Let a million iPhones bloom
Gather ye rosebuds while ye may, AT&T.
As the iPhone finally launches, I can’t help but be amused by the dynamic between Apple and the other players. I’m sure Apple is happy about the iPhone hype and the brisk sales, but Apple is used to that kind of thing. AT&T, on the other hand, is used to carpet-bombing all forms of media with shrill come-ons in an effort to drag customers into its little stores where it must then convince them to submit to a credit check and sign some draconian contract. And it must compete with other big carriers doing exactly the same thing equally well. It’s a tough market with few sweeping changes in momentum.
Well that very same AT&T in that same market just got probably half a million new two-year contracts in three days. Now I don’t know what AT&T’s usual acquisition numbers are like, but I have to think there are some big smiles in the boardroom right about now.
And that’s amusing because AT&T has almost nothing to be happy about. Those smiling executives are probably already starting to convince themselves that they’re responsible in some way for this success. That sentiment is about as well founded as the power company patting itself on the back as big-screen TVs fly off the shelves. I can only imagine what value AT&T thinks it has brought to the iPhone table. I suppose “bending to Apple’s will enough to keep the iPhone from sucking” is some sort of achievement, but truth be told, the telcos would have been better off had they conspired to ignore Apple entirely.
Apple needed one thing in order to get the iPhone off the ground: a carrier. The carriers needed about eighty-billion things to even come close to producing something like the iPhone, not the least of which was the ability to clearly see how awful their existing offerings were. Apple got its carrier, and the carriers got precious little beyond that moment of clarity. Sure, short term, AT&T gets a big bump in contracts. But long term, the carriers will get to sit back and watch as Apple absorbs every remaining shred of value in the market.
When Apple’s deal with AT&T expires, assuming the iPhone brand is even half as well established as the iPod, how do you think those negotiations will go? Yes, Apple will still need a carrier, but I’ll bet Verizon and T-Mobile will be a bit more receptive this time around. Will they have spent the intervening years working on a handset that can compete with the iPhone? That’s their only chance for any sort of leverage. Poor AT&T will likely be the least prepared in this area, having been lulled into a false sense of worth by its part in the iPhone phenomenon.
And woe be unto the carriers if Apple does the right thing and turns the iPhone into a proper platform. That’d give the iPhone the potential to go beyond the iPod, into crazy Windows-like empire territory. The kind of value that the Mac developer community can add to the iPhone platform will make the carriers' heads spin. AT&T has already made the fatal mistake of allowing some transactions to go through Apple instead of its usual toll booths. The final nail in the coffin will be when the money starts to go directly to the vendors, as it does today on the web. Apple, as the platform vendor, has enough reason to push for that.
Over the decades, the telcos have proven uniquely skilled at keeping other companies from benefiting too greatly from the infrastructure that they control. They’ve also tried repeatedly to increase their profits by building products and services on top of their own networks. The grim awfulness of nearly all these efforts has left a trail of abandoned brands behind it. (Cingular is only the latest.) And yet the death grip on the infrastructure has remained. “If we can’t provide a decent product or service, no one will!”
Maybe Apple can break the deadlock, at least in the cellular market. Maybe they can succeed where companies like TiVo have failed. If they do, it will be by finally wresting control of the most profitable parts of the business from the carriers, leaving them finally, blessedly, to be the pure infrastructure businesses that they always have been at heart.
This article originally appeared at Ars Technica. It is reproduced here with permission.