"An era can be said to end when its basic illusions are exhausted." - Arthur Miller

Thursday, June 21, 2007

iPhone's Greatest Weakness

The Jesus Phone...er iPhone is just a little over a week away from release and everyone is behaving like its the second coming. Apple's stock keeps rising on just the buzz even though there is no evidence the phone is good, that consumers that are curious will translate into gonzo sales and more importantly as the PS3 learned to much pain, the damage that lack of supplies can cause. But really these are all concerns that can't be helped or can be beat.

Really though the greatest weakness for the iPhone is Apple's partner is this deal - AT&T. Most people forget that AT&T used to have its own wireless service back in the '90 that was so aweful that they had to rename it and start from scratch to wipe away the stain. The reason is simple, AT&T is arrogant. Always has been. If it thinks there is no competition, it really doesn't give two-shits about customer service and how much it screws the customer over. They just want the money. That attitude killed then in the growing cell market at the time. They learned from the mistake and built a mostly reputable and large business with Cingular.

However, this is the "new" AT&T and sadly this "new" AT&T seems to smell and act a whole lot like the "old" AT&T and once again that arrogance is likely to leak through since they believe there is no competition for the iPhone. As a result of this, I suspect the average consumer is going to get a sticker shock of at least $80 a month for basic iPhone plan of phone and data. It wouldn't surprise me if that number is even higher.

This is what I think will happen over the next few weeks. The iPhone will sell out in the first day. There will be problems with services on the second. There will be complaints about the phone also early on as people realize their unrealistic expectations of the Jesus phone didn't come true. Based on the sell out news, Apple stock will probably crest over the $200 mark before dropping back down as the backlash starts. Apple will probably address some concerns as they can but most will just be simply the result of the uninformed early adopters. After the initial few weeks of complaints/love, the hardware of the iPhone will be considered solid but probably not needed by most users out there. A regular phone will be just fine thanks and sales will be brisk but not insane. That's Apple's part in this.

For AT&T though, the fun is just beginning. It will start with unprepared and uniformed customer service agents both in the store and on the phone making ridiculous claims or offering horrible advice mostly because they are working from outdated scripts rather then direct experience with the phones. After the technical issues are ironed on the first few days, the complaints will start with people not being switched properly, poor coverage, poor signals, and just generally poor and uniformed customer service. This will not be the customer service's departments fault but AT&T's who decided to add on as few cheap help as they could to meet the initial demand and then dump em once things calm down.

The real fun begins though when people start getting those bills. Its one thing to drop $600+tax for a phone and sign a two year agreement, its quite another to see a $90 and up monthly statement coming in. That is when it will dawn on people that they probably just agreed to pay $600 for the phone + around $1200 a year for service for a grand total of $3000 over two years. For a cool looking phone. The late coming sticker shock combined with AT&T's less is more customer service mentality...that will be what hurts Apple more then anything.

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