Will iPhone shake up the industry?

by Andrew D. Smith

The Dallas Morning News (MCT)

30 June 2007


You may never buy an iPhone, but you should still thank Apple for building it.

The frenzy surrounding the release Friday of Apple’s user-friendly multimedia cellphone - 11,000 print articles, 1 million customer queries, 80 million mentions online - has forced the entire wireless industry to confront customer dissatisfaction and plot product improvement.

All buyers of smart phones should thus benefit, and soon.

“Expect to see more touch screens, more visual controls and a new focus on making everything easy to use,” said Michael Gartenberg, vice president of Jupiter Research in New York.

Existing smart phones can already do pretty much anything an iPhone can. They can take pictures, receive e-mail, browse the Web, play music and display videos. Many phones actually do far more than the iPhone, such as receiving live television, providing GPS services, recording video, and downloading entertainment from the Internet.

But they do much of this stuff terribly. Web pages look like abstract art. E-mails lose their formatting. Downloaded files disappear. Tiny hard drives struggle to store more than a few dozen pictures or songs.

Worst of all, users have to fight through various menus and folders just to find these lackluster features.

Apple CEO Steve Jobs summed up the problem when he told a Newsweek reviewer why Apple got into the wireless market: “Everyone we talk to hates their phones - it’s universal.”

Jobs promised something radically different. Something easy. Something elegant and fun.

Early reviews suggest Apple has delivered. The combination of touch screen and pictorial function icons seems to help people find and use the phone’s features. IPhone users also say the phone’s software and its huge screen offer the best Internet they’ve seen on a phone.

If time vindicates Apple’s system, key elements will spread quickly.

Indeed, some elements spread before the iPhone even reached stores. Taiwanese handset maker HTC, for example, just hit the European market with a touch-screen phone that bears more than a passing resemblance to the iPhone.

The iPhone attitude is also spreading.

Sprint Nextel just announced an ad campaign that will show people using smart phones how to accomplish practical tasks. That’s a subtle shift from traditional advertising, which focuses mostly on product specs, but analysts say it’s a telling difference that shows the iPhone will be influential even if it flops.

“I’ll bet now that all the carriers and handset makers increase their R&D spending,” said Jeff Kagan, an independent telecom analyst. “The incredible excitement surrounding iPhone has demonstrated that a true breakthrough will be more profitable than anyone had thought. If iPhone is that breakthrough, the others will have to spend more to catch up. If not, they’ll spend more in hopes of making the breakthrough. Either way, customers win.”

The wireless industry has collectively committed to simplifying handsets, but different factions debate what else they should learn from iPhone.

Handset makers - and most analysts - say iPhone proves that carriers should ease their control over product design.

Carriers - but almost no other voices - say strict controls are needed to ensure product quality and network reliability.

Carriers now control handset design by refusing to sell any device they don’t like. Research in Motion, for example, reportedly backed away from installing a free GPS program in one of its BlackBerry phones because of objections from AT&T, which sells its own GPS program for $10 a month.

Carriers have also fought to prevent handset makers from adding Wi-Fi receivers to their products. Wi-Fi can provide faster and better Internet connections than carrier data networks. Wi-Fi helps customers but hurts carriers that profit from network usage.

The balance of power began shifting slightly toward handset makers even before iPhone’s introduction - Wi-Fi-enabled handsets have trickled to market, RIM convinced carriers to allow free instant messaging on some BlackBerries - but the shift should accelerate if iPhone sells big.

Apple’s deal with AT&T allowed the computer maker almost complete control over iPhone’s design, and Apple used that control to do things that carriers normally forbid.

The iPhone has a Wi-Fi receiver and software that automatically chooses Wi-Fi over AT&T’s network whenever it’s available. The iPhone also lacks any built-in links to AT&T’s Internet store for ring tones and other cellphone add-ons.

“Americans have traditionally chosen a carrier network first and then selected among whatever handset models that carrier offered,” said Mike McGuire, an analyst at the research firm Gartner Inc. “The iPhone shows that it’s possible to reverse that equation, to have consumers select a device first and then select among the carriers that offer it. ... That could create a considerable shift in power.”

Skeptics may ask how a single device can change an industry, particularly when even optimists peg iPhone’s market share in the low single digits.

Believers counter such questions by pointing to Apple’s track record, which goes far beyond the iPod.

Apple’s computers have never accounted for more than a small percentage of that market, but its Macintosh operating system has shaped the way the way people interact with machines.

Lucky break, you say? Apple also popularized the desktop widget and the clam-shell design for laptop computers. Plus, in an odd example of a company coming full circle, Apple invented the hand-held device that inspired today’s generation of smart phones.

The ill-fated Newton never did much for Apple, but it changed the world.

Analysts predict the iPhone will be much more like the Macintosh than it will the iPod. It will never dominate cellphone sales - even when Apple introduces cheaper models - but it may well exert a huge influence on the industry.

It may also change how Americans think about cellphones, even the ones they have right now.

“Apple is teaching America that `cellphones’ are actually powerful computers,” said Shawn Freeman, chief technology officer at Handango, a Hurst-based company that offers downloadable applications for mobile devices.

“We have programs that manage music libraries. We have programs that manage photos. We have a free application from Google Maps. If people take the time to explore what’s out there, I think they’ll love what they find.”

So Freeman sees no need for an iPhone?

“Actually,” he says sheepishly, “I’m still trying to talk my wife into letting me buy one.”

Topics: apple | iphone
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