The great iPod migration
How will Apple (AAPL) persuade 100 million iPod users to trade up to an iPhone? That's the problem Bernstein Research's Toni Sacconaghi tackles in a report to clients Wednesday.
His answer: Make an iPhone that comes without a data plan — currently $30 a month in the United States.
The opportunity for Apple is so attractive that he puts the odds of such a thing coming to market before the end of the year at better than 50-50.
Sacconaghi's premise is that the market for stand-alone music players is shrinking and will continue to decline over time — eventually going the way of the Palm Pilot — as users trade their iPods in for cell phones that can also play music.
For the vast majority of those iPod users, the iPhone is simply too expensive — not because of the $199 starting price, but because of the required voice + data service plan ($70+ per month, or roughly $1,700 over the life of a two-year contract) that Sacconaghi describes as "the biggest gating factor to mass market adoption."
The numbers involved are huge. The worldwide market for smartphones (i.e. phones that require a data plan) is estimated to be about 225 million in 2009. But that's just 17% of the total 1.35 billion mobile handset market. (See Exhibit 1.) In other words, Apple is effectively not participating in 83% of the mobile handset market place.
The irony, Sacconaghi contends, is that Apple is in a unique position to grab a hefty slice of that pie.
"Apple's more than 100 million iPod users give the company a huge opportunity to capture significant market share in the mobile device market, if it can successfully migrate these users to the iPhone. We note that these users would likely be very partial to migrating to an Apple offering, given their familiarity with iTunes and purchases of DRM encoded content."
So what would an iPhone without a data plan look like?
Apple, as usual, isn't talking about future product plans, and "the blogosphere," says Sacconaghi, "also appears to have little credible insight."
But the two solutions he proposes — an "iPhone nano" and an "iPhone touch" — are not that different from the ideas the rumor sites have been kicking around for months.
- iPhone nano: A miniature iPhone that plays music and videos, but has a small screen and can't browse the Net or run iPhone apps. $100, with subsidy.
- iPhone touch: Today's iPod touch with a cellular modem. Can make calls and play apps, but may not have 3G or a GPS. $150, with subsidy.
Sacconaghi is convinced either one of these approaches would enable Apple to capture 3% of the non-smartphone mobile handset market (compared with its current 12-15% of the smartphone market). Even assuming 100% iPod cannibalization, Apple makes out like a bandit, according to Sacconaghi:
"[For] every iPhone nano sale, Apple essentially trades about $125 in revenues (assumed wholesale price) for $250, and $44 in gross profits for $130. For the iPhone Touch, Apple would be trading about $200 in revenues for $350, and $70 in gross profits for $150."
It's all laid out in the Bernstein Research spreadsheet (Exhibit 3) pasted below the fold.
I would love to have a data only iphone but att requires it to have your phone plan which adds up to 60/month then you have to add the data which is another 30/month. 90 bucks a month for a phone sounds ridiculous. Makes me want to go back to the old days with no cell at all.
I agree with most of those who commented that this scenario seems..unlikely. The difference in cost and plan of the two proposed new products just doesn't make up for their decrease in utility. bluehost host
Toni has outlined a very solid marketing plan. However, Apple is brilliant when it comes to marketing and PR, so I'm sure they'll come-up something similar or even better. I agree that the monthly data charges for the iPhone are probably a big deterrent for some people.
I have just got the new iPhone 3GS and it rocks. I love it
Bronchitis
Toni has outlined a very solid marketing plan. However, Apple is brilliant when it comes to marketing and PR, so I'm sure they'll come-up something similar or even better. I agree that the monthly data charges for the iPhone are probably a big deterrent for some people.
Emily
1940's hairstyles
>>That there is "better than 50-50" chance Apple would make an iPhone without a data plan is so wrongheaded it borders on malpractice as a financial analyst.
Agree 100% I just cannot control myself from laughing whenever I read such ridiculous predictions! Apple is not so stupid as to make a poor decision like that!
I think I would have an iPhone even if the tariff was $100 a month. And, yes, I have just got the new iPhone 3GS and it rocks. I just love it. And because I just enjoy using it so much my productivity has trebled.
Chloe
(the baby steriliser site)
With the incredible growth of 3G phones you might want to look
at the at Iphone and see if you can use it with different service providers that cost less per month. I think there are ways to break the iPhone code and use it with your preferred cell phone carrier that probaly will cost less, but don't quote me on it. Gail (I lost 20 lbs)
"iPhone nano: A miniature iPhone that plays music and videos, but has a small screen and can’t browse the Net or run iPhone apps. $100, with subsidy." I'd love that for sure!!!
great ipod migration. iPod is very hot item for all generations.
Avermedia dvr
ipod has very large sum of apps where can be played with iphone. I think that is the most advantage of iphone.
Surveillance System
iphone touch screen is already taking the world by storm…a whole lot of people are already moving over 2 apple's sensational touchscreen high tech gadget…the iphones are truly worth every bit of the price…I'm an apple maniac 4 live! props!!!
yep as the cost of production of the iphone continues to fall and other copy cat products come into the market then Apple can afford to reduce the initial starting price – the mobile operators will also need to change – it will happen over time and I for one can not wait for it so I can get my hands on one. moses basket
I don't understand why it takes an independent consultant to point things like this out to companies like Apple. I know that this is their first foray into the mobile phone market but it doesn't take a genius to see that the ongoing price for carrying an iPhone around is the largest stumbling block for their headset…especially in this economy
The I-Phone is very powerful and is going to conquer the younger marketet. it will have a hard time removing the blackberry from the business sector but will attract a younger crowd.
I do not understand why apple doesn't get in to markets that are dominated by Nokia. Nokia makes a couple of really good phones, but where ever the iphone goes it usually crushes the compeition. http://apple20.blogs.fortune.cnn.com/2009/02/04/the-great-ipod-migration
These new developments certainly seem enticing enough especially that now it seems that having and using an iphone won't be as costly as it used to be
This is a great opportunity for apple and also for countries that have lower average income but still want an iPhone.
Cristián
I think that the reason I haven't gotten involved in this whole mess is definitely price related. The phone cost is quite high and then the data and usage fees, when you add that to a dollar for most songs. I know I couldn't afford it!
With the avalanche awaiting to happen with 3G phones you might want to look at the manufacturers that make the parts that make up the Iphone and other smart phones. These companies are set to make big profits. If you have some money to buy stocks you might want to research these companies. I think RFMG is one of them but don't quote me on it.
I thought that I stayed up on today's tech deals, but this article is awesome. I know tons of people that would love an iPhone, but hold back on buying once because they can't afford the data plan (or don't want to use AT&T, but that is a different conversation 
). Great read!!!
apple is getting brilliant with their ipods, nanos and their applications too.
cant wait till this new apple phone comes to the uk
grace uk articles
apple is making lots of good stuffs, iphones, ipods, etc.. the looks are good as well as their applications.
now i have an iphone, just getting myself familiar with the texting part. lol.
I actually read about the ipod migration on Game Music good read.
iPhones a good product but they have to be more comfortable in using windows progs, and have to be more compatible with windows, but they done well.
I am a huge iPhone fan. Frank who commented that the weakest part of the iphone is the phone is correct.
Would love to see my rates lower but the phone is worth every dime that I pay for it.
Incredible, the apple iphone is probably one of the biggest profit genreating mobile phones ever created.
I like the idea that the iPhone are about to secure more of the domestic market but I wonder when they are going to focus more on Europe and Asia as Google and their Android are gaining more and more market shares due to the fact that Steve Jobs and Apple is neglecting half the world.
iPhones start to be offered by other cell providers then you might see some service pricing battles being fought. Particularly if they offer the exact same experience/interface as the current iphone, and not tweak it.
I actually agree with some of the proposed ideas in this article. It would be cool if people had less expensive options, and I am sure they will come out with something in the future, but for now they want to keep all of their branding and marketing efforts pointed at the iPhone. It is already doing so well and selling like hotcakes so there is no real reason for them to open the market for everyone. Eventually people will either jump on the bandwagon, or get a competing smartphone such as the Google G1 which is very impressive in its own right. The android OS and the applications for the G1 are comparable to the iPhone and I am considering getting one myself.
The Apple platform has become quite powerful. I think they have opened a lot of people's eyes regarding the mobile web browser and user interface. Even with pure Wi-Fi and no 3G plan they will do well in the market.
Owning an iPhone would be great, but since they have not opened it to all cell phone carriers, it's not available in my area. Hopefully this policy will change in the future.
~Jane
"iPhone nano: A miniature iPhone that plays music and videos, but has a small screen and can’t browse the Net or run iPhone apps. $100, with subsidy."
this one is the best!!
Andy Zaky does great work, and has consistently proven himself to be far more accurate than any paid analyst out there. My concern is that the likes of Sacconaghi and co. continue to be reported without so much as a qualifying reference to their track record. Given their poor historical performance, shouldn’t this be hard-wired in by default?
Jessica
Excuse my ignorance, but what is the $70+ per month data plan? We don't seem to have that cost here in the UK, at least I'm not paying anywhere near that for my iPhone.
Tim – laptop reviews
Congrats Apple.
Now how about working on an accessible open plan to everyone?
What's the point of having an iPhone if you can't get the plan that goes with it. Until you have the answer, let people use their iPod and their affordable verizon phone plan.
I would love to have an iPhone, but I believe they should open it to all cell phone carriers and offer more reasonable data plans.
The cost of an iPhone is actually affordable by anyone. For a one time payment, everybody can save up for any gadget, even a really pricey one. It's the plan that people can't afford. A 100$ cell phone bill, on top of your internet bill, your house phone bill, your cable bill…
Therefore, people owning iPod switching to iPhone might get the itch when they come to realize that the reason they got an iPod rather than an iPhone in first place what for those money reasons
I don't think that Apple should have discontinued the original iPhone. For a $250-$300 price range the old edge model would easily outsell others like Nokia 5800.
Yeahhh… what rational do we have here? how can we consider a product development and strategy ideas from some analyst that can barely do his own job. If he hadn’t missed his numbers by almost $1B, he would have a little more credibility in giving us advices.
Wow, this is quite the incredible topic. I find the ways Apple is trying to convert iPod users to iPhone users quite impressive. Well, granted, I am one of the ones that have converted. Lol. Nice write up.
- Grant S, Phx, AZ
They need just the opposite. A iPhone without the voice plan. Data plan only. Kids text much more than they talk. A flat $15 data plan with no voice would service the demographic much better.
Daniel
I am a huge iPhone fan. Frank who commented that the weakest part of the iphone is the phone is correct.
Would love to see my rates lower but the phone is worth every dime that I pay for it.
I may spring for a iPhone nano. It sounds pretty attractive actually considering the size of 3G iPhone.
Apple shouldn't have discontinued its original iPhone. If Apple release its old EDGE model in India for $250-$300 price range, it can outsell Nokia 5800 express music which is selling well here in India.
I think you have it slightly wrong… it shouldn't be to offer an iPhone with NO data plan.. it should be to offer an iPhone with DATA PLAN ALONE. No voice, no Text. Leave it to Voip, Twitter, and gChat to cover the rest.
I think many of the comments on here are so not aware of how the wireless industry functions. How honestly think they will lower their prices (AKA how THEY make money) so Apple can gain market share? All that helps is Apple.
If you want a cheap data plan get a Blackberry and go to TMO – by far the cheapest in the states. Good luck with having the same coverage footprint though.
Obviously the best way to go is a iTouch and a cheap pay as you go cell phone. Why would anyone want an iPhone as a phone only? Thats the weakest part of the iPhone. iPhone is and will be about it's quirky little apps. If you judge its features on their own it's a poor device but the combining them and having the ability to ADD functionality is the draw.
Also if you think a device with no carrier sub will be cheaper you are delusional. Sure apple could do it but expect devices in the $300+ range. Where's the sub free unlocked iPhone at&t promised?
The current iPhone will NEVER be on VZW or Sprint – it's a hard fact apple fans have to face. Possible when LTE comes along in 2010 / 2011 but I highly doubt before that and if so it would be with Sprint as VZM can't stand Apple or will ever agree to the terms Apple wants .. and that wifi .. kiss that goodbye.
Thank you thank you Shafiq from Toronto.
You've got it. There is no new device needed here, the carriers just need to offer a contract that doesn't force you to have data. Kudos to Rogers and Fido for figuring this out.
It would be far better to create just one device, get the consumer hooked when on wifi, and the letting them buy the 3G data contract if they decide they need it. If they have wifi at work and home, that may be never. But, if they start wishing for it when on the road, then they'll upgrade their service and no new device will be needed.
Repeat — no new device is needed, just more flexible carrier contracts.
RE: Toni's iPhone Touch – did he just lose GPS and 3G? Err…isn't that the original iPhone? Did we really need a new name for that?
Cheap cell phone + iPod Touch gives a large majority of people what they want if your carrier won't let you go without a data contract.
The key thing for Apple is to get people 'platformed in' with the app store. His Nano doesn't do that at all from an Apple strategy perspective. From a consumer perspective, I'm also not sure why anyone would buy a his Nano, when you consider all you lose vs. an iPod Touch plus cheap cell phone (or no cell phone if you live on a wifi campus and use voip). It makes no sense to create buy such a product. There may be a iPhone Nano coming, but Toni's version won't be it.
I'd buy an iPhone if they opened it up to all cell phone carriers and made more reasonable data plans. Right now, my 2-year-old Treo on Verizon does more, has better coverage, and costs less than an iPhone.
I like Iphone, but I do not have it because I do not like ATT. Ihope Apple gets out of the contract with ATT soon
I think Apple needs to get out of its contract with AT&T if it wants to grab a bigger share of the cell phone market also
I, for one, am anxious for the day when the plan costs become a point of competition. The initial price for the phone I can live with, the monthly data plan, plus phone, plus texting charges – I choose not to live with.
OK, thanks then for not quoting Enderle. I do enjoy reading your columns.
I think Toni's premise is weak though, especially since iPod sales were actually slightly up, not down, as so many have been predicting for the past year. Not only that, but the market is shifting to the higher priced iPod touch (for good reason).
Toni is clearly spreading the FUD. He seems to time it just right as well. (Note APPL has been up consistently for the past week or so.)
If they could create an iPhone that could use a cell network the way that the Kindle does. The Kindle connects to the Sprint EVDO network. As of now, I don't think you pay for the cell access. Of course you really can't browse the web on them limiting the network usage.
If Amazon keeps improving the browser for the Kindle (port Firefox?) and still offers free cell network access the iPhone will have a competitor.
When iPhones start to be offered by other cell providers then you might see some service pricing battles being fought. Particularly if they offer the exact same experience/interface as the current iphone, and not tweak it, e.g., the "wonderful" Verizon menu system that they love to stick on their phones.
Andy Zaky does great work, and has consistently proven himself to be far more accurate than any paid analyst out there. My concern is that the likes of Sacconaghi and co. continue to be reported without so much as a qualifying reference to their track record. Given their poor historical performance, shouldn't this be hard-wired in by default?
"ex ped: I don’t remember ever quoting Rob Enderle."
Fair comment Phil, and kudos for not stooping. But the question remains, why are some of these so-called analysts not held to greater account by independent journalists such as yourself? Especially the Munchausen-esque Toni Sacconaghi.
ex ped: Andy Zaky does a pretty good job holding analysts to account for their predictions, as we've reported extensively. See, for example:
– Apple Q1 earnings: Analyzing the analysts
– Apple Q1 2009 earnings smackdown
– The Apple analyst who couldn’t shoot straight
They need just the opposite. A iPhone without the voice plan. Data plan only. Kids text much more than they talk. A flat $15 data plan with no voice would service the demographic much better.
Phil,
I understand your desire to remain outside the "reality distortion field," but c'mon, Tony Sacconaghi? The Tony Sacconaghi who has repeatedly demonstrated that he does not understand who or why or what Apple is. The Tony Sacconaghi who had not one green estimate on your pundits chart, and had the worst earnings estimate of all the "analysts" on the chart. This is the person whom you choose to cite?
If Toni knew his rump from a hole in the ground when it came to Apple, he'd understand that one of Apple's primary goals is to avoid the commoditization of it's products. It's a slippery slope from which there is no recovery. Sacconaghi's supposition would send Apple rushing headlong toward that end.
Apple is selling tens of millions of their "stand-alone" music players a year, they dominate the market, and yet Toni feels that there is some sense of urgency that they need to migrate customers toward a market (cheap subsidized phone/music player combos) which has shown only a mild upward trend. Just ask Verizon (the company which turned down the iPhone) how that market is faring for them.
I so strongly feel that these pundits need to periodically pull some lame-brain theory out of their behinds (ala Burger King) just to generate buzz for themselves along with internet hits. This very much smacks of that.
This is ridiculous.
Why do columnists lose their minds whenever they write about Apple?
Apple's strategy of building the entire user experience is superior, and a lot of us have known this for a long time—long before the "market" had validated it.
The iPhone experience is superior because it brings together the hardware, the software and the service.
An iPhone without a data plan is the iPod touch, as other commenters have pointed out.
iPod users are those who want a music player. Again, they want an iPod. Touch.
And while we're at it, what makes you think that iPhone users and iPod users are mutually exclusive, or that Apple intends for the iPhone to completely replace the iPod?
I don't believe that's the case. Didn't Apple just sell more iPods in one quarter than ever before? In a post-iPhone world?
How about that.
The answer is obvious: Those users can get the iPod Touch!!!
This way, they can keep their cheap cell phone.
Doing an iPhone without a data plan is actually going to be difficult.
The iPhone is so aggressive in tapping into the Edge and 3G networks that you don't have to do anything and it will go on the network.
Even if you only have a regular cell phone plan, the iPhone will still tap into the data network. This will result in a $700 monthly phone bill unless you have a data plan.
Since phone service is routed through the data network, separating voice from data becomes ever more difficult.
The iPod Touch is a perfect upgrade to the iPod. It has everything BUT phone service.
better than 50-50 odds huh? I'll take that bet — in fact — I'll bet the farm on it! Retirement, here I come!
Ahahaha… funny article. I guess you never heard of the iPod Touch. Which can do VOIP.
The iPod just needs a lower price point and higher capacity to match current iPods as much as possible. There is your migration of close to 100 mil to iPod Touch.
Sacco is so lame. iPod touch is what iPod users are expected to migrate to if they want more than a video player. The Sacco doesn’t even realize iPod touch can make wifi phone calls. Lame.
As for iPhone nano, my bet is no way. The iPhone brand stands for 3 things: cell phone, iPod, and Internet access. (It’s actually added a fourth with the AppStore apps, in particular, mobile gaming.) Anyway, did Sacco miss Jobs’ intro in 1/97 when he repeated that line almost a million times?
Why does Bernstein let him cover Apple when he is just so lame and wrong when if comes to Apple? Definitely worst Apple analyst ever.
or, att can just quit requiring a data plan. almost every other att phone is web-capable, but just charges by the kb if the user doesn't have a plan. make the iphone the same way, and those who want the iplan can get it, otherwise they'll just get charged-per-use. really, not hard a concept.
This seems to be mainly an AT&T requirement, not an Apple requirement. An iPhone without a data plan would still be perfectly useful, just use wifi when you need data, internet, IM, email, etc.
But AT&T clearly doesn't like that idea.
I have a feeling Apple couldn't care less either way, for now at least. They're getting their money whether the data plan is sold or not.
I agree with most of those who commented that this scenario seems..unlikely. The difference in cost and plan of the two proposed new products just doesn't make up for their decrease in utility.
I do think, though, that it would make sense for Apple to perhaps establish a few different lines of the iPhone to better cater to consumers.
For instance, 33% of gaming downloads are now to iPhones, and Apple seems to be planning (according to an article on Wired and a few others) to devote a good portion of the muscle of the upgrade in the 2.x iPhone to a better gaming platform. This could increase their hold on gamers and perhaps teenagers, too, but I think this shift in focus could also result in isolating the greater portion of their market who isn't interested in this.
Brand expert John Tantillo named Apple last week's 'brand winner' (Microsoft was named the loser), specifically citing the fact that Apple, unlike Microsoft, pays attention to its Target Market and what it wants.
Tantillo also had a post a while back on women as consumers of electronics–and how companies such as Best Buy had ignored these consumers and had started to mend their ways. Apple would be wise not to make the same sorts of mistakes.
"Not to be too harsh, but what rationale is there to consider product development and strategy thoughts from an analyst that has difficulty doing his own job. Maybe if he hadn’t missed the revenue numbers by almost $1B, he’d be a bit more credible."
That's a pretty big shortfall in the predictions. If the company had banked on those numbers they'd be in real trouble right now.
I personally want to know how this idiot manages to produces an "iPhone Touch" and reduce the price of the device from $600 to $350 by eliminating two chips costing $30 total.
Yeah, I guess I've missed the boat on popular culture again. Add me to the list of people that don't want an iPod without a data plan, but without a phone plan. I use about 600 minutes of cellphone time per year (t-mobile pre-pay), but every day I wish I had data access away from wi-fi points with my iPod Touch. If there were an iPhone that I could pay a monthly data access fee and only pay for the phone minutes that I use ($100 for 1000 minutes, once a year), I would buy one in a heartbeat. The monthly tab for phone time I wouldn't use is what is stopping me.
You know who has absolutely NO CREDIBILITY???
Toni, that's who. Why do you writers ONLY go to Toni or Rob Enderle for anything? It really makes it seem that you all are working together to short the stock. Seriously.
How can any iPod user NOT end up with the iPhone??? It's only been out in it's 3G model for little over a 1/2 year. It's already breaking sales records.
Leave it to Toni to make a huge issue (seeming) out of nothing.
Where are the 'missing iPhones' you were so completely wrong about, Toni? Why don't you ever question these really bad calls, Mr. DeWitt??? Toni could say anything, you would print it like it had credibility, he ends up being totally off-base, and nothing is ever said about it.
It's getting beyond ridiculous.
ex ped: I don't remember ever quoting Rob Enderle.
Thanks for the laughs. Sacconaghi has no business covering Apple — he clearly doesn't understand the first thing about that company. Apple doesn't care about making more money by tinkering with there product lines to offer consumers less. That's stupid Wall Street talk.
Apple's philosophy is — and always has been — simple: Make the best products possible. Period. The rest will take care of itself.
That there is "better than 50-50" chance Apple would make an iPhone without a data plan is so wrongheaded it borders on malpractice as a financial analyst. One: There already is an iPhone without a data plan. Apple calls it "iPod touch." Two: If you think that Apple would sell an iPhone without data access, you've clearly never used an iPhone, or you just have no concept of where the industry is going. Apple isn't interested in producing cell phones. It produces iPhones. The key thing that makes an iPhone special is its access to data — email, the web, apps, location services. Without a data plan, it's just a cell phone with an MP3 player built in. Yuck!
In short, sell any stock you have in Bernstein Research.
Phillip, I want your job. Your predictions make no sense within the Apple strategy we have all witnessed over the past 8+ years. Look at the Mac Pro and the Mac Mini; the Macbook Pro and the Macbook Air. That is where the logic is for predicting the next iPhone form factor. a $150 phone makes no sense, AT ALL. Well, maybe for Dell it does. Yes, you can write for Dell 2.0
ex ped: You want my job, Jared? Is that why you're shooting the messenger?
Not to be too harsh, but what rationale is there to consider product development and strategy thoughts from an analyst that has difficulty doing his own job. Maybe if he hadn't missed the revenue numbers by almost $1B, he'd be a bit more credible.
Completely bass-ackwards! Gimme a 3G iPhone with no VOICE plan! I wanna use it as a portable computer with great connectivity… I don't want to TALK to anyone… and I don't anyone calling me and interrupting me while I'm usint it!
The issue for me isn't the cost of a data plan. In Canada the deal breaker for many including myself is the 3 year contract Rogers forces people to sign if they want an iPhone. If Rogers did not force people to be on a contract so many people would sign up they would have to work overtime shifts in the production facilities.
Toni… I don't think apple is interested in competing with bottom fishers. Steve has as much many times. Why would apple give up a lucrative app store (recurring review) to manage a low cost phone that will need a computer to upload songs to? A more sensible approach would be to bring down the data plan cost from $70 to $25. Apple can do that by building a cheaper iphone that will require less subsidy by AT&T. I believe that's what Apple is working on with PA Semi new processsor. Assuming Apple is capable of reducing iphone cost by 30%, a lower cost data plan using the edge network may be possible. Also, if the edge network could increase throughput lower tier consumers may accept this lower performing device to have access to itunes and App store via 2G. Apple is not going to give up recurring review for lower hardware sells.
Apples strategy is to become the defacto standard for mobile content distribution. Toni, nothing in your plans supports that strategy and therefore is not likely.
Um, why would you lower the price of the iPhone Touch to $150 when you're getting rid of the data plan requirement? At the very least they should keep the price the same, if not raising it slightly.
I agree with the basic premise of the article: this would be a great way for Apple to suck people into the iPhone ecosystem, with an easy upsell to a data plan once new users realize just how great the device is and decide they want "anywhere, anytime" access to their data. Why, just call AT&T and they'll be happy to add a data plan (resulting in an additional subsidy kickback to Apple).
"Make an iPhone that comes without a data plan"
As others have pointed out: It's called an iPod Touch.
ex ped: When did they put a cellular modem in the iPod touch?
He's got it backwards. I want an iphone without the phone capability!! Yes, I effectively want a touch that can access the 3G network when wifi isn't around. I have a touch now, and I"m addicted and wish I could us network applications more often – which I could if the touch had 3G and someone offered a data plan. The 'phone' part of an iphone is nice, but not a must have.
(And, some of us hate AT&T & would buy an iphone anyway if it were on another network…)
Toni has been clueless for a long time. Just compare his analysis with the reported number.
In terms of the $1700 two year cost, it should really be $700 over two years, as most people have a cell phone bill already ($30 x 24 = $720 not $70 x 24 = $1680)
As much as it pains me to admit, in this one single isolated instance, Sacconaghi has a point. Although to achieve this remarkable turn of events he has clearly had to lean heavily on the work of Gene Munster. Nevertheless, Apple knows what's at play, and will aggressively chase the mass market as soon as the flagship is firmly established. This would probably coincide with the next model iPhone (June?) or at latest before the next holiday buying season.
One of the best ways to get Apple to migrate iPod users to an iPhone base would be to get off the poor performing AT&T network and move to a CDMA platform allowing the users to have access to Verizon's EVDO plans and data. I currently sustain a 3 Mb/sec data rate with my Verizon card for my laptop. Nothing that AT&T sells can come close to that!
Apple will increase its iPhone market share and will allow users to upgrade when the iPhone becomes available to all carriers. Simple as that. People do not want to switch to AT&T for a variety of reasons. It's a big drawback to exclusivity contracts. It may have been more expensive, but you would have had more people buy it if they didn't have to switch just to get the phone.
While the concept is good I think Toni's speadsheet needs alot of work. At some point the Ipod may not exist as a stand alone device and I think Apple could easily develop a voice only Iphone with WIFI and no dataplan and sell the phone subsidized for less then Iphone 3G. Apple wants/needs the data connection to really show their strength in devices. I expect Apple to release a high low mix in the Iphone and a GSM only or GSM/Edge device could be a possibility to lower the cost of unsubsidized devices (Russia, India, China).
Apple already has a product that allows the user to have all he features of an iPhone without the data plan. It's called the iPhone.
Up here in the Great White North (aka Canada) You can get an iPhone from either Rogers or Fido (the two telco companies offering the iPhone) with a 3 year contract (all iPhone contracts are 3 years) that only has voice.
Rogers and Fido do not require a data plan when purchasing the iPhone. No additional charge when purchasing this way either.
That said, the beauty of the iPhone comes when you add the data to it.
So the problem is not that Apple doesn't offer the device that Toni wants, it is that AT&T requires you to have a data plan when getting an iPhone.
It's telling that the none of the other comments have argued against the analyst's rational which makes perfect sense. He's prediction of 50-50 before the end of the year is guess like any one's else, but the business case for data plan less iPhone makes perfect sense given the huge market for those type's of phones.
"For the vast majority of those iPod users, the iPhone is simply too expensive — not because of the $199 starting price, but because of the required voice + data service plan ($70+ per month, or roughly $1,700 over the life of a two-year contract) that Sacconaghi describes as “the biggest gating factor to mass market adoption"
And how much are the BB plans? Or other slow-hard-to-use-useless junk out there? Certainly not cheap.
@NY An ulocked 3G iPhone will work on exactly what other national carrier in the US? Before you say T-mo, rmemeber that their 3G is in a different Band…. and will not be acccessible. Back to Edge
Anyone who has followed Toni's coverage of apple – and believe me I'm not alone in doing so – knows that not only his financial forecasts, including quarterly revenue, target prices and unit sales are ALWAYS WAY OFF THE MARK, but his ideas about what Apple should should do next are equally embarassing. Every quarter he comes up with ideas like cutting macbook prices or calling for an iphone nano, or pronouncing Apple's impending doom if they dont do this or the other. Meanwhile, Apple keeps trucking along reinventing already existing products like the ipod touch and blowing Toni's numbers away quarter after quarter. The man has no credibility on covering Apple in any shape or form whatsoever. Frankly, I almost feel sorry for him.
Come June 2009, ATT, by law, will have to unlock all iPones who's 2 year plan expires. That will create a whole new world of possibilities for Apple and iPhone users in the US!
ex ped: Really? Can you point us to that law?
Toni Sacconaghi has repeatedly proven himself to be COMPLETELY CLUELESS when it comes to analyzing anything about Apple accurately. Why would you waste space on his "theories"?
Huh? What's with the 'with subsidy' idea? The entire reason for any subsidy in the first place is that there is going to be a continuing service plan that is expensive enough for the subsidizer to recoup the subsidy over a relatively short period of time.
ex ped: There's still a subsidy for the voice plan.
As hypnosis is my specialty I would say that Apple plans to perhaps hypnotize the population into buying their new inventions? This may not sound too ridiculous when you think about it. Most advertising is all about convincing us that we need or must have something when we probably don't really need it. If you can convince people that they will be technologically left behind, or not be as trendy as their friends etc. then they will buy even if the cost is more than they originally planned to pay. It is just another example of social conditioning. If large companies were not good at it – they wouldn't be where they are today!
Terri D.
Conversational Hypnosis