iPhone Week 2: Impact of the iPhone

Topics of Interest for Week Two 

Now that the iPhone launched on Friday, there will be a news gap in technology that will likely be filled by discussions on topics that currently aren’t being discussed. Here are some of the things to look forward to.

The All-In-One vs. Specialized Device 

This is the argument that the iPhone may help settle: do you want a device that does everything reasonably well or do you want several devices, each specialized for a particular task? Now, the real test will be when we have an iPod or similar popular music device that has the features of an iPhone but connects to a network to get music updates. For a fair comparison, we’d need a marketing campaign similar to the iPhone’s and a product more similar in experience than the iPod currently is, but you can imagine that a future iPod might look a lot like an iPhone without the phone features and either be thinner or have vastly longer battery life. 

Typically, folks prefer an all-in-one if the compromises are small and dedicated devices if the compromises are large. Right now, I would argue the compromises in terms of cost of service and experience are large enough to favor a dedicated device model but the closest things to that are the SanDisk Sansa Connect which has built in WiFi (but it doesn’t do video and is more iPod-like than iPhone-like), and the iRiver Clix Gen 2 which is almost identical to the iPhone in design, but lacks any wireless connectivity to close that gap. 

The right device that has the design elements of the Clix and iPhone and the connectivity of the Sansa and iPhone could actually be favored over the iPhone as a better device until the tradeoffs in an all-in-one can be better addressed. There is every chance a future iPod may be a better choice for many than the iPhone is (and you don’t have to tie it to AT&T/Cingular for phone service). 

The perfect product might be, for most, the combination of a Blackberry paid for by their company and an iPhone-like iPod they buy themselves. It sure would be a lot cheaper for the consumer. 

Reduction in Disposable Income 

People who buy the iPhone are not only spending over $500 for the initial device they are losing over $40 a month in discretionary spending funds. We still don’t know which plan is being favored by those buying the iPhone but they all are substantially higher than what folks individually pay for a phone. 

That’s $40 a month they don’t have to spend on other things, so what will be hurt? Well, they likely can’t cut back on utilities, food, or gas. But they may put off buying new appliances, a new car, a new PC, a flat screen TV, or something else they might pay for over time. They most certainly would not buy an iPod for the 2 years nor any other MP3 player and a new digital camera would also likely fall on this list. 

So there may be collateral damage in terms of secondary spending which will likely hit a broad cross section of industries and even Apple itself. 

Uplift of Competitive Products 

The success of the iPhone will make the entire Smartphone market segment substantially larger and, at least initially, should benefit Apple competitors. Because the iPhone is positioned and configured as an entertainment device, you can’t expense it and it isn’t good at text-based tasks. Yet, people are now getting excited about having a phone like this, and the traditional downside of a phone in this class being too large, given the iPhone’s success, is becoming much less important. 

This should make similar phones like the HTC Touch (currently only available through importers in the U.S.) — which is almost a dead ringer for the iPhone, but can be expensed — much more popular than they otherwise would be if the iPhone appears to already be having a very positive impact on Blackberry (which likely will continue until the 3rd generation iPhone hits). At that time, if the other vendors don’t have a product that competes better with the iPhone when it is likely to be ready for business, they may lose the gains they’ve made back to Apple. Until then, the tide Apple is creating is likely to raise all boats. 

Accessories 

The iPhone will beg for accessories, with the most obvious being wireless stereo headsets. There is only one company that has a line of these right now and that is Plantronics. They have three products in market under the Pulsar brand, ranging from $110 to $250 (hey, you paid $2k for the phone, fees, and service — what’s $250 for a headset?). BlueAnt has an interesting collapsible Bluetooth stereo headset  that should work as well; it’s called the X5 and it sells for around $200.
This is probably where we are going to see a lot of innovation going forward, because there simply hasn’t been much of a market for wireless stereo headsets, but the iPhone clearly changes that. Look for some really cool new products here before year end. 

If you like to text or do e-mail, you’ll quickly discover touch screens suck for this. A portable keyboard helps a lot and this is another niche that hasn’t, until now, captured much interest. ThinkOutside makes a Stowaway foldable keyboard that sells for $150 and uses Bluetooth as well. This keyboard will likely make a huge difference for folks who want to text message or do e-mail with a screen phone like the iPhone and HTC Touch. 

Finally, we likely will see a bunch of iPhone car docks shortly, but I wasn’t able to find one as of this writing. What is interesting is that Microsoft may actually have the patent needed to make one of these things work with something like the iPhone. That was kind of an interesting discovery. 

Buying an iPhone On-Line 

Of course, with the iPod, for those who are experienced buyers, the lesson has been to buy it online. The Apple web store virtually always gets priority, and you don’t have to stand in line for just the chance of getting one. Granted, you’ll have to wait 2 or 3 days, but you may be able to have it monogrammed, and standing in line sucks, particularly if they are out when you get to the front. 

For all of those folks thinking they are going to make a ton of money on eBay, the online Apple store may be their worst nightmare, but for those buying one for themselves, it is their best friend.
Waiting for Generation 2 or 3 

While I still think it would be best to wait until around October for the generation-two iPhone or around this time next year for the Generation 3 (which you may be able to expense), the iPhone will change the phone market and have an impact that goes beyond phones. Regardless of whether you get this phone, it will touch your life in some way in the future, and that makes its launch much more important than I think most realize.

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