc. But again here we tend to go to our nearby grocery store or the nearest post office or the nearest branch of our bank etc, the familiar pub or bar or restaurant, etc.

Even if we go to a restaurant with a friend which is somewhere else, where we have never gone before - we then rely on our friend to get us there. We tend not to find ourselves "suddenly lost" and needing guidance.

Now - this is different for people driving cars, because of all the matters that relate to cars, one-way streets, traffic congestion, parking, etc - so yes, for car drivers a TomTom type of LBS guidance system is fine; but that already exists and having that in our phone will not radically expand the experience beyond the phone.

We do have strong needs for guidance - when we are tourists. When we arrive at a strange town. But except for travelling businesspeople, this is very rare, happens a couple of times per year or less for the average person. Not anywhere near enough to create the mass market adoption of location-based services (LBS).

Paul, I've written about LBS for a whole chapter in my first book in 2002. I've debated and argued the various business concepts around LBS for the past nine years since we started to talk of them with Nokia when I was Nokia's global head of consulting. Every single significant LBS idea has already been trialled for the mass market and almost every one of them a dismal failure in the market place.

That Apple would do it now with the iPhone will not turn that dead horse into an alive one. There are several very valid LBS service opportunities, but they are niche opportunities for business/enterprise uses (vehicle management, employee tracking, parcel tracking, hunting dog tracking, tree tracking of forests, etc) but not for us humans in our normal consumer behaviour. The reason - because the need is so rare, that we simply cannot learn to do it enough. We may try it once or twice, but we then forget, because the need is simply not there.

Now, I do give them 5% chance of success. Not because of Apple, but because of Nokia's strong push into GPS - Nokia will sell more GPS units in their top-end phones this year, than all GPS units sold before by all manufacturers combined. Nokia will outsell GPS phone to all Apple iPhones (older ones definitely without GPS plus perhaps the new 3G unit with GPS if you are right) this year by at least 4 to 1. So if someone will drive the LBS success based around GPS, that will be Nokia much more than Apple.

But like I've said, I've been around this block for so long, seen so many brilliant ideas die unceremoniously during this decade, that I urge all who work in this space to be very wary of LBS.

MVNO - Here Paul, Apple has its hands tied. It could have launched an MVNO last year, before signing the iPhone deals, but now that they've made their deals with the biggest operators/carriers in the biggest markets, they have zero chance of launching MVNO. It was a strategy option that Apple had before these deals, but now it is impossible.

MMS - you say that the only way MMS will be successful is if its pricing is the same or very similar to SMS; that is expressly not true; numerous end-user surveys have proven that customers are fully willing to pay a significant premium for picture messging over plain text messaging. In many markets picture messaging is taking off very well. I do not mean that the prices of MMS are yet as user-friendly as they need to be, but they don't need to be the same price as SMS. MMS is growing at far greater rates than SMS in most advanced markets. No, that is not the reason.

And sending pictures as email - ha-ha, you are thinking like a techie-oriented Westerner, and one who owns a PC... Most people do not own PCs, not even most people in the Industrialized world. Only Americans and a few other top leading markets have more than half of the population with a PC. For the rest - there is no valid option to deliver pictures as email. My sister is a medical doctor in Finland. She uses her mobile phone for everything, but does not have a PC and cannot be reached via the traditional internet.

Yes, email can be a viable option for many, but even in more than half of the industrialized world, less than half of the population can be reached that way. In the developing world mobile phones outnumber PCs by anything from 10 to 1, to 20 to 1. If you want to send a picture, MMS is the only viable option..

About email on activation. This is not in the operator's interest (and MVNO is impossible for Apple now). Yes, if the operator has sold a Blackberry style premium email system for the customer, but beyond that, the operator knows the customer by the telephone number - delivers SMS (at 90% profit margins) via mobile phone number (and thus doesn't want to make it too easy to migrate that traffic away) and delivers MMS via mobile phone number. If the operator were to standardize over one identity, you bet it will be the phone number, not an email address.. You have to understand how deeply the operators are dependent on SMS - it delivers between 40% and 60% of Western operator profits. TOTAL profits... There is no way operators voluntarily abandon this just to please iPhone users. Why do you think Blackberry email costs so much....

Then you say "one thing is for sure, it will be in high demand" and increase iTunes business. Increase iTunes, yes I'll grant you that. But "for sure it will be in high demand" is NOT that certain. The first iPhone was iconic, cool and expensive. It went very well into the market in America, for the first half, but this second half even at significantly lower prices, it has not sold half as well..

Why is that? I think part of it, is that there is a segment of the market who really REALLY want the iPhone. They now have it. Some will upgrade to the 3G iPhone yes, BUT - they won't get their "free" upgrade to the new iPhone until two years from the first purchase, so the new 3G iPhone users will have a natural need for a replacement only in 2009... Not good...

As to the others who didn't buy the original iPhone last year (in America) who might now consider a 3G variant? Then they don't compare it to the Nokia N93 and N95 of last year, they compare now with the N82 and N96 this year - phones that are already 3.5G and have 5 megapixel cameras with Carl Zeiss optics, real Xenon flashes (bet you Apple won't have that) and GPS and a dozen other features that the Apple 3G iPhone won't have.

I then will need to be very clear - the Nokia phones are ugly. The N82 that I have is extremely unsexy. But its a powerhouse of a phone, far smaller than the iPhone and lighter, yet packed with twice the technology (of the current iPhone). So yes, some will want the new iPhone just because it is the cool new Apple.

But Paul - I would argue, that the majority of the Apple fanatics who have to have the greatest Apple iPhone no matter what the cost (in America) got one last year. This year, some of them will be satisfied to hold onto last year's model. Others will want a new one, but cannot justify the great cost of upgrading now, and will wait until their contract expires next year. The REPLACEMENT market for the iPhone this year in America is FAR less than the original market was last year.

Then the rest of the world? They have not fallen in love with the iPhone. In all markets where it has officially been launched, it has underperformed. Part of that was lack of 3G. But now, when Apple releases a 3G phone in the summer of 2008 - the rest of the world is again half a generation ahead, where all other major phones by the big five, in similar prices of 500 dollars or more in cost - will tend to be 3.5G phones.

Apple will not have this market to itself like it had with the iPod when only puny Creative challenged it, and Sony decided not to contest the MP3 player market as it pushed its minidisk. The iPhone is facing tough competition from five of the strongest personal electronics players (or four, Motorola is not really up to its full potential). This is not going to be easy.

With all that, the 3G iPhone will be a dramatic improvement over the original, and can very well be the must-have phone for us geeks this year. Lets see how it goes. But your statement "for sure it will be in high demand" is a bit too certain. I'd say, quite possible that in America it will be in high demand. The rest of the world, it is a possibility, but by no means even strongly likely..

But we will see on the 9th, and I'll return to this blog posting then, so we'll see how it plays out. Like I've said, I have not been in any way involved so I honestly don't know what they are doing - but I do know what many of the operators have been saying, and if Apple understands their customer is the operator - they should heed that advice very closely..

David - yeah, it should be a good one. I might have to buy it myself ha-ha.. We'll see in a few days..

Thank you all for writing

Tomi Ahonen :-)


Hi Tomi,

a great post again; and agreed that the operator wish list looks about like that.

But I also agree with David's comment, which you have passed over lightly:
"apple will build it from the user perspective first"
This is what Apple's strength is all about: to create superior value for consumers. Yes, operators are Apple's only direct customers outside US and UK, but I'm pretty sure that Apple won't sell its soul and blindly prioritize operator-wished features highest.

For instance, 3G video calls are an utter failure in the mass-market (like all previous attempts at fixed and mobile video), and additionally the standardized video quality is just too poor.
If Apple does video, then more likely in their own way, maybe a mobile version of iChat-like video. Well, they have started in fact with YouTube.

Similarly, I would expect MMS when Apple understands a mass-market consumer need for it. This may be now already, or maybe later as software upgrade, once Apple gets massive feedback from consumers outside the US.

Since operators don't get significant money out of 3G video calls or MMS, Apple would in the end of the day get away with not implementing these.
iPhone features must of course support operators' voice & SMS business. Hence, expect more features alike to threaded SMS user interface, easy multi-party calling, and visual voicemail. And that's why Apple cannot allow 3rd party VoIP or IM over cellular.

Conversely, I would say a better camera, possibly with video recording and improvements for low-light conditions, is quite likely, since Apple should have learned by now that cameras are among the most used features in mobiles.

LBS is a tough topic. I have the same pessimistic view as you, Tomi, from being in this industry too long.
However, Google recently claimed that the iPhone Maps application has generated traffic for Google Maps big time. And I would expect that Apple has still something up their sleeves to get more out of their partnerships for cellular & Wi-Fi based positioning. Maybe just enabling "long-tail" 3rd party LBS, but I wouldn't exclude a surprise innovation for a mass-market consumer case. Yes, most people know mostly where they are, but it can also be just pure fun to share location with friends (yes, I am aware of the privacy etc. problems with that...)

Personally I am most curious whether Apple can enhance one-handed operation (in particular for calling, texting, and browsing) significantly. I am sure they have long been aware of the need (hey, the iPod can be operated one-handedly very well) and are working heavily on solutions. But what they can do now, for next week's new iPhone?


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