iPhone 2 - a new business model

Thomas Husson | June 10, 2008, 01:24 AM

So the iPhone 2 has finally officially been announced. Lots has already been said on the device: A-GPS (but with no navigation software embedded), HSDPA-enabled (a must-have), Microsoft Exchange support, 2MP camera only (no auto-focus, no flash; btw not a big deal if there is no front facing video camera since the market is not mature for videocalling yet).

Julie's take on MusicMe and Michael's insistance on the software platform are interesting lenses to the announcement beyond the focus on hardware.

So the speculation now ends, as expressed in this BBC news article. Just to put figures in perspective, the 350,000 shipments in Europe referred to in this article come from announcements made by T-Mobile, Orange and O2 at the beginning of Januaury 08 when Apple had officially announced 4M sales. Since then, an additional 1.7M iPhones have been sold in Q1 2008. Again, to put figures in perspective HTC sold 11.8M devices in 2007 (including 2M HTC Touch), Nokia sold 38M NSeries (N95 sold in the range of 1M units in the UK alone), RIM sold 14M Blackberry, Symbian sold more than 70M devices. Bear with me, those figures are obviously not directly comparable since those smartphones have been released at different periods of the year and on different territories. The fact that the new iPhone will be distibuted worldwide by many operators is in that sense a good news. But anyway, the key idea is that with such a high price point iPhone V1 could not be a volume play in Europe where most operators subsidize devices.

It seems to me the real news comes from ATT. The US operator clearly stated the revenue sharing with Apple is now over. It means ATT will subsidize the device and look for volumes. In exchange of a 2 years' contract, ATT customers will get the new iPhone for $199 (8G0 version) or $299 (16Go) with a mimimun unlimited voice/data bundle of $70. As pointed out by my colleague Ian Fogg, one can wonder how European operators will translate $ into euros. O2 has just announced some aggressive UK prices (the 8GB model will cost just £99 on a new £30 per month tariff - cheapest tariff has dropped by GBP 5)*.

I have always wondered to what extent Apple could succeed without embracing the traditional mobile eco-system. With the end of the exclusivity approach in several territories, the end of the revenue-share model with ATT and the new subsidy approach, it seems I now have my answer.

There is now a range of very cool devices that will be available in the coming months: iPhone 2, Nokia N96, Samsung Omnia (announced yesterday :-)), HTC Touch Diamond, Sony Ericsson Xperia, Blackberry Thunder...It will be very interesting to see how successful they are.

* UPDATED: since then 02 announced the iPhone 3G 8GB for free for customers paying 45 GBP and T-Mobile Germany annnounced it at 1 euro for customers signing-in for 2 years to a 69 euros service