Do you want wireless with that?

Apple’s recent recession-bucking third-quarter results have been widely reported, with continued growth of sales of the iPhone (a staggering 626% on the previous year) and its associated apps as a major driver. Just as interesting to my mind, however, is the associated fall of 7%) in sales of the iPod. The iPod was responsible for Apple’s recent resurgence, yet now it is just one more app – albeit a tightly-integrated one – amidst the many on the iPhone.

So it seems that users value the wireless connectivity on the iPhone particularly highly. What’s more, they value the wide-area (cellular) connectivity compared with the small-area (Wi-Fi) connectivity of the iPod touch, which is otherwise virtually identical in terms of functionality. And the price premium that this wide-area connectivity demands is enormous, when you factor in both the initial purchase price of the devices and the ongoing service costs.

It’ll be interesting to see if this value translates into other devices. One potential example is the Amazon kindle e-book reader, whose wide-area(3G) connectivity contrasts sharply with the need to sideload books onto the main competitor’s devices (Sony). One factor which helps is that Amazon appear to have delivered global connectivity for the Kindle via a single deal with AT&T. As well as simplifying the deal-making for Amazon, this also delivers the potential for users outside the US to gain unparalleled coverage, accessing any network which is available to them even in their home country (see Disruptive Analysis’ speculation on this deal).

These may be early examples of a new wave of embedding wide-area wireless in a wider range of devices. For example, the Wireless World Research Forum has set out a bold vision for 7 trillion wireless devices serving 7 billion users by 2017 (http://www.wireless-world-research.org/). Clearly that implies that most of the growth is going to come from machine-to-machine communications, or if you prefer, the Internet-of-things, enabled by low cost next-generation wireless modems, particularly using next-generation LTE/WiMAX/IMT-Advanced technologies.

Do you want wireless with that?

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The iPhone 3G is radical – but the business model is conventional

The new iPhone 3G, announced yesterday, looks like a very cool device.

But one of the more striking features from a business standpoint is that Apple appear to have reverted to a much more conventional business model than for previous versions.

 

iPhone 3G

When the original iPhone was launched, Apple managed to convince operators to enter into a revenue-sharing model, where they would take a proportion of the call revenues flowing to the operator. This required a very close relationship with the operator. The balancing factor in the deals was operator exclusivity for supplying the iPhone in a given territory. All of this ran counter to the prevailng industry trends, where the movement has been away from such approaches, with handset subsidies and operator locking gradually diminishing, and  revenue sharing almost unheard of, certainly in the case of handset manufacturers.

But with the release of the new device, reports suggest that Apple have reverted to a conventional hardware sale, leaving the operator to collect the revenues in the normal way. They also seem to be moving away from operator exclusivity. The technology may be revolutionary, but it seems that simple business deals work best for all concerned.

 Update: Interestingly, some reports have suggested that the net result is not necessarily favourable to operators, as the reduced retail price of the iPhone 3G requires operators to provide larger subsidies. I suspect operators ae smarter than that, and expect the device to drive take-up of data services and increased loyalty which which will provide a net positive effect.