Apple – Opening Up – It’s About Time But Hacking and Unbilled Calls Are Still an Issue

Implications: By the end of March 2008, Apple has sold a grand total of 5.7 Million iPhones.  Big whoop.  Who cares?  The number is a painfully low and a pitiful reminder that the computing device market just does not understand the mobile handset market.  The company has been selling the iPhone since July 2007. If this were any other handset maker, the stock analysts would be calling for the head of the company’s CEO.  The Street is definitely biased towards Apple. The company’s numbers include a significant number of hacked handsets. But I applaud Apple for finally taking steps to open up distribution of handsets to other carriers.

Analysis: I give Apple a lot of credit for finally doing something they should have done months ago.  Let us hope Apple starts selling the handset like this worldwide.  I understand that exclusivity was a gimmick to get attention from Wall Street and even AT&T’s way of getting press attention.  I have no problem with a company promoting its wares for a short period of time.  However, long term exclusivity does not benefit the consumer and holds the investors and consumers hostage to a certain company.  I am pro consumer and pro investor.

The consumer benefits from competition.  Apple’s iPhone raised the bar of the competition.

Even though the iPhone really was not as advanced as brokers would like to have you think the fact is people who were buying up tech stocks often don’t understand the finer points in technology products.  For example HTC’s Touch was launched before the iPhone yet hardly an investor heard of the company.  So, the iPhone created the kind of stir that forced the other manufacturers to duplicate and surpass the handset.  The competition forced Apple to finally make a 3G phone.  Nothing but upside for the consumer.

As for the investor, the competition means more opportunities for investors who are seeking to put money into companies other than Apple.  Apple supporters fail to understand the importance of what Apple has done to the handset business – forced the other handset makers to emulate and even surpass the iPhone.  Nothing but upside for the investor.  Keep in mind not everyone wants to own Apple stock.  It’s called choice.

Exclusivity eliminates the consumer’s ability to make a choice.  Exclusivity was a cute gimmick that has a long term impact on the cellular carriers.  Exclusivity made the iPhone such a collectible that hackers have now pushed up sales and AT&T and other carriers now have no way of billing the hacked phone users.

This unique situation with the iPhone has resurrected the cell phone fraud industry.  See my past analysis entitled, Missing iPhones – Good For Apple and a Disaster for the Wireless Industry, also see my past analysis entitled, The iPhone is a Hit in China – Thanks to Hacking and Smuggling.  The press has already reported a significant percentage of the handsets sold are now operating without the carriers’ ability to bill the user.  Apple wins and the carriers and the carriers’ shareholders lose.  The Street is biased towards Apple because of the transaction fees generated by the purchase of the company’s stock.  Yet no one seems concerned that the carriers are losing money in unbilled calls.

It is unbelievable that the cellular industry has not been screaming at the top of its lungs over this issue.  Oh wait; they are not screaming because only a handful of exclusive carriers are losing.  As for Apple not getting its share of the Internet access fees, I don’t think Apple is really concerned.  Apple sells devices and sells content online.  The Internet access fees and phone usage fees are just money that is nice to have.  The carriers need the Internet access fees and the phone usage fees.  I am stunned that AT&T and other carriers were so desperate they even agreed to share phone and Internet revenue.  Apple is a handset vendor not a carrier.  AT&T and other carriers provide the network that provides the service.  A little solid competition in the handset space may actually rectify this insane arrangement between a handset vendor and a carrier.  The revenue generated by content needs to be shared without the handset vendor sticking its nose into the revenue stream.

Handset competition will dump dozens of models of smart handsets onto the marketplace.  The handset is a commodity that needs to be easily available to the consumer.

One more suggestion to other carriers who are now going to be accepting the iPhone into their networks:  Improve handset security and authentication algorithms.