Apple's $100 question

The iPhone (I didn't think they were going to call it that—my money was on iPod phone), by my estimation, lived up to the pre-show hype. Using an old salesman's tactic, Steve saved the price for the end: $500 for the 4GB iPhone, and $600 for the 8GB model. At the low end, Apple's giving their smartphone competitors a $100 advantage. Will customers go the extra c-note for Apple?

It helps to dig into the way Apple's positioning the iPhone. I rather like the way Jobs described it as really three devices in one: an iPod, a phone, and an internet client.

As an iPod, the iPhone:

  • has as much storage as an iPod nano
  • plays video like a 5G iPod
  • has a high-resolution 3.5 inch widescreen display
  • syncs through iTunes

As a phone:

  • is a quad-band GSM world phone with EDGE for data
  • incorporates a 2 megapixel camera
  • uh…makes calls, manages voicemail, and supports SMS
  • synchronizes contacts from your desktop computer

And, as an internet device:

  • it runs a real operating system, Mac OS X
  • sports a real browser (Safari)
  • has an HTML-rendering email client that supports most POP and IMAP mail services
  • has custom-built support for Google Search and Maps
  • can run Dashboard widgets
  • can connect over Wi-Fi and Bluetooth

So what we're really looking at is a single device that, taken as any one of it's three stand-alone components, does something new (it's the first widescreen iPod, it's a significant new mobile network computing device), or does something particularly well (thanks to the Mac OS X underpinnings and the touchscreen interface, it's a very, very slick phone). And the way the iPhone works is where Apple starts to really pull away from the competition.

Doubtless we'll hear Palm and Microsoft, for example, counter Apple's hype by pointing out their devices can claim similar, if not even more impressive feature lists. Take the Treo 750, which runs Windows Mobile, but already retails through Cingular for $100 less than the lower-end iPhone will. You'd have to call Windows Mobile a real OS, Microsoft has Windows Mobile Office viewer applications already developed, and the 750 already supports 3G, which gives it a significant speed edge (where you can find coverage, that is). Again, though, even if Apple and Microsoft are close on the "what," Apple blows them away on the "how." Apple's iPhone is to Windows Mobile as Mac OS X is to Windows XP; Microsoft needs the equivalent of Windows Mobile Vista to even catch up to the iPhone's (clearly obvious) ease of use.

And let's not even get started on pitting Apple's industrial design against Palm's.

The question, again, is whether buyers will see the extra $100 they have to pay (while not getting 3G in the deal, and other little quibbles) as a bargain, given not just what the iPhone does, but how it goes about doing it. Personally, T-Mobile can expect this subscriber to be cancelling his contract in the second half of this year. Judging by the reaction in the markets, investors are betting that I won't be the only one, either.

Tags: , , , , , , , , , , ,