AT&T Mobility says more than a million customers have signed up for information regarding the much-hyped iPhone, and Apple Inc.’s Steve Jobs has said that he expects the device to sell around 10 million units in 2008.
An April survey by M:Metrics found that an estimated 19 million U.S. mobile-phone users considered themselves strongly interested in buying an iPhone, despite the hefty $500 or $600 price tag and the fact that most of them (67%) would have to switch carriers due to AT&T Mobility’s exclusive rights to sell the phone in the U.S. for the first five years.
“That kind of latent demand is something I don’t think we’ve ever seen before,” said Mark Donovan, senior VP and senior analyst at M:Metrics.
But if the carrier does manage to add so many customers quickly, it could face significant challenges in handling the onslaught of new activations, new customers crowding its stores, and customer service inquiries related to the iPhone.
Both AT&T Mobility and Apple have kept mum on most details about the device and service as well as their preparations for the initial feeding frenzy and the longer-term handling of high demand. Analysts compared the introduction of the iPhone to the launch of highly anticipated video gaming systems such as Sony Corp.’s Playstation3 and the Nintendo Wii.
Sustaining sales
Donovan, noting that the launch will take place on a Friday, described the launch as “very much like you’d launch a movie. After a big opening weekend, the question is always, can that be maintained? That’s going to be a function of what the consumer-generated buzz on the iPhone becomes, not what the advertising and marketing machine is putting out, which is what we’re getting now.”
AT&T Mobility spokesman John Kampfe declined to discuss the carrier’s preparations and plans for dealing with the potential blitz of customers, but did say that the iPhone will be available in all of AT&T Mobility’s company-owned retail stores, but not through resellers. The phone will be available online immediately through Apple’s Web site as well as through Apple’s retail stores, with availability from AT&T Mobility’s Web site expected to follow within a short period of time.
Synchronoss Technologies, which counts among its customers various cable companies, ILECs and VoIP providers, will provide the platform for service activations, but not much more is known. As far as service plans, Glen Lurie, AT&T president of national distribution for wireless, told the Seattle Post-Intelligencer that iPhone customers would be “asked to have an unlimited package”-although whether that meant an unlimited data plan, voice package or both (and whether it would be a requirement), was unclear.
Donovan said that a broad swathe of users were considering an iPhone purchase: both data-savvy smartphone users and those with less experience in advanced wireless services. He noted that more than 12% of people in the survey who had a strong interest in the iPhone already paid more than $100 per month for their wireless service.
“People who are saying they want to buy an iPhone are very much tuned in to paying a lot of money for both the phone bill and the phone,” Donovan said. “These are very high-value customers.”
Customer service concerns
The companies have offered no details on how customer service calls will be handled, but that is likely to be AT&T Mobility’s biggest challenge, said Roger Entner, senior VP of the communications sector at IAG Research.
“You really hope that this device is very intuitive to use. If not, they’re going to drown in customer service calls, because typically the more complex the device, the more difficult to support,” Entner added.
Apple prides itself on the usability of its products, but the massive amount of interest in the iPhone could also mean that plenty of neophyte smartphone users might need some hand-holding. Entner also said that AT&T Mobility might simply end up fielding calls sparked not by actual problems, but by customer expectations for the device-on network speed, battery life or other aspects-that may or may not be met.
Entner described the expectations for the iPhone being of “mythical proportions. It’s like a superhero from Marvel Comics that also cures cancer and brings world peace just by using it. . Potentially, if they’re not careful with managing expectations, they have the problem of pulling a “Sopranos”-very secretive, very high expectations and a lot of people were let down by the ending.”
Several industry observers concluded that even heavy data use by the iPhone population is unlikely to impact AT&T Mobility’s wireless network, given the carrier’s network capacity and the fact that the device is not 3G-capable. Current Analysis analyst Weston Henderek said if network impacts were to be seen, they likely would be short-lived.
As for broader consequences for AT&T Mobility, Henderek questioned how much control the carrier will have over these (presumably profitable) customers, considering the power which Apple has already exerted so far: the carrier is not mentioned in iPhone commercials and most promotions, users must sign up for an iTunes account in order to activate the service and Apple’s Web site gets a sales jump on AT&T Mobility’s.
“It seems like [AT&T Mobility] has sold its soul to Apple,” Henderek said. “In their grasping to be the first and have an exclusive with the iPhone, did they release their customers and just become a dumb pipe for this thing?” If so, he said, it could end up being a potential negative for the company if its own brand and customer access are pushed aside in favor of Apple’s.
“The hype is great, but it seems to be an Apple show,” Henderek said.
