Andrey Golub

Received via e-mail from J. Gerry Purdy, VP & Chief Analyst of Frost & Sullivan

  

 

Yesterday, Apple announced their long anticipated iPhone 3G that will be available to customers on July 11. What’s most interesting to me is what Apple didn’t do from a device perspective and what they did do from a services perspective. Here’s why.

In my Inside Mobile column last fall, I pointed out that full GPS should be added when Apple upgraded to 3G, and that’s now been done. The 3G chipset supports much faster data communications using HSDPA technology that will provide up to 1.4M bps download speeds – or about the speed of a DSL or cable modem. That’s great, and it was expected at a minimum.

What Apple didn’t do is make some real improvements to the iPhone like adding broadcast video (AT&T has adopted MediaFLO) or offer a new model with a built-in keyboard that perhaps was hidden until needed by those who do a lot of keyboard entry within text messaging and email. We hope to see more models with some innovative features over the coming year.

Apple has agreed to a major change in the business model with AT&T Wireless: the iPhone will be sold using a standard subsidy arrangement that reduces the price of the product to $199 (8GB) and $299 (16GB). That removes Apple from getting part of the recurring revenue from AT&T Wireless which was one of the cornerstones of the original business model. But it also allows Apple to generate more margin dollars from iPhone sales than before. While Apple doesn’t share in the monthly fees, it does get more customers to consider getting an iPhone since the price to the customer (due to capital cost buy down by AT&T Wireless) is half what it was before. I still wish that Apple had entered into a shorter exclusive term with AT&T so Apple could now be announcing versions if the iPhone for Sprint, Verizon and T-Mobile (although it’s rather simple to alter a current iPhone to run on the T-Mobile network).

I believe that the biggest news about the iPhone 3G is Apple creating their own recurring revenue stream with this announcement of the App Store and MobileMe. With the launch of the iPhone App Store, Apple allows software companies around the world to develop applications that are then provided in the App Store in a variety of categories including business, games, health, news, reference, sports and travel. Users pay the price (could be free) and download the application that they run on the iPhone (as well as the iPod touch). Apple acts as a censor and has to approve all applications in the App Store, but I expect to see thousands of applications in the App Store when it goes live. Some of the applications in the App Store will operate more as services (like location based services) and, hence, Apple will share in the recurring revenue.

The iPhone 3G includes Microsoft Exchange ActiveSync so that out of the box, users who work for a company that uses Microsoft Exchange will be able to get their email, contacts and calendar automatically synced with their iPhone 2.0.

What about everyone else? Well, Apple has created MobileMe which includes auto push/sync Mail, Contacts, Calendar, Gallery (for viewing and sharing photos) and iDisk (for storing and exchanging documents). MobileMe will allow Apple to compete with Kodak (KodakGallery), HP (SnapFish) and other similar services for online photo management (store, share & print). MobileMe allows users to download print quality images (something other online services don’t provide), contribute photos to an album and then rearrange, rotate and title photos.

MobileMe iDisk also lets users store and manage files online which makes it easy to share documents too large to email. MobileMe includes 20GB of storage for $99 with 20GB more for $49. MobileMe is not competitive with online backup so don’t use it for that. It’s much more expensive than online backup systems.

An important feature of MobileMe is built-in sync with (non-Exchange) Outlook which is used by over 150 million people. Outlook users can sync their personal Outlook mail, calendar and contacts with MobileMe which then will sync over the air with the user’s iPhone. Sync of mail, contacts and calendar no longer is restricted the iPhone sync cable and provides a continuous update experience whether accessing your mail, calendar and contact data via your PC, online via MobileMe (using a Web browser) or via your iPhone.

Overall, this is more of a services announcement for Apple than a hardware product announcement. I look forward to trying out the App Store, using location based services that benefit from the GPS chipset, seeing faster download of web pages and trying out MobileMe.

The Apple iPhone 3G, App Store and MobileMe should help other firms like Nokia (Ovi services platform), RIM (BlackBerry platform), Microsoft (Windows Mobile platform), Symbian and Google (upcoming Android/OHA platform) step up and offer similar great wireless services.

Written by:

J. Gerry Purdy, Ph.D.
VP & Chief Analyst
Mobile & Wireless
Frost & Sullivan

Keywords: 3G, App Store, Apple, BlackBerry, Frost & Sullivan, Gerry Purdy, Google, HSDPA, Inside Mobile and Wireless, Mobile & Wireless, MobileMe, Nokia, Symbian, T-Mobile, Verizon, Windows Mobile, Wireless Services Platform, iPhone, iPhone 2.0, mobile 2.0, AT&T Wireless