Jul 25 2007
Want To Sell iPhones? Get Off AT&T
Apple is not seeing the sales they wanted from the launch of their iPhone (which are really cool – I saw one in action). Well I have some advice for Apple – get off the exclusive arrangement with AT&T. Apple and iphone are edgy, out of the norm, forward looking entities. They appeal to us mavericks. AT&T carries the stigma of the tried and true, stodgy, conservative old-time company. The two images do not match. I am a Sprint fan, which is now merged with another edgy pioneering company Nextel. Apple made another one of its classic blunders in marketing by going exclusive with AT&T. I will not end my service with Sprint just to get an iPhone. Another piece of advice: Lower the annual cost of using the phone. iPhone is really, really cool. But no phone is so cool I would shell out a lot of money and give up all of my families phones to get one.
Rush gave away ten iPhones plus a check with each for about $1500 — the cost of the required 2-year contract with AT&T. Ouch!
People laugh at me, but I have a Tracfone. (I’ve had one for years.) I need a cell phone for emergencies, not as my main mode of conversation, and I don’t want a monthly bill. I bought the phone and all the time I’ll need for about $100. I won’t need to spend another penny until Feb ’08.
Apple has always defaulted to a “high price-closed technology” model – it’s almost the entire reason the Macintosh didn’t become the standard rather than IBM – it’s basic economics, but with the ordinary model of supply and demand curves there are often two potential equilibria with equal market clearing effects and profits – one that results in more sales at a lower price and one that has a higer price with fewer sales. The difference between the actual price and the amount that the people who would buy at the higher price would pay is called the “consumer surplus” — Apple’s pricing model (reinforced by its closed architecture to limit substitution by consumers) has always been based on trying to capture as much of the consumer surplus as possible.
Nothing illegal about it, but not the approach you would expect from supposedly progressive people who prate on about enabling people to use technology and making it widespread.
On the basis of their pricing strategy alone, I have always refused to buy or use Apple products since adequate substitutes are available (my iPod, which was a gift, is the only exception).
The true progressive, and enabler of mass use of technology, was stodgy old IBM, which used an open architecture. While it started with a pricing strategy similar to Apple’s, the ability of the market to provide substitutes brough the price on PCs and PC Compatibles down rapidly once people discovered the “killer app” that made everyone want a computer. (The killer app was Visicalc, then Lotus 123 and Word Perfect made things even “more better”)
Cato,
Agree on IBM, but at least Apple doesn’t use the “closed” MS operating system. Being the real innovators , Apple doesn’t need to “prate.” The others just follow.
AJ
And the i-phone has unique functions that will persuade many to change to ATT.
AT&T is not the old conservative company you refer to – in case you didn’t know it was Cingular a few months ago after SBC technically bought out AT&T and Bell South.
I have an i- phone – it is great!!!
I get so tired of hearing folks bash Apple for selecting AT&T as its exclusive partner. Frankly, they were the only legit choice. Anyone who knows the slightest bit about the mobile communications business knows that Verizon gimps phones and sells all their own content piece meal through V-Cast. Totally proprietary and handset makers have almost NO say as to which features are enabled. So Verizon is out and Sprint doesn’t have the same National presense to launch something as big as iPhone. Moreover, Apple specifically wanted to CHANGE how things were done AND create new back-end features like visual voicemail which Jobs has already stated NONE OF THE OTHERS WERE WILLING TO DO!
The iPhone is what it is on AT&T. It would be less than it is on any other network. That’s not me being a fanboy for AT&T. I have them and am extremely disappointed with their cell service, atm. But the critiques leveled at Apple are simply baseless. They couldn’t have done it any other way. With as much as Apple wanted, NONE of the providers were gonna let them sign anything less than a long-term, exclusive agreement. I sure as heck wouldn’t if I was a provider having to make such significant back-end changes like was needed with iPhone.
If you have beef, grill it with your provider, because I’m sure if Sprint/Nextel wanted to really step up and get significant marketshare, they could have.