Analyst Angle (Special Edition): Apple iPhone 4 & AT&T metered data

Editor’s Note: Welcome to our weekly feature, Analyst Angle. We’ve collected a group of the industry’s leading analysts to give their outlook on the hot topics in the wireless industry.
You have to love the ritual: Every June at the Mac Worldwide Developer’s Conference in San Francisco, Steve Jobs delivers a keynote address. For the past few years, he used this opportunity to announce the next iPhone as well as to give an update on a few other products. And, when it’s a big announcement, he likes to wait until the end of his talk and say, “Oh, and just one more thing” (which usually brings cheers from the audience). Steve used this year’s occasion (Monday, June 7) to announce the iPhone 4 – the fourth model of the iPhone since it began to ship three years ago in June 2007.
Enhancing rich media is clearly the focus of the new iPhone, which introduces a much-improved digital camera, video capture in HD, and a forward-facing camera to enable video calls. The new iPhone supports AT&T’s next generation of high speed wireless data communications called HSUPA (high speed uplink packet access) to provide 7.2 megabit per second downlink and 5.8 Mbps uplink capability. HSUPA finally brings faster data communications speeds to AT&T’s network (along with much broader coverage).
The iPhone 4 is a lot thinner at 9.3 mm, and that’s very cool because thinner handheld devices feel better in your hand. The metal band on the side of the iPhone 4 is actually part of the wireless antenna.
The iPhone 4 has a new high resolution display that Apple calls the Retina Display – delivering 3.5-inch diagonal, 960×640 pixels (326 pixels per inch), and a solid 800:1 contrast ratio (that’s a four-times improvement). The iPhone 4 digital camera is now 5 megapixels with five-times digital zoom, and the video can capture HD movies at 720p at 30 frames per second.
Other new features in the Apple iPhone 4 include delivery of Version 4 of the iPhone OS – now branded as iOS4 – that includes multi-tasking (allowing users to do multiple things at the same time, such as listen to music while browsing the Web or playing a game). Multi-tasking is even more important for the iPad where users desire to open and interact with multiple applications at the same time.
Folders now available on the home screen are actually very useful because people are downloading an array of applications. Folders allow you to group your apps by whatever category you’d like to use. And, Apple added threading to e-mail which is really helpful – you can each e-mail exchange between you and someone else in one place. Outlook 2010 will have this same feature. Finally, the new iAd platform begins on July 1 with developers getting 60% of the ad revenue for including ad spots in their applications.
And, yes, Steve did his famous “Just one more thing” by announcing FaceTime – video calling over Wi-Fi that will likely now become popular, especially with the younger crowd. Apple will support FaceTime with 3G later. FaceTime is a nice addition, but I think he should have kept the famous closing to announce something really big such as signing on with Verizon Wireless or coming to peace with Adobe over Flash.
The price of the iPhone 4 with a two-year contract is $199 (16 GB) and $299 (32 GB). Current iPhone owners are eligible for upgrade if their contract is due to expire in 2010.
There are a number of things that are not included in the iPhone 4: a version of the iPhone running on CDMA that would allow Verizon Wireless and Sprint to offer the iPhone. It looks like AT&T’s exclusive is still in place. Still no Flash. Still no microSD slot. Still no broadcast video. Still no NFC chip (to enable wireless mobile commerce). So, I guess there’s still a lot of opportunity for future editions of the iPhone (5, 6, 7 …).
AT&T announced last week that they were eliminating unlimited data plans for the iPhone and iPad, although current customers will be able to retain their plan under their current service agreement. And AT&T has announced lower monthly price of $15 per month that includes 200 megabytes of data. A plan with 2 gigabytes of data cost $25 per month which the carrier feels will adequately serve 98% of its subscribers, and then it’s metered after that at the rate of $10 per GB.
These lower cost plans will help most consumers, but those who download lots of videos could find their monthly fees going up, and, in some cases, way up. A good example: Let’s say you downloaded three YouTube videos a day at 500 MB each for 30 days, that would result in a consumption of 15 GB which, in turn, would result in a charge of $25 for the first 2 GB and 13 GB x $10/GB = $130 or a total of $25 + 130 = $155, far more than the $30 the subscriber was paying before.
In the short term, this new pricing scheme is good for most consumers and “expensive” for high powered users. It forces subscribers to do their rich media downloads and uploads using their Wi-Fi connection at home or in public venues.
Longer term, I expect metered pricing to be adopted by all wireless operators. They have spent billions to roll out these networks that are now being used far more than anyone expected. Call it the iPhone effect: Provide subscribers with an easy way to manage rich media (music, photos & video) and they use it – a lot. In the short-term (next year or two), operators like Sprint will continue to offer unlimited plans as a competitive advantage. Also, the AT&T switch to metered plans gives upstarts like Clearwire a chance to offer unlimited plans for those who desire to consume high volumes of rich media.
Long-term (say five or more years from now), AT&T’s current pricing will likely be lowered as they bring on advanced and much higher capacity technologies such as Long Term Evolution. Subscribers will migrate to interacting with more Web sites, more YouTube videos, and will be generating more rich media on their phones. I’d expect that operators within five years will offer 5 to 10 GB instead of 200 MB in the base plan and see metered rates closer to $1 per GB or less.
So, there you have it. Apple announced the iPhone 4 that generates more rich media in better digital photos and HD video. It uses AT&T’s 3.5G HSUPA to assist with downloading rich media (for a price). Now watch for new Android phones from HTC, Motorola and others to match or beat the iPhone 4 feature set.
J. Gerry Purdy, Ph.D. is Principal Analyst, Mobile & Wireless, MobileTrax L.L.C. As a nationally recognized industry authority, he focuses on monitoring and analyzing emerging trends, technologies and market behavior in the mobile computing and wireless data communications industry in North America. Dr. Purdy is an ‘edge of network’ analyst looking at devices, applications and services as well as wireless connectivity to those devices.
Dr. Purdy provides critical insights regarding mobile and wireless devices, wireless data communications and connection to the infrastructure that powers the data in the wireless handheld. He is author of the column Inside Mobile & Wireless that provides industry insights and is read by over 100,000 people a month.
Dr. Purdy continues to be affiliated with the venture capital industry as well. He currently is Managing Director, Yosemite Ventures. And, he spent five years as a Venture Advisor for Diamondhead Ventures in Menlo Park where he identified, attracted and recommended investments in emerging companies in the mobile and wireless. He has had a prior affiliation with East Peak Advisors and, subsequently, following their acquisition, with FBR Capital Markets.
For more than 16 years, Dr. Purdy has been consulting, speaking, researching, networking, writing and developing state-of-the-art concepts that challenge people’s mind-sets and developing new ways of thinki
ng and forecasting in the mobile computing and wireless data arenas. Often quoted, his ideas and opinions are followed closely by thought leaders in the mobile & wireless industry. He is author of three books.
Dr. Purdy currently is a member of the Program Advisory Board of the Consumer Electronics Association (CEA) that produces CES, one of the largest trade shows in the world. He is a frequent moderator at CTIA conferences and GSM Mobile World Congress. He also is a member of the Board of the Atlanta Wireless Technology Forum.