How Apple iPhone Changes the Market Landscape and What Should Carriers Do?

The runaway success of iPhone across the world has indeed revolutionalised the next generation of phones. Before the debut of iPhone, touch phones were at best a good to have feature. For example, resisitive screens have always been available on Windows Mobile phones, but it was not THE thing. We would always prefer a physical keyboard and a stylus. Apple changed the game when it launched its first generation of iPhone 2G/Edge . We are awed by the convenience of touch and the ease of zooming in and out of internet pages by panning and pinching with our fingers. The capacitive screen brought the touch phones to a new level. (see here for more details on how capactitive screen works: http://electronics.howstuffworks.com/iphone2.htm )

Since then, we have seen a slew of phones that aim to provide the similar touch and accelerometer capabilities as the iPhone. I said similar and not same because to date, I have yet to test a phone that offers the same level of finess in its touch and accelerometer capabilities (see my other posts on the recent phone models). Storm and G1 are close competitors to iPhone in this aspect - they make it up with many other features that are missing in iPhone today - such as expandable slot, MMS, copy and paste function, just to mention a few). If you may remember, Samsung Omnia had some good success, particularly in countries where iPhone 3G was / would be launched later than Omnia. Now almost all major phone manufacturers from Nokia to Sony Ericsson to HTC have their touch phones series. I won't belabour too much on each of these phones since this is not the intent of this post. I thought this is healthy for the market. Now, we have more choices. Apple has indeed caused a disruptive change in the competitive landscape in just 2 short years. It has even overtaken RIM's second position in smartphone sales. Of course, now with Verizon launching Storm, we have yet to see how this will pan out.

iPhone is not simply about the Phone itself. In fact, iPhone brings with it an ecosystem - the iTunes. If you are a Blackberry user especially if you are a Blackberry Enterprise Server (BES) corporate user, you have very applications that you would buy and load into your Blackberry. Reasons are two-fold. Firstly, the range of applications is limited and certain corporate policies may prohibit installation of third party apps. Secondly, the applications are relatively expensive, say about $10 or $20 or more. Thirdly, traditional Blackberry phone is really meant for one core functionality - messaging. The same goes for Windows Mobile phone or Symbian Phones. To be fair, I must say that there are many third party Windows Mobile applications that are availabie. There is no lack of applications. Then one might wonder, why didn't the "appstore" concept take the central stage in the past so many years since the availability of Windows Mobile phones. Let's look back in history. Windows Mobile was an attempt by Microsoft to take away market share from RIM by extending its dominant reach in the PC market and desktop Windows / Microsoft Outlook base to the mobile world. The whole "wow" factor of having a Windows Mobile phone was that you were able to finally synchronise your emails, calendar appointments and contacts over the air. The big "PUSH EMAIL" capabilitiy was why people wanted to buy a Windows Mobile phone. Plus, the early Blackberry gadgets limited phone functions as its primary purpose was for messaging. Even then, it was a real pain to read attachments on Blackberry. Windows Mobile made up for the shortcomings in Blackberry. Not only do I not need an activation pin/password that is required for my Blackberry (which is different from your Outlook user name / password and domain), I can easily set up my email outlook account on my Windows Mobile phone anytime. Reading attachments was much better on Windows Mobile phone. I could also buy third party applications like Documents To Go. In the case of Blackberry, while similar third party apps for reading attachments are available, they are usually on a subscription model (if you are recall, you could not download and save attachments from a Blackberry back then. You could only open them).

Fast forward to today. What has Apple done? When Apple launched iPhone 2G, Apple was not targeting at enterprise users. It avoided direct head-on competition with either Windows Mobile or RIM. Instead, it aim straight at consumers. Apple leveraged on its core competence - designed a phone that had the form factor which would wow people as an iMAC or MACBOOK did and positioned the phone as a all-in-one for voice, videos, photos, and music. This is what a Apple is good at. By then iTunes was already widely used by both Mac and Windows users and people were used to buying music and synchronising it into iPod. No doubt there would be some cannibalisation on the iPods, but the upside was far bigger. iPhone would allow Apple to make inroads into the mobile world and take a slice of the mobile market which would tip 1.8 billion by end 2007 (estimate from Yankee Group report).

Apple upped its ante in 2008 with the launch of iPhone 3G and this time, Apple aimed squarely at the enterprise market by annoucing the capability of provide Exchange push mail. This will expand its addressable market to some "prosumers" who are at two minds about using iPhone because of the lack of Exchange push mail. Most importantly, the linchpin of Apple's iPhone strategy again lies in its iTunes contents and ecosystem. This time, it announced the availablity of appstore on iTunes. Free applications would be available. Paid applications would start as low as $0.99. This lowered the entry barrier for consumers to try out many types of applications. I would not mind paying just under $5 for any application. Most of the applications were largely games and utilities tools initially but as more and more corporations adopt iPhone, we see that more and more software developers are now incorporating mobile applications on iPhone into their roadmaps. I'm sure Apple would realise that as user loads more and more applications onto the iPhone, he is less reluctant to switch to a different phone and loses all the applications that he has been using or has bought. This is very strong customer stickiness. RIM must have realised this and thus it's luanching its first Application Centre to support Blackberry OS 4.7 (which is what Storm's OS is). If you take a leaf from Apple's iPod strategy, Apple is not going to rest on its laurels and cede the market share. Apple will push out new upgrades on iPhone firmwares (Just look at the time interval between major firmware upgrades 2.0, 2.1 and 2.2 - it's getting shorter). Let's see over the next few months how the competition will heat up. In the meantime, sit back and hold tight to the coming mobile war.

While social networking such as MySpace, Facebook, Twitter became popular way before iPhone took the market by storm (let's see if Blackberry Storm will replicate this success), iPhone has popularised this even more. Now, I can easily access do my 'twittering' or update my flickr or facebook easily with one button on the iPhone. The types of iPhone social networking apps, particularly for Twitter, reflects the underlying trend. Now even Sony Ericsson X1 has a new panel for Facebook. Storm will also come with pre-installed application for Flickr and Facebook. Given the increasing penetration of social networking tools, I'm wondering why carriers (telco operators) are not leveraging on this for their marketing or customer support. I think there is a lot of opportunity in the social media marketing that the carriers are missing out. I have yet to come across a carrier that is proactively using blogs or twitter to do product releases or news updates or to use social networking tools to make product or event annoucements. Going forward, phones will become more powerful and applications running on the phones become the key factor to creating customer stickiness. Carriers should exploit this opportunity to work closely with the handset manufactureres or the independent software developers to pre-install certain applications unique to them. Carriers should also be aware that customer support has to go beyond just supporting the phone hardware itself if carriers really want to be the first touch point to customers. It's no longer good enough to just set up retail stores to sell the phones. Carriers need to understand the needs of the customers and provide the right type of phone to customer. That's true customer service.

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