Google today announced they are going to offer free voice calling for users of gMail. Some media outlets have said this poses a significant threat to Skype. I’ll confess that was my immediate thought but on reflection I think the news may actually be far worse for carriers such as AT&T. What Google has done is validate that the concept of free/almost free calling using the Internet is the way forward. To use their service you need a gMail account. If you already have an email account from say Yahoo! or Hotmail, then you can of course open a gMail account or simply use Skype… Given the way Skype works, I can’t see people necessarily switching to using the Google service. What I can see is some people who still use land lines giving the Google service a try. I can also see that having competing services from Skype and Google will really a) improve these products and b) force traditional carriers to look at their pricing. In other words, the people who will likely feel the most pain are the AT&Ts of this world who will inevitably end up having to make drastic cuts to their rates.
As the media speculated about the launch of the iPhone 4 there was a lot of chatter about them also launching a Verizon version of the new phone. Rationally this was never on the cards for a few simple reasons:
1. AT&T has really struggled to provide reliable service in two major metros (New York and San Francisco). If Apple had opened the door to Verizon, customers would have fled from AT&T at an alarming rate. I’m pretty sure AT&T knows this and will have been negotiating with Apple to keep the exclusive arrangement until its coverage issues are resolved. According to Mr Jobs that should be by late summer if his answer at D8 is to be believed.
2. The Verizon version of the phone uses different technology. One presumes that the engineers at Apple will want to get the version they know working before they introduce an alternative.
3. Apple actually likes the single supplier deal it has with AT&T. Apple never went down the clone route because it loves to control as much as it can. Having multiple carriers isn’t something Apple wants as it gives them more risk. Apple signed up single carriers in lots of other markets – eg O2 in the UK. They’d prefer to stay single carrier as long as they can. Multiple carriers makes life more complicated and unless they need to do it, they won’t.
Don’t get me wrong, at some point Apple will let other carriers in, not many but some. But right now it is no hurry. It can sell all the iPhones 4s it can build. Pre-orders on eBay are already going for over $1000. If they open up now they will simply have two channels they can’t fill. They are much better waiting ’till the buzz has died down around the 4 and then introducing it on Verizon. My guess is late this year…
Earlier today I was pondering the fact that someone will inevitably produce a better iPhone. I have no clue whether that product is the Droid. I very much doubt it. But it may be. At this point in the game Apple holds most of the cards. It has a well designed product, reasonable customer service and the iPhone links to that wonderfully closed world call iTunes. Google is trying to do an end run around all that with its own links to music producers and it may well get somewhere. The Android technology also looks like it will be good enough to keep some Verizon customers who would have shifted to the Apple/ATT world. But Google has a huge mountain to climb. The noise level around the iPhone is still huge. A Google news search shows there are roughly 87,000 news stories about the iPhone versus a little under 10,000 for the Android phone. The stats on YouTube are even more in the iPhone’s favor with just 11,200 hits for the Android versus 385,000 for the iPhone. But I expect things to change on that front and change quickly. I have two reasons for believing this:
1. Verizon has to throw a lot behind the launch of the Droid and when that happens the US public will know that the Droid is a real competitor to the iPhone.
2. I think the world is ready for someone to compete with the iPhone. Innovation on the iPhone seems to have stalled. I own one and I love it but the 3GS isn’t that much better than the original. The battery life is still dreadful.
All this makes me wonder whether there really is such a thing as an enduring brand anymore. Competition is more fierce than ever and the tools for competitors to compete using social media mean that any weakness can be exploited and any opportunity grabbed.
We may well have seen Apple’s peak, or we may have seen another competitor try and fail. We’ll know all too soon.
Apple launched its much anticipated update to iPhone today, called the 3GS. It has some good new features, such as a camera that actually takes decent pictures, video and sound activation. Price? $199 plus a two year contract with AT&T. That’s the good news. The bad news is if you’re an existing iPhone user and want to upgrade the price is… (wait for it) $599. In other words if you have been a good Apple/AT&T customer and want to buy the latest product you pay $400 more than someone who has waited until now. This seems crazy to me. They can clearly afford to sell the product at one price, so why charge existing users so much more? The argument is that if you haven’t yet run down your old contract then you haven’t yet given them the chance to recoup the discount they gave you on the phone you bought. But they ignored that fact when they launched the 3G. Therefore I can only assume that they don’t really want existing users to switch. This also means that the iPhone’s actually should retail at these crazy prices and the contracts are what bring the prices down. Even with this, surely an upgrade at some lower price could be justified by someone extending their existing AT&T contract by two years. My headline says Apple must not want the business. This is probably unfair. In truth it is AT&T that control this part of the pricing. I really hope some common sense prevails though and that Apple and AT&T get together and change this policy.