The iPhone is a Subscription

The NYT’s Bits Blog spells out how the pricing for the iPhone basically turns it into a subscription, at least for people who want to upgrade their phone regularly. With the new prices and GS model announced Monday, there are now three tiers, as described by Bits:

• The $199-every-two-years plan. That gives you the base model of the most current phone hardware every two years. You have to suffer a year of jealousy when others have the newest phone and you don’t. There is a similar $299-every-two-years plan for the higher capacity phone.
• The $399-every-year plan (with an introductory rate of $199 the first year only). For four times the effective annual cost, you get the base model as soon as it comes out. Premium users may gravitate to the $499-a-year plan ($299 to start out) to be sure of having the very best model.
• The new $99-every-two-years plan, if you want to have last year’s model and keep it for two years. As I wrote Monday, this may go down to a $0-every-two-years plan next year.

Given that the average consumer gets a new cellphone every 18 months, this isn’t really different from what’s been going on for years, it’s just that the price-point is far higher. But it’s not out of line for other smartphones, and if anything Apple has been pushing prices down in the category — for launch prices at least. BlackBerry and Palm both had to launch the Storm and Pre, respectively, at the $200 pricepoint, or they wouldn’t stand a chance against the iPhone.

The difference is that in the past launch prices quickly dropped, sometimes to free, whereas Apple keeps them consistent throughout the life of a product generation. So while it puts pressure on competitors for their launch prices, it also opens the door for them to drop their prices over time, perhaps significantly undercutting the iPhone.

[And for the record, I sympathize with a commenter on the Bits Blog post that it’s unfortunate that so many see resource-intensive products like cellphones as disposable on such a frequent basis. Granted, they get beat up a lot being handheld and portable, but upgrading is by far the most common reason. I have to plea guilty as charged here too, though I generally hang on to a phone for more like 3 years (my Sony Ericsson has a cracked screen, but otherwise I still use it).]

RIM Tracks Employee Calls, Maintains a Monoculture

A startling report on Cnet reveals that Research in Motion, maker of BlackBerries, records all employee calls. The extent of the recording is not quite clear — do they just log the times and the numbers, or do they literally record the content of the call? If the former then there is nothing unusual in that, but if they are recording the content then it seems another kettle of fish. Is it even legal? It’s one thing if the employees know about and agree to it, but my understanding is that the other party on the line also needs to know the call is being recorded.

The Cnet article about RIM’s CIO Robin Bienfait says:

When asked exactly whether it was conversations, rather than just written information she kept tabs on, Bienfait answered: “Everything. I record everything.”

It wasn’t a violation of privacy, according to Bienfait, who maintained the workers were aware of the surveillance: “They’re doing business inside of RIM. Everything they can say or do can be patented…We’re not violating anybody’s privacy. They’re aware that their information is transparent and in visibility.”

It goes on to say:

[S]taff can only use BlackBerry devices for work. Bienfait said she had never had to deal with a request to put the iPhone on the network.

She said it freed her from some of the problems which plagued other companies, where IT departments had needed to deal with people wanting devices to be hooked up to the network which might compromise security. “I think it is a challenge for the industry to be able to manage some of the Gen Y’s,” she admitted.

Aside from the legal question that I’m not an expert on, there are a couple of other worrying things that come out of this — worrying for RIM that is:

1. If you can’t trust your employees, then you’ve either hired the wrong employees, set up the wrong culture and incentives in the organization, or created such a widespread sense of paranoia that everyone assumes that everyone else must be doing the wrong thing, so it’s OK for them to as well. The idea that they can uncover new ideas for patents simply by tracking phone calls is absurd — and certainly about the least efficient way imaginable of coming up with new patents.
2. Maintaining a monoculture of devices is bad practice. I saw this at Sun Microsystems when I worked there years ago (I don’t know if it’s still the case). We were not allowed to use non-Sun machines for anything, even if Suns were patently unsuited to the task. This mentality leads to a lack of understanding about what your competition is doing, and creates a monoculture of devices that other customers are probably not experiencing. You should buy and use all your competitors for extended periods of time and find out what makes them tick. Besides, any large company’s IT organization most likely has some sort of heterogeneous infrastructure of different types of devices, users, needs, technologies and security systems. By forcing a monoculture and not “dealing with” requests for new devices like iPhones, you put yourself in an idealized world that makes it hard to empathize and design for the vagaries of more complex systems.
3. Lastly, the high-handed and dismissive comment about managing Gen-Y’ers really bugs me. This is another example of the holier-than-thou attitude I’ve seen from RIM executives before. Get over it.

Getting Away from All-you-can-eat

An article in Telephony Magazine (snappy title!) talks about the challenges the phone carriers are going to face getting customers off the drug of all-you-can-eat-endless-rollover-minutes plans. Both mobile and broadband providers have got themselves hooked on this, along with their customers, but the fact is it’s unsustainable in the long-run.

Not that I would really enjoy paying more for higher bandwidth, and I definitely don’t think the non-neutral net that some of the carriers have proposed is right for any number of reasons. And caps and throttling of bandwidth typically seem arbitrary and sudden, which ticks people off. But it’s also true that there’s no such thing as a free lunch, and the fact is that the current set-up just doesn’t pay the bills for the carriers, which is going to stifle next gen infrastructure spending. If they can’t even make money off the current system, how can they justify spending the billions on the next one?

Here are some excerpts:

It’s no secret that most broadband plans today are flat-rate, all-you-can-eat - often with some fine print about usage caps that rarely come into play (or cause customer havoc when they do).

In large part it’s that one-size-fits-all approach to billing and charging that is at the center of many of the problems facing carrier broadband delivery today. And it is those monolithic billing systems carriers have relied on for years - slow to process transactions and designed to support simple, yet difficult to change, billing schemes (without million-dollar upgrade projects) - that must be overcome for broadband delivery to reach its true potential.

“The trend is that broadband is moving from an all-you-can-eat service driven by ever-increasing bandwidth apps to a combination of throttling, usage and [quality of service] that could drive new services and allow consumers to differentiate what type of service they get with what they are prepared to pay for,” said Nigel Upton, general manager of business support system products for HP.

The end result is that customers will become more active in choosing - and understanding - how they consume and are charged for bandwidth. “There will be some customers that feel nickel-and-dimed,” [Alice] Bartram said, especially those who were used to consuming huge amounts of bandwidth with no consequence. “But the question is: Are those high-value customers you really want and need to do something about?”

In the end, the key for operators is to understand that the future of broadband billing is less about billing at all - and more about pricing and new service creation and merchandising.

“What we’re talking about instead is using pricing as an alternative to throttling, using it as a way to try to influence and control customer behavior,” said David McNierney, vice president of business development for pricing and rating vendor HighDeal. “[Service providers] need to empower front-office people - product managers and marketing teams - to price and package services to meet not one but two objectives: to maximize revenue, yes, but also to minimize the impact on the network. Typically carriers have learned to put blinders on because their billing systems were so inflexible.”

Article: How the Broadband of the Future will be Billed

Palm Treo Pro: Not digging it

Underwhelming. That’s the word that comes to mind when I look at the new Palm Treo Pro. Yes, nicer looking for sure, with a strong influence from the lower-cost Centro model (and looking rather like the upcoming Blackberry Bold). And it has 3G and WiFi, which is great, and the newest version of Windows Mobile, and GPS, though these can also be found on existing competitors. So it’s got a decent package of features, but what’s so compelling about it that isn’t being offered elsewhere?

In this day and age, offering a screen that takes up less than 50% of the device, especially with as big borders around it as the Pro has, just doesn’t cut it. I’m not suggesting touchscreen only here, as I definitely prefer typing on a physical keyboard to tapping on a virtual one, but really, even a business-oriented device like this one is going to be used to show off photos, looking at web pages, etc. which all benefit from a large screen. 320x320 has been the Palm standard for years now. Heck, even the Palm Tungsten T3 I had 4 years ago had a 50% bigger screen, albeit without a physical keyboard. The Pro’s screen already looks small, and will look even more diminutive over its product lifecycle given how slowly Palm brings out new models.

Size-wise the Pro is almost identical to Blackberries, though longer. It’s fatter than the iPhone. So no real advantage in pocketability or bragging rights there.

The talk time and battery life are good, but the 2MP camera is ho-hum.

In this video Palm talks about how the Windows interface is great because it mimics what people are used to on their desktops. Ironically, as Rob Haitani, the software architect for Palm back in the day used to talk about, the whole philosophy of the original Palm OS was that you should not try to mimic a big-screen mouse/screen environment, because it was not optimized for small-screen direct touch interactions. Transferring desktop interaction patterns onto a handheld was just not efficient, and which is why the early versions of Windows Mobile were slow to use. Now they’ve adopted the Windows platform on this device, Palm has to sing the opposite song.

Palm got a lot right in their earliest models, but they’ve struggled to stay innovative and focused in the last few years.

In the video they also talk about how they wanted to take care of all the little details. It looks like they’ve done that, but by focusing on the small things Palm’s come up with a device that treads water in the market. There are no big things that really push the boat out further compared to other smartphones, no marquee features that really stand out from the increasingly large and diverse crowd. With the current state of the smartphone market, that’s just not good enough to move the needle on their dwindling market share and attract new customers to the Palm brand.