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Slow but steady: How the iPhone is changing the phone industry

Dan Moren | March 11, 2013
Every time Apple enters—or seems to even think about entering—another market, we’re barraged with noise about how the company should, or must, or can’t reinvent this industry. Why all the attention? Because Apple has a remarkable track record of having reinvented industries before, and the reward for a job well done is—surprise—another job.

Every time Apple entersor seems to even think about enteringanother market, were barraged with noise about how the company should, or must, or cant reinvent this industry. Why all the attention? Because Apple has a remarkable track record of having reinvented industries before, and the reward for a job well done issurpriseanother job.

The critical backlash to Apples involvement, or rumored involvement, is frequently immediate and vehement: Nothings changed! Apples failed!

Because its not just that people expect these markets to changeits that they expect those changes overnight. But these shifts dont usually happen immediately or catastrophically; more often than not, its a gradual, tectonic erosion of the established norms.

At the launch of the iPhone, then CEO Steve Jobs did not hesitate to proclaim, in his usual hyperbolic fashion, that the handset would reinvent the phone.

But Jobs prefaced the introduction of the iPhone by discussing two of Apples previous revolutionary products:

In 1984, we introduced the Macintosh. It didn't just change Apple, it changed the whole computer industry.

In 2001, we introduced the first iPod. And, it didn't just change how we all listen to music. It changed the entire music industry.

Moving directly from those to announcing the iPhone, Jobss implication was clear: This product wasnt just about changing the phone as a device.

In the months leading up to the announcementand in the years afterwardthere have been more than a few rumors that Apple might extend its different-thinking ways to the cell phone industry itself; say, by becoming its own carrier, perhaps by selling rebranded service as a mobile virtual network operator (MVNO).

To date, Apple hasnt taken these stepsnor do I think it intends to. But its influence has still unquestionably been felt in the wireless industry at large. And while you might not be able to draw a single, direct line of causation, it seems clear that the rise of the iPhone and other smartphones are nudging the industry onto a new path, whether the industry likes it or not.

The beginning of the end of subsidies

In 2007, Apple struck an exclusive deal with AT&T (then Cingular) to distribute the iPhone, a situation which lasted until early 2011. As part of that initial deal, AT&T would not subsidize sales of the handsetinstead, Apple got a portion of the carriers subscriber revenue.

That was in itself unprecedented, but it didnt end up benefiting Apple as much as the company might have hoped. At a time when people could pick up less capable phones for free or cheapas long as they signed up for a two-year contractthe subsidy-free $500 price tag was too costly for many mainstream consumers. Apple ended up cutting the price, and since the subsequent introduction of the iPhone 3G in 2008, Apple has operated on the same subsidized model as everybody else.

 

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