Mimsy Were the Borogoves

Editorials: Where I rant to the wall about politics. And sometimes the wall rants back.

We have met the enemy, and he is our carrier

Jerry Stratton, September 20, 2007

While I agree that Apple is showing signs of iPhone greed in other areas (especially with ring tones), I disagree with Wil Shipley when he writes:

But why is the iPhone locked to a single carrier, so I can’t travel internationally with it? There’s really only one viable reason: Apple wanted a share of the carrier’s profits, which meant giving AT&T an exclusive deal. Which meant, we get screwed so Apple can make more money. It’s that simple.

First, Apple’s share of AT&T’s profit isn’t just for being exclusive. It’s because AT&T is making more per month from iPhone customers than they are from other cell phone customers. Phone plans include a free cell phone surcharge to pay for the free or practically free cell phones that the carriers include with plans. Apple has good reason to want to get away from the “free” cell phone mentality, and I’m glad that they are: that mentality hurts consumers by reducing the incentive for innovation both in cell phones and in cell phone plans.

But this means that unless AT&T charges less per month for iPhone customers than for everyone else, AT&T reaps a windfall on Apple customers. I’d guess that somewhere along the line, AT&T told them that they were not going to remove the “free cell phone surcharge” to iPhone customers. If Apple insisted on it, Apple could just go somewhere else. (Which is not to say that Apple would have tried, just that this was likely a non-negotiable point on AT&T’s side.)

Someday, I hope, those surcharges will go away, and Apple’s share of them will disappear too. We’ll be able to buy the phone we want and then buy a service contract with the carrier we want, instead of having to take what the carrier gives us. Someday is not today.

But more importantly, people who claim that Apple shouldn’t have gone exclusive with one carrier are missing one of the most important innovations of the iPhone: that it provides access to network information that other phones don’t have. The big example, of course, is visual voicemail. This requires changes on the network side, and those changes make it easier for cell phone customers to use their phones. This is something that the networks don’t want to provide. Some networks don’t seem to care about what their customers can do; others are actively antagonistic. In order to convince a carrier to make customer information available to the customer, Apple had to give, and what they gave was exclusivity.

And here’s the problem: from Apple’s perspective, they gain nothing from that exchange. An XML feed of waiting voicemails? This is something that AT&T and every other network should already be providing for free to every phone. It’s a service that AT&T can (eventually) start providing to other phone makers now that it’s available. What’s in it for Apple? They’ve tied their phones exclusively to one network and in return they get something that should have been on all networks since RSS was created eight years ago?

Wil has it backwards. While I’m sure Apple “wants” a share of the carrier’s profits, that’s not why they went exclusive. They went exclusive for technical innovations on the network that make the iPhone a better phone. But those technical innovations are so simple that us geeks don’t see any importance in them. An XML feed? Wil writes those in his sleep. Every data storage system has that, right? Yeah, except phone networks.

Any phone company can easily undercut Apple here. All they have to do is hire someone like Wil for a few days to provide a simple XML feed of their data to their customers. No need for a relationship or contract at all, just a simple file format and a simple API. But they didn’t, and as far as we can tell they aren’t. Apple had to bargain hard to convince a carrier to provide something that simple and basic, so, yeah, Apple should get something real from AT&T in exchange for being exclusive with them.

Edited to add link to Carl Howe and hat tip to Daring Fireball.

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