The A in AT&T stands for Albatross
Commentary: Is Apple's exclusive partner weighing down the iPhone?
By Therese Poletti, MarketWatch
SAN FRANCISCO (MarketWatch) -- Author Sue Grafton has gone through almost the entire alphabet for titles of her murder mysteries that take place in Southern California. But her pithy, alphabet-inspired book titles can also be appropriate for mysteries in the technology world.
Some in Silicon Valley remain stumped by Apple Inc.'s ongoing exclusive distribution deal with the increasingly maligned carrier, AT&T Inc. Since Apple announced its new iPhone 3G S Monday, the griping among fans has been non-stop. Some are wondering again, as they did at the launch of the first iPhone, is AT&T an albatross for Apple?
For one thing, the S in the iPhone 3G S seems to stand for "Suspect," not "Speed."
The new phone goes on sale June 19. Apple claims it will be up to twice as fast as the current 3G iPhone, but I don't yet see how. It won't be taking advantage of AT&T's ballyhooed faster network because the network won't be ready. AT&T is not even starting to deploy its new network until many months after the phone is out.
Apple instead must be souping up the new iPhone with faster processors or other chips, along with its new 3.0 software. The phone now has additional processor-intensive functions, such as a more powerful camera, video recording and playback. Apple says in its spec sheet on its Web site that it tested its new iPhone 3G S over current 3G and WiFi networks.
When I asked an Apple spokesman what makes the new iPhone 3G S faster, he referred me to a video of Monday's keynote, which did not give technical details.
Completion in 2011
AT&T said in its press release on Monday that the new iPhone "will be compatible with High Speed Packet Access (HSPA) 7.2 technology, which offers theoretical peak download speeds of up to 7.2 Mbps (megabits per second), though actual speeds will vary as these capabilities become available. AT&T plans to begin deploying HSPA 7.2 later this year, with completion expected in 2011."
So if you buy the new iPhone 3G S for $199 now, it seems you are paying more for useful features in the phone, not the network. A compass, better camera with video capabilities and voice dialing or calling up songs from your iTunes playlist are among the big features. The version with a 32-gigabyte flash drive costs $299, and current iPhone owners who are not eligible for upgrades will pay even more for their phones.
Those thinking about buying the iPhone 3G S need to remember that they will remain on AT&T's current 3G cell network initially. That network sometimes still switches to AT&T's dreaded Edge network, which all users complain is as slow as molasses.
Trip Hawkins is the video-game pioneer whose latest startup company, Digital Chocolate, develops the most popular iPhone application at the moment - a free game called Roller Coaster Rush. When I talked to Hawkins at Apple's Worldwide Developer Conference this week, he said if he sees his iPhone connect to the Edge network, he won't even play or demo a game. He just tries later.
No tethering yet
There were two other points of contention after Monday's announcements. AT&T was absent from the list of carriers worldwide that will immediately support a feature called tethering. This will let the new iPhone 3G S act as a sort of wireless modem for laptops. Apple showed a list of the initial 22 carriers around the world that will support tethering next week at launch; AT&T was conspicuously absent.
The grumbling and laughter in the crowd was unmistakable. An AT&T spokesman told MarketWatch that the telco giant will support this feature but he did not give a timeframe. AT&T is still figuring out how to price the service, among other things.
Apple also is finally offering MMS, for sending multimedia messages like photos and video, but AT&T won't offer that service until late this summer. Another mystery.
The amateur sleuth in me wants to know why Apple sticks with AT&T as its exclusive partner in the U.S.
A former Nokia executive told me recently that AT&T was probably the only U.S. carrier to agree to all of Apple's demands, including not allowing the AT&T brand on the iPhone hardware. Nokia has had a difficult time in the U.S. market, in part because Nokia does not want its phones branded with carrier logos.
Developers' perspective
But software developers tell another side of the story. When a customer buys an application in Apple's iPhone App Store, whether it's a game or car navigation software, it's simple to buy through an Apple iTunes account.
Apple's App Store is a direct contrast to shopping for applications on other cell phones, which feature games or applications that give carriers a big share of the revenue. The billing of these sales is also more convoluted, as each transaction is processed by the carriers, who take a cut of the sale. Consumers are billed separately by the developers.
With iTunes, the billing seems almost seamless, and the cost for whatever you buy in the App Store shows up as part of your monthly iTunes purchases.
"It's far and away easier than on any device," said Josh Parker, marketing manager for consumer electronics at Intermap Technologies Inc. , a Denver mapping company now developing software for the iPhone. The company's AccuTerra software offers detailed maps of national parks both for free and varying prices on the iPhone. It was named the best 3.0 application at Apple's Design Awards this week.
Apple fans have complained about AT&T since the first iPhone was launched two years ago. But that has not stopped all of them from buying the device. Apple has sold more than 20 million iPhones to date, and more than 1 billion applications have been downloaded from the App Store in just nine months.
There now is increasing rivalry among smart-phone developers, from the entrenched Research in Motion Ltd. , the brand new Pre from Palm Inc. and phones based on Google Inc.'s Android software.
All are eager to create the kind of ecosystem with the thousands of software developers that Apple has fostered. As competition gets more fierce, time will tell if Apple's exclusive AT&T deal is indeed an Achilles heel.
