iPhone: big bang or slow burn?
28-03-2008
by Ciara O'Brien

 

However you look at it, the iPhone has been a global marketing coup. Long before it was available for sale, Apple fans were eagerly awaiting the launch of the device. When it was finally available in the US in June last year, iPhone owners queued overnight to ensure they were one of the first to get their hands on the device. And despite Apple striking exclusive deals with a single operator in each country, people still made the journey overseas to buy an iPhone and unlock it for use at home.

Available exclusively on O2 in Ireland, the iPhone launched to a little less hype than greeted it in other countries. Unlike the US and UK launches, there were few queues to be found at stores around the country, and most customers decided against queuing overnight. Despite this, stores at local level were reporting rapid sales of the iPhone.

The lack of hysteria on launch day may have had less to do with a lack of interest in the iPhone and more to do with the fact that unlocked iPhones are already in Ireland. Add to this the hefty EUR399 price tag for the 8GB version and EUR499 for the 16GB variant in Ireland, and the absence of launch-day mania is understandable.

"The iPhone is an expensive smartphone that is targeted at the richest 2 to 3 percent of users in Ireland," said Neil Mawston, Director, Wireless Device Strategies for analyst firm Strategy Analytics. "Irish shipments of the iPhone this year are likely to be modest, due to its relatively high price."

It is too early for any kind of concrete predictions on how the iPhone will impact on the Irish market. O2 has not yet released sales figures for the device, but says it's "extremely pleased" with the initial reception.

"Footfall in O2 Retail stores last Friday when the iPhone launched was twice the footfall for a normal Friday," said a spokesperson for the company. "Likewise, footfall over the weekend was higher than normal for a bank holiday weekend. Interest in the device has been high, so O2 is extremely pleased with the reaction to date."

Enough with the phones, already

One of the biggest challenges for any phone entering Ireland is the hyper-saturated market. According to the latest EU telecoms report, Ireland has a mobile phone saturation rate of 117 percent, above the almost 112 percent recorded as the EU average. But Mawston said the iPhone occupies a promising niche.

"The iPhone is targeting the smartphone category, which offers high growth, high revenues and high profit. It is an attractive segment in a mature, saturated industry," said Mawston.

While Nokia, Blackberry and Sony Ericsson may find their smartphones challenged by the iPhone, there could be some knock on benefits for all manufacturers.

"A rising tide lifts all ships. The hype of the iPhone is likely to stimulate wider interest among mass market consumers in smartphones and associated mobile media services. For example, someone who cannot afford an iPhone may instead choose to buy a less expensive Blackberry or Nokia N95," said Mawston.

However, the deal that Apple has struck with the operators in each country does set a precedent that the networks may be reluctant to follow. While the exclusive deal guarantees O2 a certain edge over its competitors, it could also signal changes ahead for operators that they may not be so willing to adopt.

"The iPhone is a double-edged sword for mobile operators. On one hand, it may raise ARPU [average revenue per user] and stimulate mobile media usage. On the other hand, Apple's revenue-sharing deal is a sign that operators are losing some control of their supply chain," said Mawston.

There may be some added reasons to buy the device in the coming months. Apple's latest business plan is reported to be a proposal to offer free iTunes library access to iPhone and iPod customers in exchange for a premium charged on each device. Some of this premium would be passed on to the record labels, similar to the deal that Nokia has struck for its "Comes with music" handsets.

However, the device is becoming increasingly attractive to different sectors of the mobile phone market. Instead of being solely a consumer device, there are definite business applications for the iPhone.

When it was first launched, the iPhone was locked down tight. Apple, and only Apple, could produce software for the music player/phone hybrid. Hackers soon circumvented the iPhone's controls, creating their own applications for instant messaging, voice over IP and anything else they felt Apple had overlooked.

Apple has rethought its position, and a software developer kit (SDK) for the iPhone is now available. This will allow third party developers to produce applications for the iPhone without taking advantage of flaws in the operating system and risking their iPhone being "bricked" -- rendered useless -- as happened to some users who had hacked their iPhones when they installed a software update pushed out by Apple.

However, the SDK has already come in for some criticism, with one blogger, Zac Bowling -- who is involved in the Mono open source project -- saying in his blog: "The developer program is turning out to be bunch of hype for something stupid. The restrictions on what your application is allowed to do is total, laugh-out-loud, crap." The restrictions in question include only being able to run one application at a time, and no full file system access.

At the time of writing, there was no indication of when the iPhone would be available with a tariff specific to businesses. However, O2 pointed out that businesses can still purchase the iPhone with existing tariffs starting from EUR45 per month.