The 3G iPhone goes on sale on Friday, and UK carrier O2 has probably led the way in stirring up the hype, talking up its business capabilities and claiming that, credit crunch notwithstanding, the device was sold out online days before the official launch. Meanwhile, AT&T has published its own tariffs and a new activation method. But there was also intense speculation about Apple’s claim that it had made this iPhone ‘completely unhackable’ with eyes particularly on China, where analysts now claim there are over one million illegal 2G devices.
Making itself something of a hostage to fortune. Apple claims its new phone will be ‘unhackable’ and only able to be activated by ‘authorized retailers appointed by official telcos’. Of course, every techie in the world will be taking up the challenge, but AT&T has introduced a new activation process to try to keep the iPhone to itself. Over the holiday weekend, a memo was sent to AT&T retailers emphasizing that the iPhone 3G will need to be physically connected to an in-store computer to be activated, a process the cellco insists will take only 15 minutes at most. Every user will need to activate the handset and sign the two-year contract before leaving the store, in contrast to the process for the 2G launch, where the phones were activated online at home.
After that launch in June 2007, hackers unlocked the iPhone ‘ then available only in the US on AT&T’s network ‘ within a month and analysts now estimate that between 33% and 50% of the total installed base of iPhones is illegal. This may have done Apple many favors, spreading enthusiasm, sales and applications for its device virally without actually breaking its exclusivity with AT&T, which came with terms that were deemed very favorable to the device maker in revenue share. But this time, AT&T will be more determined to keep iPhone to itself.
It will have a challenge on its hands. A Utah-based company called Freeit4less has posted the cost of unlocked iPhone 3G models on its web site already, at $100 above US shop prices. However, the company admits it may have to withdraw its no-contract iPhone offer if the activation process really is tight, and another unlocker, Uniquephones of New York, told journalists that it had pulled out of the iPhone sector, saying ‘it’s looking pretty bleak for unlockers’.
Apple and AT&T may soon get the law on their side too. US federal law allows consumers to unlock their phones but this is being challenged in various test cases and at least one regional carrier has won a (non-iPhone related) civil case. But such actions will not work, of course, against hackers who post free unlocking codes on the internet ‘ already plenty are available for the 3G iPhone, and even if these hackers can be traced, they are not making any money from their codes, and so cannot be touched by US law.
Although the 3G iPhones are significantly cheaper than their predecessors, they still come with sufficiently demanding contract terms to drive some users towards the unlockers. As well as the two-year contract, AT&T will charge a $36 activation fee, and early termination of the contract costs a fee of $175. AT&T has also said it is working with Apple on ‘penalties’ for users who fail to activate handsets within 30 days or ‘repeatedly’ buy iPhones. From AT&T, the 3G iPhone will be available for $199 for the 8Gb model and $299 for the 16Gb model, but only with the two-year commitment, and only for new customers, those who purchased an iPhone pre-launch, or certain other eligible subscribers. Those in the middle of a contract can upgrade to 3G but not at the cheaper handset prices. The carrier also released voice plan pricing paired with unlimited data for the 3G iPhone ranging from $70 a month to $130 a month. Text message bundles are additional.
As well as AT&T, carriers in 22 countries will launch the 3G iPhone on Friday. A global launch is a major feat for a relatively small handset maker. ‘Even if a global launch is routine for Nokia, it’s still quite impressive for Apple, which isn’t just launching a phone in these markets ‘ it’s entering these markets with a phone for the very first time, simultaneously,’ said Avi Greengart, an analyst at Current Analysis. Analysts at iSuppli, meanwhile, predict that Apple will ship 8.8 million 3G units in the rest of this year, a run rate that would be similar to that of a typical Nokia smartphone model, and that Apple will need a first run of between one and two million units to supply the carriers launching on Friday. Wall Street is looking for iPhone sales of 10 million (2G and 3G) for calendar 2008, and one of the first tests will be whether Apple’s supply chain can deliver the volumes needed for Friday, fully tested and certified for all 22 territories. In the mobile world, Apple’s supply chain is ranked second only to Nokia’s for efficiency by the specialist analysts of this sector, AMR Research (which last year rated Nokia the best in any industry). The new iPhones are manufactured in Taiwan by Foxconn.
As well as geographical reach, another change at the 3G stage is the iPhone’s increased focus on the enterprise. Business users have taken a low profile with Apple in recent years, and many felt they were being neglected during the original iPhone furore of last year. While they may have coveted the handset’s interface and kudos, it just lacked too many of the features essential for doing business on the move. With the 3G upgrade, Apple promised to address these complaints and said, with typical understatement, that the new model was ‘the best phone for business. Ever.’ Now exclusive UK carrier O2 claims that the enterprise world is, indeed, showing high levels of interest in the product, and has so far been more aggressive about this market than other iPhone channels, even flagship AT&T.
O2 did not offer a business tariff with the first generation iPhone but is providing a range of options with the 3G version. Several iPhones will be able to be placed on a single account, and there will be bundled-in access to Wi-Fi hotspots from The Cloud and Openzone. The iPhone can be added to existing business accounts as a monthly bolt-on, for about an extra £8.50 a month, and the 8Gb variant will come free with most business tariffs on a 24- or 36-month contract. The cost of the 16Gb device will range between £135 and free, depending on tariff.
Although Apple has talked about moving into RIM BlackBerry’s corporate territory, the iPhone is really taking a different tack. While the BlackBerry relies on expensive server software and is a corporate purchase, the iPhone is looking to end user push ‘ people who want the handset as consumers, but also want a single device that also supports their work functions and can be managed (and billed) by the enterprise system. These users will, O2 believes, provide a ground-up demand within small and large companies to include the iPhone in the corporate portfolio.
And the improvements made in the 3G iteration should help with making the product acceptable to companies. O2 has completed beta testing with 15 corporations in the UK, including Citigroup and McDonald’s, and says the feedback is ‘all very positive’, especially as many business users had already taken the 2G iPhone on a consumer tariff and so have become familiar with the interface.
The main concerns were potential security weaknesses and the lack of RIM-style push email, but the new device goes some way to addressing these. Security fears have largely disappeared, O2 said in an interview this week, and iPhone 2.0 comes with a software update that includes enterprise licensing of Microsoft ActiveSync, for push email, calendar and contacts, and also Cisco IPSec VPN (virtual private network) for secure data. On the Wi-Fi side of the phone, the security standard WPA2 Enterprise, the highest level of security for the standard, is now supported. O2 justified the bolt-on cost for the iPhone on the basis that users get unlimited data and Wi-Fi, and iPhone users ‘tend to gorge’ on data, compared to other smartphone users ‘ consuming data at a level more comparable to a laptop user.
Of course, despite the wider distribution, with some countries having more than one iPhone carrier, there are still operators left out of the iPhone fold. In Australia, 3 is the only major cellco not to offer the Apple device, with Optus, Telstra and Vodafone all launching it, and 3 is now appealing to its customers to petition Apple to allow it to distribute the iPhone 3G. Meanwhile, Canadians are up in arms over the 3G iPhone rate structure from Rogers Wireless, and 30,000 have sent a petition to Apple CEO Steve Jobs over the deal. Rogers is making customers sign a mandatory three-year contract and the company will cap data usage at 750 MB a month. Although both AT&T and Rogers offer calling, data and text messaging for $75 a month, Rogers at that price gives Canadians 33% less calling time, half as many text messages, plus the data cap.