CHAPTER TWO: MOBILE COMMUNICATION
and the more recent iOS units11: the iPod Touch from 2007, the Apple TV from 2007, and the iPad from 2010 among others.
As early as 2003 at the “D – All Things Digital” conference12, Steve Jobs showed interest in the possibilities of the mobile phone, and in 2005 Apple and Motorola launched
“ROKR E1”, the first mobile phone to be integrated with Apple’s iTunes software13. The collaboration ended in 2006, just five months prior to the announcement of the iPhone in January 2007 at the Macworld Conference and Expo. Even before the initial announcement of the iPhone, there was considerable speculation on what the “rumored Apple mobile phone” would look like (see Figure 1). Writing for The Mac Observer14 on November 9th 2006, John Martellaro stated:
“For several years now, we've all been swooning over the possibility of an Apple product we all believe will be called the ‘iPhone’. Why is this? I believe it's because, deep down, we suspect, based on Apple's track record, that the Apple iPhone will be a very desirable product. It will blow away the competition. It will make us look cool just using it. It will be a work of design art. And we'll want one.”
The hype of the iPhone took off when Apple CEO Steve Jobs unveiled it at the annual Macworld Conference and Expo. The dramatic introduction, accompanied by applause and a standing ovation from thousands of Apple enthusiasts, was followed up by a public relations attack and a large number of articles in blogs, publications, and the mainstream media.
11 Apple units that run on Apple’s updated operating software iOS.
12 http://d8.allthingsd.com/speakers/steve-jobs/
13 http://direct.motorola.com/hellomoto/rokr/
14
Figure 1: Examples of the Rumored Apple Mobile Phone
The Mac Observer, 9 November 2006 iPhoneFreak15, 20 October 2006
Apple claimed that the iPhone would be easier to use than other smart phones because of its unique touch screen display and intuitive software that allowed for such user-friendly features as scrolling visually through voice mail messages and easy access to the Internet, video, music, and third party application libraries.
Figure 2: Launch of the First iPhone in New York City, 2007, and Copenhagen, 2008
iPhone Edge launch, New York City 11 July 2007
iPhone 3G launch, Copenhagen 10 July 2008
15 http://www.iphonefreak.com/2006/10/iphone_fake_pic.html
Apple aficionados elevated the status of the iPhone to unprecedented proportions. John Martellaro’s prediction proved to be very accurate and as the launch date approached people all over the US waited in line for days to secure an iPhone. The launch itself, which took place over a weekend, was an event with live music, performances, and distribution of related samples. In Denmark an event leading up to the launch was held at midnight the year after (see Figure 2).While Apple began selling the iPhone, skeptics were questioning the hype surrounding it. The iPhone was less capable than existing competitive devices in many ways. The first release did not have 3G, using the older 2G technology from Edge; it did not allow synchronization with popular software programs, such as Microsoft Office including Exchange; and the camera was a mere two megapixels compared to the standard five megapixels in competing smartphones.
Alongside the less competitive functionality, users were tied to a single network provider:
AT&T in the US and Telia in Denmark. Finally, the monthly subscription plan for using the iPhone was one of the most expensive plans to date. Despite these apparent shortcomings, Apple sold 270,000 iPhones in the US in the first thirty hours of the launch weekend16 and the accumulated sales worldwide have since escalated (see Figure 3). The explanation for the escalated sales can, at least to some extent, be attributed the ecosystem surrounding the iPhone. It is not just a competitive mobile device, but rather it is a multipurpose information appliance (Hong and Tam, 2006) that complements the personal computer, and can be carried everywhere.
16
Figure 3: Accumulated iPhone Sales Worldwide, 2007-2011
Source: Apple's Press Release Library: Quarterly Sales Statements
The announcement of the iPhone and the statement that Apple would be entering a
“multi-year partnership” with AT&T (at the time Cingular) meant an exclusive mobile voice and data service plan for iPhone users. According to Apple, AT&T was the “best and most popular carrier in the US”17. The media, however, noted that the large US competitor Verizon Wireless earlier declined the offer to enter a partnership18, and that while AT&T now had a multi-year exclusive contract with Apple to sell the iPhone19, Apple was, and still is, responsible for defining the iPhone's specifications, setting the price, building the user interface, deciding which 3rd party applications are allowed to be installed on the device, as well as the decision not to include 3G data support in the initial iPhone. Furthermore, AT&T only has on-screen branding and no brand name on the exterior of the iPhone. While Apple has confirmed that a payment agreement exists, the
17 http://www.apple.com/pr/library/2007/01/09cingular.html
18 http://www.usatoday.com/tech/news/2007-01-28-verizon-iphone_x.htm?POE=TECISVA
19 Recently, Apple entered a partnership with Verizon in the US and a partnership with 3 in Denmark.
0 20000 40000 60000 80000 100000 120000
Q1 2007 Q2 2007 Q3 2007 Q4 2007 Q1 2008 Q2 2008 Q3 2008 Q4 2008 Q1 2009 Q2 2009 Q3 2009 Q4 2009 Q1 2010 Q2 2010 Q3 2010 Q4 2010 Q1 2011
Tusinde iPhone Sales
exact details have never been disclosed. It has, however, been estimated that Apple receives 18 USD per customer per month from AT&T, which amounts to 432 USD per subscriber over at two year contract period20. The power relations between the actors of the mobile ecosystem have thus undergone a tremendous change. Whereas network operators traditionally were the powerful players within the mobile industry, able to price mobile phones and subscriptions based on competition, Apple, the mobile platform provider, has now become the powerful industry player that charges the network provider for selling its products. This revenue sharing model has set a new industry standard. Prior to the partnership between Apple and AT&T, a mobile device producer enforcing a new market structure had never before been observed. The popularity surrounding the Apple brand, along with the hype created at the yearly Macworld Conference and Expo, is continually being satisfied, and the expectations of Apple’s innovative designs continues to live on.
Figure 4: Accumulated Application Downloads Worldwide, 2008-2011
Source: Apple Timeline: http://www.apple.com/pr/products/ipodhistory/
0
2000 4000 6000 8000 10000 12000
Q2 2008 Q3 2008 Q4 2008 Q1 2009 Q2 2009 Q3 2009 Q4 2009 Q1 2010 Q2 2010 Q3 2010 Q3 2010 Q4 2010 Q1 2011
Millioner
App store downloads
By January 2011, Apple had sold almost one hundred million iPhones worldwide and consumers had downloaded ten billion applications from the App Store (see Figure 4).
Upon its introduction, optimism that the iPhone would be available “unlocked” (open to other networks) through gray market channels in the US was met from AT&T with a promise of retaliation against those who unlock the iPhone21. A week after the US release, hackers at the “iPhone Dev Wiki” managed to partially unlock the iPhone and released a program for others to do so as well. Other hackers subsequently managed to completely unlock the iPhone and within two months the original “iPhone Dev Wiki”
team released free software to facilitate this22. In response, Apple released software updates that disabled unlocked iPhones, starting the inevitable arms race: each software update was followed by a program to unlock the updated iPhone. Consumers did not just unlock the iPhone in order to use it on other networks other than Apple’s exclusive partners, they also started to “jailbreak” the devices to remove any limitations imposed upon the iPhone by Apple, such as the design and third party application limitations mentioned above.