One of my predictions in Flattening The Cellphone Market came true today. It suggests that the iPhone’s Android-induced troubles are about to get much worse.
I had written:
Back to Apple. Anybody want to bet that Steve Jobs hasnâ€™t already been on the horn to AT&T demanding that they allow the iPhone 4G to ship with tethering enabled? From his point of view this is now a must-have if the 4G isnâ€™t going to look like a weak second-best. But AT&T is going to push back, oh yes they will, because theyâ€™re already notorious for iPhone service problems stemming from network underprovisioning and congestion. Hilarity, and possibly some bloodletting, will ensue. There are only three possible outcomes here: (a) iPhone 4G fails to ship with tethering, in which case Apple and AT&T both take a hit, (b) iPhone 4G ships with tethering and it sucks, in which case AT&T takes a hit and Apple may dodge a bullet or not, or (c) AT&T ponies up a gigabuck or three to upgrade to 4G at record speed.
It looks like we got outcome (b).
Apple AT&T announced today that the 4G will allow tethering for an extra $20 per month, but there’s a sting in the tail: only with a new data plan that has a 2G-per-month cap, and the iPhone unlimited-data plan is being scrapped. I think we can deduce from what wasn’t announced that there will be no mobile-Wifi-hotspot support, especially since multiple WiFi clients would hit that cap in no time at all.
And yes, iPhone tethering is going to suck. We learn from Business Week that iPhone users average 7 times the data load of non-iPhone users on AT&T’s network. This means the usage cap will hit them 7 times as hard.
It’s pretty clear that Jobs’s reality-distortion-field failed and AT&T won this round with Apple. The net effect will be to decrease the data load on AT&T’s creaking, underprovisioned network while increasing the toll charged for it. Unfortunately for Apple, this probably also means that the iPhone 4G is not going to achieve feature parity with Android 2.2. Of course it’s possible that Jobs is going to pull the mobile-Wifi-hotspot feature out of the air at WWDC in 5 days, but now that looks unlikely. The timing of today’s announcement tells me that Apple doesn’t want to be seen to be playing catch-up at WWDC.
Catch-up is, nevertheless, what Apple has to play now. It’s significantly behind in features (mobile-Wifi-hotspot, voice recognition, and Flash support are the big ones) and behind in new-unit sales. It’s fast alienating app developers with onerous restrictions on development tools and an app-approval policy that looks increasingly murky and arbitrary. All of which makes me think Steve Jobs’s cunning has deserted him, that he’s either losing his grip or overtightening it.
It will be interesting to see how aggressive the Android-using carriers get about kicking Apple when it’s down. Sprint, in particular, has a golden opportunity two days from now at the EVO 4G launch. It’s already announced that the mobile-WiFi -hotspot feature is on; if Sprint decides to exploit its 4G buildout by making that feature uncapped, Apple will get well and truly hammered among the elite, opinion-molding users it most covets.
This also illustrates the point that Apple’s bind isn’t entirely due to Android. The fact that iPhone has a U.S. exclusive with a badly underprovisioned carrier is seriously limiting Steve Jobs’s ability to respond. One wonders what he will do about that, or can do.