3GSM, the big cell phone show, just wrapped up in Barcelona, Spain, and there were a number of big announcements. We’ve already seen LG’s Prada phone, which launched this month, take aim at the iPhone. At this show, we saw two others — both of which are capable of doing more that the iPhone does for less money.
In addition, HP entered this segment with a product that is targeted at changing who buys your phone — a very interesting and different approach to Apple’s own initially unique market-entry strategy.
A large number of people, just because Apple was successful with the iPod, are concluding that history will repeat itself with the iPhone. Let’s once again revisit what happened with the iPod and then drift into a discussion of HP’s offering and the iPhone killers and once again ask if these predictions are at risk.
A Quick iPod Primer
When the iPod launched, it did so against three companies. Sony, which was doing its level best to make DRM (digital rights management) as annoying as possible, Creative Labs which appeared to have the view that big and heavy were good things, and S3, which owned the Rio line and was being sued out of business because of ReplayTV.
In short, they were blessed with a bunch of competitors that either were clueless or going out of business. Still, after years in this market and Microsoft’s entry, the only real competition that Apple got came from SanDisk and its Sensa, which probably displaced more non-Apple products than it did iPods.
To sum it up, this has been a long competition with a bunch of relatively clueless companies that simply didn’t want to do what was needed to compete with the iPod, and the end result is that Apple is considered a near monopoly in the MP3 player market.
Cell Phone Primer
The cell phone market is very mature, and it is largely controlled by carriers — not hardware companies — at least in the U.S. and Asia Pacific. The problems with cell phones often can be traced back to these firms, which are known to take good products and cripple them in a futile effort to force folks to use expensive services to browse the Web, download ringtones, upload pictures, or acquire media.
Over time, the cell phone vendors have become expert at getting through the carrier roadblocks and bringing out phones that buyers find compelling over the objections of the carriers. Even so, few phones are used for anything other than phone calls and SMS (short message service) today, and that is largely because the carriers don’t make it particularly easy or financially attractive to do those other things — although they are improving.
Also, because the carriers control the deal, it is very difficult to make an incredibly good one, which is why Apple’s incredibly good deal is suspect. Based on how the carriers typically behave, one might assume that AT&T has pulled a fast one and will use the iPhone to draw store traffic but then will sell phones that have contracts closer to what AT&T wants — until Apple either agrees to change the contract or drops out of the deal.
Of course, AT&T will need competitive alternatives to the iPhone, and we’ll get there in a moment.
HP’s Alternative Idea
HP looked at this model and rightly concluded it sucked for the hardware vendor, and, like Apple, decided it needed a game-changing offering. Both companies approached the problem from their respective, and different, positions of strength. Apple’s is more like Motorola’s with a different spin — a trendy, attractive phone with the Apple advantage of a high-margin, high-control contract.
HP went the corporate route and designed a phone for companies. With centralized management and security at the core, its iPaq 510 is well-differentiated from the Palm and RIM phones it will find itself up against. Smaller and lighter, but lacking the QWERTY keyboard business users typically like, this phone is designed to utilize voice command and provides capabilities to allow vocal reading of e-mail with voice responses to those messages. It has VoIP (Voice over Internet Protocol) capability built in, and it will work native with Cisco VoIP PBXs (private branch exchanges) as an alternative handset.
HP actually purchased Bitfone to make the centralized management of this phone work, and if it can convince IT that the unique benefits better protect companies — which, in fact, they do — it could be a big hit in the corporate world.
This last part is the risk, though, because IT currently has little to do with phones outside of RIM’s or Good Technology’s smartphones. Still, both Good Technology and RIM have proven that IT can get engaged and make the purchase decision when the value is clearly there, so HP should be able to expand the market. IT hates redundant vendors and should prefer going to HP if HP is already in-house with another solution.
Realize, too, that this is the first of a series of new smartphone products from HP. The phones that follow, I’m told, will have a much more distinctive design. Apple has showcased very effectively that design is important.
An iPhone killer needs to be better than the iPhone in a number of key ways while still targeting the same market. That’s why the HP phone above doesn’t count; it goes after a different market, and even if hugely successful, is unlikely to damage iPhone sales.
The areas the iPhone is vulnerable in are price, connection speed, battery life, storage capacity, data entry, carrier coverage, and camera quality. It will be almost impossible to come up with a phone that looks cooler, has a better brand or a stronger marketing campaign than Apple.
Both of the phones below beat the iPhone on carrier coverage, because they are sold unlocked. Both also beat it on storage capacity and battery life, because they both have memory slots — initially maxed at 8 GB but with a potential max of 32 GB — and replaceable batteries. That’s an impressive start.
TheSamsung Ultra F700, similar in size to the iPhone, goes farther, in that it has a keyboard for data entry and a 5 megapixel camera. It is also a true 3G phone, supporting HSDPA (High-Speed Downlink Packet Access) with a very fast 7.2 Mbps data rate.
No price is yet given, and we don’t yet know what operating system it uses, so we don’t know if it will have access to third-party applications. (The iPhone is locked to the carrier, and it won’t allow third-party applications to be installed.) Samsung’s Ultra F700 does not support Windows file formats but does support Real MP3, suggesting it will be tied to that network for subscription music. Iit also supports a broad spectrum of nonaligned media types.
Even more amazing is theNeonode, with an unlocked price just slightly over the iPhone’s. With a two-year contract, this phone has a number of stunning features that make it more attractive for those that want a media phone.
First is that it’s PC music utility will work like a TiVo to automatically download content off Web music sites to fill the phone with free music. No dollar-a-song problem here.
It has a unique screen that uses a light mesh to detect movement, making it potentially more robust than the iPhone’s more traditional touch screen, and it allows for gestures to perform advanced functions — something unique in the class.
It is based on the Windows CE platform but has a unique, easier-to-use interface –something that I really think other Microsoft customers should try — which potentially creates a user experience similar to the iPhone, but with connectivity to everything Microsoft.
One of the first phones to use theNeomagic platform, its screen efficiency gives it an amazing 16 hours of estimated movie-viewing time on a charge — and it has a removable battery if that isn’t long enough.
It even has an external loudspeaker for music if you want to share with friends. While it really isn’t for e-mail, neither is the iPhone, really. It matches the iPhone on camera and data rate, but it falls a little short on talk time — four hours instead of five.
Smaller and lighter than the iPhone, it is clearly differentiated, and once you factor out the subsidy, it is actually about US$200 less than the iPhone at initial volumes, and it has a lot of price headroom, so could drop dramatically in price as volumes increase. With a subsidy similar to the iPhone’s, it should cost around $300 and could eventually drop as low as $100 as volumes increase over time.
This isn’t to say the iPhone won’t win this battle. It still could, particularly if Apple announces the second “nano phone” as expected in June. However, it does mean not only that the phone market has done what the MP3 folks couldn’t do in nearly five years — come up with competitive products — but also that it did it before the iPhone ever shipped.
Now, that is a major market difference, and once again makes me wonder if the outcome of Apple’s signaling that the MP3 player market was shifting to phones will be that the market shifts to another vendor.
We’ll see — and it will be exciting to watch, regardless.
Rob Enderle is a TechNewsWorld columnist and the principal analyst for the Enderle Group, a consultancy that focuses on personal technology products and trends.