Will the iPhone ignite a Cellular Revolution or a Counter-Revolution?

An opinion piece by Blackfriars' Marketing entitled Consumers sparking a quiet revolution against US mobile carrier lockdowns comments on an article in today's Boston Globe. The contention of the Boston Globe article is that Cellular companies limit cell phone features to force users to utilize their extra cost services, and that cell phone users are going to third parties to unlock these cell phone features in what amounts to a revolt. Blackfriars' goes on to suggest that Apple has grokked this consumer sentiment; and, by generating considerable consumer interest in the iPhone, used it to force Cingular (now AT&T) into selling the iPhone unsubsidized and unlocked. It's a good argument. I don't buy it.

I believe that the relationship between Apple and AT&T is a partnership and not a confrontation. Purely speculational. On stage at All things Digital, Steve Jobs suggested that partnering is the way to go. The iPhone does not create Rokr deja vu for me. AT&T seems as excited about the iPhone as the most rabid Apple fan (that would be Steve Jobs). Apple didn't stop at AT&T. They added Google and Yahoo to the mix. Whenever people ask Mr. Jobs about 3rd party software on the iPhone, he suggests Apple is struggling to find a way to do that. I think he's already found it. Partnering.

I believe Apple and AT&T are partnering to sell both the iPhone and an unlimited service plan. That's the Revolution. Charge up front for everything, and there's no need to limit anything. Every iPhone feature will be enabled because the iPhone is designed for the AT&T network.

Instead of limiting features, Apple and AT&T have promised two years of new features and upgrades included in the price of the iPhone. Switch networks, and you'll miss out on that. By incorporating client-server like applications into the iPhone that depend on the AT&T network, a virtual lock has been created. Will another cellular network interface with Google Maps, and tell it where your iPhone is located? Probably not for free.

I'm calling it a counter-revolution. Instead of consumers unlocking the phone to break away from their cellular provider, we have a cellular provider (AT&T) selling an unsubsidized, unlocked iPhone, whose unique features are designed to lock the consumer into an unlimited service plan.

Here is a speculational metaphor. Imagine the iPhone is an iPod that plays phone calls, and AT&T is an iTunes Store with a two-year subscription plan. This plan doesn't provide songs. It provides voice and data services. Instead of an FM radio, this iPod includes a WiFi transceiver. It's a little hard to imagine because the iPhone IS an iPod that plays BOTH songs and phone calls, and it DOES have a WiFI transceiver built in. Grok it.

"Whole Widget" synergy and the iPhone.

A new series of TV commercials promoting the iPhone have appeared. The original iPhone commercial, Hello, was not very informative. The new series makes up for that. If, like me, you haven't seen the commercials on TV, you can catch them at Apple - iPhone - TV ads.

The commercial that seems to be generating the most buzz is called Calamari, and features Google Maps. It appears as though the phone knows it's own location, and supplies that information to Google Maps. Google returned a "local" Map, followed by directions to a nearby resturant. How is this possible? There are a number of ways this can be accomplished. I'd like to speculate on the most profound.

AT&T already knows where your phone is...

more or less. A significant portion of cell phone technology is devoted to cell phone tracking. The E-911 mandate requires it. The Global System for Mobile Communications (GSM) utilized by AT&T provides several methods. That's geek talk. Bottom line, GPS is NOT required.

Because Apple and AT&T collaborated on the design of the iPhone, it would be trivial for AT&T to provide this information to the iPhone upon request. Because Google designed a custom Map application for the iPhone, it could be designed to use this information. Because this is the way Apple thinks about design, this should not be a surprise. I expect even more.

I've already predicted that Apple and AT&T will reinvent Cellular. Purely Speculational.

Caveat lector

Cell phone tracking is not 1 meter accurate, yet; I don't know how far along AT&T is in implementing Phase II of E-911; and the Google provided directions are not visible in the Calamari iPhone ad. There is still room for more speculation.

No sources have been bribed to provide the speculations in this blog.

Will Apple and AT&T reinvent Cellular?

The current paradigm in American cellular seems to be to hook a customer on a service plan with a subsidized phone, and then profit by selling extras - minutes, text messages, ring tones, music, &c. AT&T will soon be offering cellular service with an "unlimited" data plan, and an unsubsidized iPhone. Not subsidizing the phone means AT&T makes a bigger profit from the service plan, without the need to sell extras.

There's no need for a bewildering array of service plans with complex rules and gimmicks if the basic plan is profitable. If the basic plan is profitable, then the way to increase profits is to increase market share. The way to increase market share is to offer a killer plan. The key to profiting from the killer plan is the unsubsidized phone. The key to the unsubsidized phone is a killer feature set. Enter the iPhone.

Verizon makes a good point. A service plan can only be as good as the service - coverage, reliability, customer support, &c. Both Apple and AT&T know how to do those. They just have to execute.

I'm not going to predict a price for this plan, as I don't know what the "sweet spot" is. I do know that most prognosticators were wrong - and Apple was right - about "sweet spot" pricing for the iPod and iTunes. That's why I'm betting on another solid hit with the iPhone. I expect Apple and AT&T to reinvent Cellular.

Wait! There's more....