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Week in Review: Expensive upgrades and unwanted iBuds are iPhone 7 ‘highlights’

 

This week was that annual event known as ‘iPhone week’, though it was hard for even the most dedicated Apple watchers to find excitement in the iPhone 7. Faster processor, better camera, improved screen resolution – all of these are to be expected from any high end (or indeed midrange) smartphone refresh, and the most talked-about feature was the much-criticized axing of the standard headphone jack in favor of the new Apple-proprietary iBud.

It is not really worrying for Apple that the iPhone is no longer delivering surprises. Few products do in their tenth year of upgrades – the smartphone is a mature category and reaching the limit of its ability to innovate. Indeed, some vendors seem to innovate merely to grab headlines and stick their heads above the parapet – it is questionable whether consumers really ever wanted 3D, odd-shaped screens and so on. Some suppliers continue to deliver desirable new features, such as Samsung’s edgeless displays, while with the latest Xperia model, the XZ – launched at the giant IFA show in Berlin – Sony is harnessing its inhouse camera expertise to good effect with a 32-megapixel unit.

But despite a host of launches at IFA, the real concern for Apple is not failure to innovate with the iPhone, but failure to innovate in other products areas. When a well-respected columnist headlines his report ‘Could Apple be the new Nokia?’ (http://www.networkworld.com/article/3118085/ios/iphone-7-announcement-could-apple-be-the-next-nokia.html), it’s clear something is going badly wrong for the company which ruined Nokia’s business model. It needs new ‘magical’ gadgets and services to ease Apple’s worrying over-dependence on a single product family, but those are not appearing. Apple Pay and Apple Music are well-received, but are basically copies of existing services, geared to keeping people within the iOS environment and upgrading their iPhones. That strategy will increasingly work only with existing users – a large base, to be sure, but not growing as quickly as Apple needs to keep pleasing its investors. And if it keeps annoying them with decisions like the headphone jack, it may lose customers.

The iPhone will naturally be increasingly an upgrade market, and the most radical change announced at the launch event was an alteration in the upgrade program, which is geared to reviving iPhone revenues even if units decline. In the US, the entry level cost of the new iPhone is, as usual, $650 but the annual upgrade plan, spread over three years, costs $1,150.

In fact, more important things than the iPhone launch did happen this week, though it was hard to tell in a media so fixated on the US. In India, a market where Apple needs to do some serious rethinking, Reliance Jio continued to roll out its low cost 4G voice and data services despite disputes with the regulator and other operators, clearly aiming, after all the years of tortuous network building, to be as disruptive as Iliad Free was in France.  For the first time in India, free voice calls and domestic roaming are on offer, plus data plans as low as $.75 per gigabyte.

The problem is, while consumers will benefit initially, this is not a stagnant, highly priced market like France was. It already has some of the lowest ARPUs in the world, and a high level of competition – probably too high. Consolidation and new spectrum is helping, but overall, the low revenues and profits for MNOs mean they underinvest in coverage and quality of service, often leading to a miserable experience for users. Investments in WiFi, whether by MNOs, Facebook or the government, will be the real driver of new mobile data services and usage.

After Berlin’s venerable electronics show, IFA, the next big jamboree is IBC, the international broadcasting convention. It is a sign of the times that there is more interesting news from these two shows, neither of which would have been of great mobile industry relevance a few years ago, than in CTIA, once vying with MWC (or 3GSM) as the key event in the mobile calendar. Despite being rebranded as CTIA Super Mobility, the conference has become a shadow of its former self, though its merger with the GSMA to form Mobile World Congress Americas next year may hel.

In the meantime, an electronics show and a broadcasting show are full of mobile news, indicating how the smartphone has broken out of its original corral and infiltrated all kinds of activities. Increasing use of mobile video, whether streamed or downloaded, and of broadcast or multicast services on handsets, are blurring the lines for MNOs and broadcasters, and while they argue now about priorities for sub-1 GHz spectrum, in the next generation they may be more interested in working together with converged 5G/TV networks and multiplay services. IBC has only just begun, but LG is already claiming to have set a new bar for mobile multimedia with its new V20 smartphone, with features including Steady Record 2.0, Hi-Fi Quad DAC, HD Audio Recorder and front and rear wide-angle lens cameras.

Now LG, which continues to pack innovative features into its designs, needs to acquire some of Apple’s marketing magic to translate its creativity into increased sales. But conversely, Apple needs to recapture some of that creative drive, not just for the iPhone, but for products which might propel it into a leadership position again.

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