Two years after Apple launched the iPhone it should be totally clear that AT&T’s network was not ready for a true smart phone. What did Apple know that AT&T did not? The Mac maker, iPod maker, and now smart phone maker builds products that get used by customers. Mac users buy more software than average PC users. iPod users buy (maybe acquire is a better word) more music, TV shows, and movies. iPhone users? Apple knew they would use the device as a portable Mac/iPod/cell phone. AT&T wanted to sell gym memberships.
Gym & Insurance
Gym memberships are like insurance premiums. The gym wants your membership, wants you to pay each month, but they’re really not interested in members who actually want to use the gym’s facilities.
If all members came to the gym at the same time, the facilities would be overcrowded, overused, resulting in unhappy customers.
Insurance companies work the same way. They want you to pay the monthly premiums; on time, every month, month after month. But they really don’t want you to collect the insurance when needed.
Think of AT&T as the gym owner, and iPhone users as the gym members. AT&T wants iPhone customers to pay the monthly fee (averaging somewhere around $95), but really don’t want you to use their network.
Discipline, Grasshopper
Apple endured plenty of criticism for choosing AT&T as the carrier of choice for the iPhone. The EDGE network is slow, yes, but 3G was not widely deployed in the US.
Verizon’s network is CDMA which is not compatible with GSM, more widely used elsewhere in the world. Again, Apple chose wisely.
Waiting a year for the iPhone 3G was wisdom personified. It gave Apple time to develop a robust software development kit and distribution model for iPhone applications, utilities, and games.
And it gave original iPhone customers something to upgrade to. It also gave AT&T’s network a lot of stress testing.
Not Ready For Prime Time
To say that AT&T has struggled to keep their 3G network from constant bottlenecks is to say that Joy Behar is not hot. Isn’t it obvious?
Why? Good old fashioned greed. The US cell phone carriers have enjoyed relative prosperity as users flocked to inexpensive phones which used little bandwidth, while the company charged by the minute.
Worse, they charged (and continue to do so) outrageous sums for text messaging, and other services for phones that were smarter than the two phones for free with a two year contract.
AT&T simply was not ready for Apple. In fact, Apple was barely ready (hence the one year delay for the SK).
Gut Feelings
Apple does not mind taking very big risks. The iPhone, for all the change it has wrought on smart phone market segment, was a big risk, but not without precedent, and with plenty of experience to make sure success happened quickly.
The iPod was probably a gut feeling product for Apple. They knew it was ripe because everyone in on the development of the device wanted one, and Apple made it easy to use.
The iPhone was probably a gut feeling product for Apple. They knew it was ripe because smart phones were not so smart, and developers and engineers at Apple knew they could do better.
And, they had the iPod revenue stream and market share to protect. The iPhone was a risk, but it was also do or die slowly.
Apple knew that the iPhone would spur a huge gold rush in application development, but even more so, actual smart phone feature usage, such as browsing, email, and online commerce.
Apple’s (Steve Jobs and crew) gut was correct. AT&T just went along for the ride hoping they’d get a decent hit product and one up Verizon.
Gym Redux
What AT&T did not expect was that customers would actually use their iPhones for email, web browsing, video downloads, online purchases. All that unexpected iPhone usage activity put a huge strain on their ‘gym membership’ inspired network.
Too bad. Lesson learned. Hey, AT&T, some customers actually expect to use what you sell. I didn’t buy a gym membership so I could tell my friends that I work out (even if only once a month).
The iPhone is not only a game changer among smart phones, it’s a game changer for cell phone networks, and it’s a game changer for the gym membership marketing efforts of companies too lazy to give customers what they pay for.