Tech IT Easy

July 20, 2007

Why iPhone won’t matter in Europe

Filed under: Apple, Consumer electronics, Entertainment, Europe, Telecommunications, marketing, retail — Kari Silvennoinen @ 10:50 am

Jeremy experiences the iPhone

Many Apple fans are salivating over the rumored launch of Apple’s long-awaited mobile device in Europe. These fans (who put ”fan” in ”fanatic”) are reading the American echo-chamber-blogs and are certain that Apple will not only introduce iPhone in Europe this year, but it will be also revolutionary. As a card-carrying Nokialand citizen who, though, has never owned a Nokia, I disagree.

Telecom operators are far more heterogeneous in Europe and prices vary wildly in each country. Recently EU tried to limit the roaming charges, which is positive development. In USA, Apple went with exclusive deal with an operator so it can control the experience. In Europe, this will be so much difficult. Will Apple discard its main core skill, the user experience, so it can sell its device all around Europe? Or does the user experience mean so much to Apple, that they’re willing to concentrate on just the important markets? I’m betting the latter will happen.

I have to admit that my guess is based on the assumption that Apple launches the phone in Europe on a single carrier. This probably means that iPhone will not be available in all European countries at first. My guess is UK, Germany and France. I’ve very limited knowledge of operators in these markets, but my guess is that there are some big players in all of these fighting over the exclusive deal over iPhone. Other markets will see iPhone later, through subscriptions or after Apple starts to sell iPhone without subscription in whole Europe. But for this to happen, Apple needs to find a way to bring down the price, at around 800-900 euros, it is way too expensive. Compare this to iPods and Macs, which have gained lot of adoption when they entered the price ranges of their competitors.

And then there’s 3G. Telecom operators mis-invested in 3G en masse during the dot-com boom and it’s not widely adopted, but the fact remains that the infrastructure is there and the telecom operators are desperately seeking killer apps for it. Yes, 3G eats your handset battery like nothing else. Yes, the data charges are insanely priced pretty much everywhere. Yes, pretty much everyone has broadband at home these days.

But these are just technicalities. The mobile phone culture is different here and differs widely across countries.

The main reason it won’t matter is… we just don’t care about smart phones. Or what goes as a smart phone on the other side of the pond, as according to some statistics, about a quarter of phones in European hands have the multimedia capabilities. That’s a lot. Go to any European store and try to find a model without camera, music player or internet (3G or EDGE or what they now have). I won’t mention other features like calendars, ring tones, games and such, as they’re are even in the cheapest models already. This is 2007, after all.

The European handset manufacturers made a grave mistake couple of years ago in 2004, when they presumed people were into feature-filled bricks and cheap “clam-shell” phones from Motorola and Samsung came and conquered lot of market ground. After a quick shuffle, both SonyEricsson and Nokia quickly reintroduced cheap models to their offerings. Even Nokia was forced to launch their first clam-shell model. Now, Motorola and Samsung are going for “thin” models and at least SonyEricsson is answering that challenge. Nokia’s answer to these “slim” phones is expected during fall, but the company is know for missing deadlines.

Nokia on the other hand is betting on its N-series line. These are, according to Nokia, what computers have become. Nokia N95 is formidable opponent to iPhone in Europe. On a spec sheet, it has pretty much all the features of the iPhone and is better in some fronts. Naturally, the UI isn’t slick and it doesn’t have the future technology iPhone has.

In Europe the people going for other Apple’s forte, style, might not be throwing their Samsung Ultras, Nokia N-series or SE Walkmans out of the window. They are so much cheaper and get the jobs done and look good. On the other front, technical advances, the likes of N95 is dominating the field with its geek appeal (3G and WLAN, GPS, runs on third-party-welcoming Symbian). And for the enterprise, I don’t see anyone challenging Nokia’s Communicator (and now E-series) foothold. In Finland, the Nokia Communicator (which I think totally sucks not only as a device but as an user experience) is as ubiquitous among business people as iPods are among urban people.

Yes, there will be buzz. Yes, in many ways, it will be a success. But, will iPhone matter in Europe? Probably not. It will have its niche and I hope it challenges other players in the market to improve their user interfaces, but that’s about it.

Better question is, I think, does Apple care? I got the impression that Steve Jobs would of course love to sell as many of these things as possible, but he’s not counting on it to penetrate the market, going so far as using one of the common start-up lies, “we only need 1% of the market”. The device seems to have an audience, but the features might not be so revolutionary to us Europeans that we’d invest in it. It would be a lie to say that Apple is not out to capture the markets it enters, as that’s what corporations do by definition, but it has shown that it can survive as a niche player in computer markets. It’s not Microsoft and it’s not Dell. Using their tactics, Apple probably would have larger market-share, but the costs of doing so might be not worth it (goodwill, community, brand). With iPods, they had tremendous luck (and skill) and could dominate the market without sacrificing their values. I’m afraid many Apple fans believe that with iPhone, Apple has been able to combine the the different market advantages it has in Macs and iPods. This is wishful thinking and I don’t believe that. The fact remains that computers, portable music players and phones are all different markets. Both Nokia and Apple would like us to believe in this trio’s convergence. Their devices, after all, are “what computers have become”.

Kari has always depended on the last year’s models of SonyEricsson. Now he has a SE K610i with Opera Mini installed. Even it will kick iPhone’s ass in Europe.

13 Comments »

  1. It’s funny how anti-apple and anti-microsoft folks have the same methods.
    Exaggerating the prices, lowering the capabilities, lowering the successes…

    IT clearly is all about passion ! ;)

    Comment by Etienne — July 20, 2007 @ 12:11 pm

  2. I wouldn’t have expected such an anti-apple article here on the blog… ;-)

    1. However the market entry policy of Apple in Europe will be: In the longer run iPhones will be available everywhere and with any carrier. So why bother about the success in the first 12 months?

    2. 3G really is a problem in Europe. But: In Germany for example both T-Mobile and Vodafone recently have also built up EDGE-networks so there will be quite a good infrastructure for the iPhone (and for blackberries as well!)

    3. The devices: Of course there are many good smartphones available in Europe, some with even better features than the iPhone. But what about the handling? The iPhone offers an outstanding simple and intuitive handling via its touchscreen. So let’s wait and see how consumers will decide!

    My opinion: The race is open, but Apple might see a similar success as with its iPod (in Europa as in America). And as the iPod is not a single device but a product family so will be the iPhone (in 2 to 3 years time).

    Comment by Matthias Schwenk — July 20, 2007 @ 5:09 pm

  3. I think it’s the first time someone says of Kari he’s anti-Apple.

    I’ve known Kari for quite some time, and I can tell both of you, Matthias & Etienne, that Kari is a huge fan of Apple.

    And even addicts have opinions. There’s nothing passionate in this article.

    Comment by Jeremy Fain — July 20, 2007 @ 5:34 pm

  4. Kari, I believe you are mostly right.

    Nevertheless, one should admit that besides the 3G, most differences between the iPhone and its competitors do not seem to overweight the perceived benefits of the “multitouch (& multipoint)” .

    Of course, these might be completely overrated by customers, but then it is SO HYPE :-)

    I am more dubious about the automatic text correction system, which is almost compulsory because of the virtual keyboard. Will Apple be able to develop the same thing for all the European languages, including Finnish ?

    Comment by Steve — July 21, 2007 @ 11:03 am

  5. Just a reminder, Nokia sold about 90 million phones in Q3 2006, while Apple sold 9 million iPods in the same time-frame. I hope this put things back in perspective. Similar success as with iPod is nowhere near if you’re expecting Apple to be a major player in mobile devices as in portable music devices. And even Nokia has to listen to what the telecom operators want. The operators were up in arms years back about Nokia’s short-lived Nokia Club thing, where they sold ringontes and wallpapers directly.

    I guess what Apple needs to prove about iPhone is that on average, an iPhone owner is more profitable to an operator (ie. uses more SMS and data services). The exclusivity to an operator probably isn’t enough. For the carrier, iPhone must mean higher profits and margins for the 12-24 month subscription period.

    The European price range for iPhone is not from my sleeve, but from amazon.de (they have since pulled the prices from their pages).

    Seriously, what’s up with these extremities? Suddenly I’m anti-Apple? I’m really worried about this trend where you’re either with “us”, or you’re with “them”. Should I be all “I support the tro.. Apple, but not the war in Ir… iPhone”? Another difference between USA and Europe is that most European countries do not have a two-party system so there’s a wider set of opinions than pro- and anti-. OK, I knew I was going to get some backslash. Just take a look at what Jeff Atwood at Coding Horror got when he said Mac’s program installation method is inferior to Windows’ setup.exes, a point that I totally disagree with. At least he deserved to get his ass handed back to him.

    Steve, I think pretty much everyone agrees that iPhone’s UI is the best designed in any handset on market. Is that enough? I can understand the importance of UI, when you use a device, but consider the main use cases of a phone. Most of the time, you’re either talking to it or it’s in your pocket waiting for a call. This is how phones are used now. Phones like iPhone and N95 show us the future when the capabilites of phones have increased and the prices of data services come down and there are more and more services for mobile users on the net.

    Matthias, your point about >12 month timescale is good. I’ve not seen articles about what’s Apple’s iPhone strategy. I guess no-one really knows. My guess is that iPhone will stay US-centric and focus on high-end smartphone market (so don’t expect iPhone Shuffle). I expect iPhone product like to act more like Apple’s laptop product line. Too many people seem to fixate on iPod-likeness of the phone.

    Steve, if you’re talking about predicting text input like T9 (t9.com) and even if you’re not, I believe this is technology Apple doesn’t (and probably patent-wise can’t) develop in-house, but gets elsewhere. The mobile phone market is a patent minefield. This is one of the reasons good ideas and applications rarely spread there. This is bad for customers especially because the lifespan of a device is couple of years, yet many of its innovations are protected for 20 years.

    Comment by Kari — July 23, 2007 @ 8:11 am

  6. 1. The iPhone is NOT just another smartphone. It is to the telephone industry at large what the first Mac was to the computer industry : a wake-up call.

    2. In Europe per se, three major mobile operators : Vodafone, T-Mobile, Orange. All of them do cover the whole region and beyond (e.g. North Africa, Middle East). Partner with at least two of them, and you’re all set.

    3. Again, the iPhone is not just another (smart)phone. It is a computer. Add some hardware connectivity, e.g. USB and external display, and you get a perfect tablet computer. Foreseeable future : a complete family of iPhone products, like the actual iPod one.

    Last, on the pricing issue : just go to the online AppleStore and compare the prices of the iPods and Macs on both the USA site and the France site. Save a few bucks, pricing is the same. Why the heck would you want the iPhone to follow a different scheme ? In the iPhone ecosystem, Apple rules, not the Telco.

    post-scriptum #1 : the iPhone even changes the way the user activates its cell phone.

    post-scriptum #2 : comparing a downsized web browser (Opera Mini) to a full-blown one (Safari, running on the iPhone) is a mistake.

    post-scriptum #3 : mentioning a * iPhone Shuffle * is a total misunderstanding of what Product Marketing is all about.

    Comment by Marc Duchesne — July 24, 2007 @ 12:12 am

  7. ” I can understand the importance of UI, when you use a device, but consider the main use cases of a phone. Most of the time, you’re either talking to it or it’s in your pocket waiting for a call. This is how phones are used now. ”

    Replace “phone” by “computer” or better, “PC”, “talking to it” by “typing on it”, and “your pocket waiting for a call” by “”before your eyes on your desk waiting for answer” : you get the typical reaction of most of the so-called experts/observers/analysts when the first Mac came out back in 1984. It didn’t change the Computer Industry, huh ?…

    Comment by Marc Duchesne — July 24, 2007 @ 12:19 am

  8. Kari, your comparing of the figures of Nokia with those of Apple is a very good point!

    Indeed Apple still is a very small player sitting in a niche and we don’t really know anything about the strategy of Steve Jobs.

    But maybe he saw the market shift from personal computers to mobile devices (the web going mobile). In the market for mobile computing Apple had no device - so the idea for the iPhone might have come up.

    And once the idea of the iPhone was born, it was quite clear, that the new device would need outstanding qualities in order to keep the niche profitable!

    So Steve Jobs might unvoluntarily change the world: Maybe he only wanted a good mobile device for his niche strategy - but the iPhone now obviously seems to have the power to dictate market standards (as far as mobile devices are concerned)…

    Comment by Matthias Schwenk — July 24, 2007 @ 1:23 pm

  9. Marc,
    you make good arguments, but I don’t buy the idea that iPhone is revolutionary. I’m also doubtful about iPhone’s development into a tablet and besides, N95 has TV-out and can be used with external keybarods. (I don’t actually like the N95, but it’s the only phone I know that is in the same market segment as iPhone)

    What I’ve understood, the version of Safari on iPhone is far from full-blown and on par with Opera Mini and N95’s browser.

    As I said, devices like iPhone show us what the future might look like, but we’re not there yet and I think that, Marc and Matthias, you might overestimate Apple’s impact on mobile phone industry. Moving 500,000 iPhones in a weekend is really an amazing job. I’d love to know how that compares to other hype phones on the market.

    I still think the impact on mobile industry is small. My main arguments for this is that it is a closed environment and this is Apple’s first mobile phone - Mac wasn’t Apple’s first computer. This will all probably change in the future, but I’m talking about the iPhone that is now available. Without any clues about Apple’s mobile strategy, the future is anyone’s guess.

    Comment by Kari — July 26, 2007 @ 10:48 am

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