Like everyone else, I’ve had the ringing of some mythical Apple cell phone in my ears for months now. I’m not particularly excited about the prospect of such a device, but it’s obvious that some vocal group of people is about to wet their pants over the idea. I’ve written about it here before, and I keep coming back to the same thesis: The cell phone market is saturated already and doesn’t seem like a money maker for Apple. VoIP makes more sense.
On this eve of Macworld, I was talking to my friend Shawn King when I decided to draw out a couple of tables to illustrate why I think VoIP makes more sense than a cell phone. There is a pattern to successful Apple hardware products (two points do make a line) and a cell phone doesn’t fit into that pattern, but VoIP does. Why would Apple deviate from an obviously successful formula to risk their cash and their image for a cell phone product that would be a tough sell?
In all my reading of Apple cell phone proponents, I haven’t seen many (any?) specifics. The phone will be “better”. It will be “easier to use”. It will be integrated with the iPod. That’s all fine and dandy, but what does it mean? Obviously, only some people inside Apple know what’s really happening with their phone efforts (if any), but I haven’t seen any solid ideas proposed as to how Apple will make a cell phone so much “better” that they’ll be able to successfully compete with the myriad of cell phone makers out there and do so in a way that won’t be a PR disaster. Let’s face it, the Mac-Macs in this world have overblown this phone idea so much that, unless this phone balances your checkbook and cleans behind the toilet for you, it’ll be a disappointment. Even if Apple does introduce a great product, it’s impossible to meet expectations now, and that’s equally as poisonous as introducing nothing.
Frankly, I don’t know what features either a cell phone or a VoIP phone would have. I could speculate, but it seems more like fantasy than informed guess. So let’s look at this from a high-level business perspective, using history and the current state of the market as our guides. Apple is, after all, in business to make money for shareholders, not to provide nerds with fun toys.
Mac vs. iPod vs. Cell phone
| Mac | iPod | Cell phone |
|---|---|---|
| At the time of the introduction of the Mac, the personal computer market was just emerging. There were other computers for sale, but the market was immature, and Apple had a truly unique product that was unmatched by competitors. | At the time of the introduction of the iPod, the music player market was just emerging. There were other players for sale, but the market was immature, and Apple had a truly unique product that was unmatched by competitors. | The cell phone market is a mature market that is already saturated with products of every shape and kind. A cell phone exists for almost every need. No speculator yet has offered anything concrete as to features or services an Apple phone will offer that make it unique. |
| Apple’s product caused the personal computer market to grow. | Apple’s product caused the music player market to grow. | Almost everyone who wants a cell phone has one. There is very little room for market growth. |
| The Mac was (is) a self-contained item, requiring no services from other companies to function. | The iPod was (is) a self-contained item, requiring no services from other companies to function. | A cell phone requires service provided by another company to function. |
| Apple provides service and support for the Mac and it’s operating system, the two components required to use the device. | Apple provides service and support for the iPod and the software required for the functioning of the device. | Apple would obviously provide service and support for the phone itself, but it’s extremely unlikely Apple would provide support for what service is provided. Conversely, it’s also unlikely service providers would provide service and support for a phone they don’t sell. |
| When the Mac was introduced, there was an obvious way to make money by selling the machines and providing software. | When the iPod was introduced, there was an obvious way to make money by selling the devices and providing (although not requiring) music for purchase. | Overwhelmingly, cell phones come free or at a significant discount with a service plan from a provider. As of yet, nobody has specified a compelling feature or service set in an Apple phone that would compel prospective customers to give up free / cheap phones for an Apple phone. On the back end, Apple is very unlikely to provide or profit from cell service the same way it provides software and music for the Mac and iPod. |
Mac vs. iPod vs. VoIP
| Mac | iPod | VoIP |
|---|---|---|
| At the time of the introduction of the Mac, the personal computer market was just emerging. There were other computers for sale, but the market was immature, and Apple had a truly unique product that was unmatched by competitors. | At the time of the introduction of the iPod, the music player market was just emerging. There were other players for sale, but the market was immature, and Apple had a truly unique product that was unmatched by competitors. | Currently, the VoIP market is emerging. There are currently VoIP services and devices for sale, but none of them is especially “hot” right now. Apple could create a unique product that integrates VoIP with their existing devices (Mac and iPod) in useful ways (iChat? Voicemail/iPod sync?). Windows compatibility would also be possible. |
| Apple’s product caused the personal computer market to grow. | Apple’s product caused the music player market to grow. | Apple’s product could cause the VoIP handset market to grow. There are few competitors right now, none of which are are dominant or making huge money. |
| The Mac was (is) a self-contained item, requiring no services from other companies to function. | The iPod was (is) a self-contained item, requiring no services from other companies to function. | A VoIP phone would be a self-contained item, requiring no services from other companies to function. Apple is a computer company with experience creating and managing network infrastructure (the Apple site, Developer Connection, Sales Web, iTunes Media Store, .Mac). Such an infrastructure would be needed to route VoIP traffic, and would be totally under Apple’s direct control without the need to rely on agreements or services of third parties. |
| Created, supported, and serviced by Apple with no third-party involvement. | Created, supported, and serviced by Apple with no third-party involvement. | Created, supported, and serviced by Apple with no third-party involvement. |
| When the Mac was introduced, there was an obvious way to make money by selling the machines and providing software. | When the iPod was introduced, there was an obvious way to make money by selling the devices and providing (although not requiring) music for purchase. | If a VoIP phone were to be introduced, there would be an obvious way to make money by selling the hardware and the monthly service. |
To my way of thinking, a VoIP phone fits Apple’s pattern of past successes much better than a cell phone. A VoIP phone obviously wouldn’t be portable like a cell, rather, it would be an extended home phone of sorts. Other companies like Vonage, Lingo, SunRocket, and Skype have started VoIP services because they believe money making potential is there. However, none of these services has grown in a big way. Apple, with it’s ability to design very good hardware, and its past record of substantially growing fledgling markets, seems like a good fit for the VoIP market. Apple has the experience to create and maintain the infrastructure and service, create a phone people will like, control the whole widget, and integrate a VoIP phone into existing products, all of which combine to create revenue (and hopefully profit).
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January 4th, 2007 at 1:17 pm
By everything you’ve pointed out in comparison, a VoIP product makes much more sense.
But past history aside, it will probably be a phone with a plan.
January 4th, 2007 at 1:19 pm
Wow… I bet chicks just flock around you at cocktail parties.
–chuck
January 4th, 2007 at 1:25 pm
Mike W, why? What does Apple bring to cell phones that others haven’t?
January 4th, 2007 at 2:47 pm
[...] Aaron Adams make a compelling case for a VOIP-based Apple phone. He even has little tables. You can’t argue with little tables. [...]
January 4th, 2007 at 2:59 pm
The force driving Apple to integrate phone technology into the iPod is simple. Soon it will be impossible to buy a phone without music capabilities just as it’s getting impossible to find one without a camera. I never go anywhere without my phone so I’ll already have a music player with me even if I leave the iPod at home. It’s going to get harder and harder to justify carrying two devices when the one I always have with me has all the features of both (except the iPod interface and iTunes integration).
January 4th, 2007 at 3:31 pm
Four times in Apple’s history, they have changed the course of the industry.
1. The Apple I – When the choice was renting time at a terminal at a local college or soldering together your own components, Apple sold a pre-built motherboard.
2. The Apple II – when everyone and their brother was selling pre-fab motherboards and kits, Apple sold a ready-to-use out-of-the-box real machine for regular people.
3. The IIGS/Lisa/Mac – when every other computer manufacturer was trying to clone the command line of The Apple II or the IBM AT, Apple introduced “the computer for the rest of us”. No command memorizing required.
4. The iPod – before the iPod, it was about the technology. A device that plays back a format. Apple made it about the user. The iPod is about music – and how a person listens to it and manages their music collection. Before the iPod, 50% of all the players looked like pens. Now every player looks like an iPod knock-off.
The iPod changed how I get, store, and use pre-recorded audio. the iTV promises to do the same for pre-recorded video.
The Apple II killed the mainframe. The Mac killed the command line, the iPod killed FM, iTMS killed brick-and-morter CD sales, the iTV kills NTSC, and any voice communication device Apple introduces will kill cellular.
It’s time to rethink about what a portable communication device should be, and how it should work. If anyone can think outside of the box, it’s Apple.
My question: Should voice chat or video chat be it’s #1 feature?
January 4th, 2007 at 3:40 pm
Or what about a VoIP mobile handset?
See, it’s not a joke. In England mobile carrier 3 offers a flat-rate mobile-internet deal for £5/month on top of an existing conventional mobile plan.
What’s more is that they specifically push this with Skype, bundling it with the handset.
Now sure, it’s not really unlimited, capped at 1GB of data or 5000 Skype minutes per month in the name of “fair use”. And also, while they claim to be “working on it” there’s no Skypeout support just yet.
Still, it’s an interesting start, no?
January 4th, 2007 at 5:42 pm
Just to be ridiculous about it…
If I have a VOIP-phone using WiFi, it’s about as useful as a dixie cup with a string tied to my computer. Yeah, WiFi can go through walls, but I’ve still got to be near a WiFi Hotspot.
But hey, I’ll just take my computer with me and use that as a WiFi access point. Of course, I’ll have to buy a 3G capable phone and share it’s network connection over 3G networking (or maybe just a 3G card for my laptop).
But…um…once I’ve got my computer, I don’t really need my iPod to listen to my music because it’s on my computer. And, um, I don’t really need my phone because I could just use a Bluetooth headset and treat my computer as a VOIP-phone.
So why did I want a VOIP-phone over WiFi again?
Yeah, yeah, yeah…you didn’t say I had to connect to my computer…but I’ve got to connect to something before I can VOIP…Voice Over IP only works once the IP is there.
reinharden
January 4th, 2007 at 5:55 pm
Like any other VoIP provider, Apple would include an ATA as part of the package. I’m not speculating about what precise form the phone hardware will take. I’m making the business case for VoIP, as in, how does Apple make money doing this? (Because making money for shareholders is Apple’s purpose.)
However, if you’d like me to speculate (and trust me, this is all stuff off the top of my head), I will. It may be a stand-alone ATA you plug your existing phone into. It may be an ATA that’s a base for an included cordless phone. It may be an Airport Super Duper Kick-Ass Extreme With A Cherry On Top that has 802.11n (Now with improved range!) and ATA capabilities. I don’t really know. And it’s not my point.
January 4th, 2007 at 6:16 pm
I think your analysis holds up pretty well, though i think there are a few compelling concepts that would make a so-called “iPhone” worth a thought.
As it stands, the mobile handset market is a mess. There are many phones that do many thing, some even do a few things well, but as a whole, the hardware and software available are “good enough” at best. Hardware design has gotten better, but is still messy. Software design has gotten more flashy, but basic usability is still far from good.
In this theoretical world where Apple releases a cellphone, i imagine it’s benefits to include:
Superior interface and usability design (like the iPod compared to the other mp3 players available, from release even to today)
Superior integration with computers (isync, etc. but this creates a problem with windows compatibility… but i should point out that i have a brand new top of the line bluetooth phones that STILL doesn’t support industry standard synching (iSync) and has very poor integration with any operating system) Usability, even on expensive phones, is pathetic.
Designed for consumers, instead of the current state of affairs which leaves consumers as an afterthought and focuses on squeezing every penny from the users as possible (For example: poor Bluetooth support and lack of syncing cables – both specifically for the purpose of forcing consumers to sign up for extra fees and services such as Picture Mail. Another example is an the SamsungA900 there is a “play” button on the exterior that, instead of any kind of logical function (Playing music), launches the Sprint Music Store, which is completely unusable while the phone is closed.) Apple, without having any interest in making the Service Provider any extra money, could theoretically design the hardware and software to be USEFUL.
These are just a few. i do not mean to say that these justify the gamble, only that there may be compelling reasons to consider purchasing an Apple cellphone over what is available today. When it’s all said and done, i’m still very skeptical, but would be pleasantly surprised should Apple actually announce a product like this.
January 4th, 2007 at 6:24 pm
This is an excellent article. I have followed Apple very closely for a long time (I’m a professional Mac developer). I have been and continue to be very skeptical that Apple would introduce a cellular phone with a standard cellular plan. I think the phone will probably be VOIP running on EVDO or maybe EDGE.
I think the service for it will be available from Apple. Like the article says, it will be a one-stop deal. I think that the service will also allow for mobile internet for your Mac. So, basically you would pay a flat fee to Apple and get mobile internet for your Mac a VOIP phone.
Apple will probably have some deal with Sprint, Verizon, and/or Cingular to provide the back end, but as an Apple customer you will just deal with Apple.
The device will not be running any kind of open mobile OS (i.e. I think the “mobile OS X lite” rumors are untrue.) Whatever software you can buy for it will be like the games for the 5G iPod – digitally signed in order to work.
Expect integration with iSync, iChat, iTunes (of course), iPhoto, and Keynote.
Like the iPod, you will probably be able to sync/charge it over USB. It will probably have an iPod dock connector and work with automobile adapters.
These predictions are not based on inside info – just educated guesses after following Apple for a long time.
January 4th, 2007 at 6:36 pm
[...] Aaron Adams makes his case for Apple releasing a VoIP phone (if anything) instead of a true mobile phone. I like what he’s written, but i have to disagree with one point he makes. In all my reading of Apple cell phone proponents, I haven’t seen many (any?) specifics. The phone will be “better”. It will be “easier to use”. It will be integrated with the iPod. That’s all fine and dandy, but what does it mean? [...]
January 4th, 2007 at 9:06 pm
I still think the product design apple brings has the capacity to change the mobile phone world. The use of skins will allow for, coupled with a touch screen, a complete rework of the user interface.
My dad, (64) isn’t afraid of technology, but hates his cell phone b/c he has issues reading the screen and the menu commands. A cell phone that could use the entire surface are as a CallerID screen or a dial pad has a GREAT deal of appeal to a massive amount of the population.
If they do it with skins…they have a winner – no doubt about it.
January 5th, 2007 at 3:30 am
What is an ATA?
January 5th, 2007 at 7:17 am
>Mike W, why? What does Apple bring to cell phones that others haven’t?
Not much, other than the brand name.
January 5th, 2007 at 9:20 am
An ATA is an Analog Telephone Adapter. It translates VoIP to an analog telephone signal, and vice-versa.
January 6th, 2007 at 10:05 pm
I guess the only point I would make is that if you look at the history of the PDA/phone market, nobody has gotten it right yet in my opinion.
- Windows Mobile is slow and really not a great phone
- Windows Smartphone is Windows Mobile less any useful features in an almost phone like package
- Palm is outdated and people that I have seen use them end up switching to phones or Windows Mobile
- Blackberry at least it gets your email for you but as a phone it is annoying (I carried a 7100 for a year)
- Skype… well perhaps rotary phoned and tin cans string are a better option
*IF* they actually made an iPod/Phone combination perhaps it would take the “PDA” type features of the iPod and extend them. Having contacts and calendars and notes on the iPod is a nice feature but it is somewhat limited. So maybe the iPhone will just be a mobile phone pda that is well thought out and well integrated with a good interface.
January 7th, 2007 at 6:35 am
The big problem with all the Phone speculation I have heard is that it is US-centric.
The cellphone industry is global and systems that operate globally are very different to the US market.
Also wireless internet varies to the extent that some countries have high speed wireless available now at a good price. Others don’t.
I have heard that it may be CDMA.
In some countries the CDMA network has been closed down to make way for newer technology.
The biggest problem here is that Apple is a global company and cellphone markets vary too much to speculate on the type of network they might use.
Perhaps they need to offer all manner of network systems including VOIP. So long as it is a full functioning iPod it will sell.
January 8th, 2007 at 3:24 am
Very very close to what I’ve been thinking too Aaron.
A couple of other points worth noting – which doesn’t appear to have been mentioned.
1. Youth are the future and Apple knows it. And that market in most of the developed world now text/IM more than phone. My teenage kids certainly do. Apples iChat, .Mac, perhaps a new online web service combined with iPod features may be enough to get interest. In my view iChat could be the killer app – if they get it right.
2. Add VOIP over airport/wifi, plus maybe an unlocked gsm radio (i.e. some sort of fusion device) would be enough. Phone could be really basic if web features and Text/IM rocked. I can just see my Kids sitting in the privacy of their bedrooms IMing over the homes airport network, listening to thier iTunes as they type.
3. Apple is close with Google and Google have been building out a free wifi network (in San Fran I believe – perhaps elsewhere).
4. Googles Schmidt is on record stating that communication should be Free. Free Wifi will mean Free communication. You just buy the device, pay for downloaded content (e.g. tunes, video) get traffic for nix. Carrier charges and plans suck. Especially for teens.
5. Wifi/Wimax can deliver media far better than 3G can or ever will.
6. Consider Sony’s MyLo and Nokia’s Internet tablet with VOIP. Even Nintendo DS can access the web via Wifi. Major brands – testing the WiFi waters. Nearly there but Apple could be far more compelling.
7. The stars are aligning folks. I hope we’ll get a glimpse of the future tomorrow.
January 8th, 2007 at 7:33 pm
Another clue:
Apple pushed out Software Update for iChat days just a few days ago. It was described very cryptically as an update for the iChat cryptographic keys.
Why would that be necessary? And who now? Because they want to update all the installations of iChat to be able to communicate properly with the new keys that will be deployed on all the of iChat Mobile or iChat Phone hardware devices they will have available …. TODAY!
January 8th, 2007 at 8:48 pm
Aaron,
Just a point: The problem with VOIP is that you can only talk to people who use VOIP… and Grandma doesn’t.
As a matter of fact, my kids’ Grandma and Grandpa DO have VOIP right now… it’s called iChat, and they never use it.
Companies like Skype ad Vonage aren’t making money by trying to get people to talk through their computer and you don’t seem to be proposing that Apple is going to sell a box like Vonage does, right?
So, how would your “iPhone” concept be different from iChat?
January 8th, 2007 at 9:12 pm
That’s incorrect. A VoIP phone can certainly call a POTS phone, and an iChat that can call or receive calls from a POTS line could be popular. I don’t know, and I’m not attempting to predict exactly what form an Apple phone or service would take. I’m trying to figure out how Apple would make money selling phones and services.
January 8th, 2007 at 9:16 pm
Well, yeah, you can call a POTS line from a VOIP phone… but everyone makes you pay for it… and the whole draw of PC-based VOIP communications is that you don’t have to pay for it.
I think that iChat in your hand makes a lot of sense, but, as you have said, that would require networks that Apple is probably not going to want to play with. So, if the phone is a VOIP product, it will rely on your broadband, which makes it nothing more than a glorified iChat interface. I think that would be a *cool* product, and a likely extension of the iChat experience. That’s something that Apple could do, easily, tomorrow.