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December 16, 2007, 10:09 am

iPhone: How to get from 2G to 3G without killing sales

picture-32.jpgFor Apple (AAPL), the transition from the 2G (or 2.5G) iPhone to the 3G iPhone is a tricky one.

We know the new model is coming sometime in 2008. Steve Jobs hinted as much in September, and AT&T’s (T) Randall Stephenson confirmed it last month.

The problem for Apple is that it must get formal FCC approval before it releases any new radio-based device. Such applications are public documents, which makes it hard to keep a new cellphone secret for very long.

Jobs unveiled the original iPhone six months before it shipped. If he announces the 3G iPhone ahead of time, he risks choking off sales of the 2G model.

What to do?

The stock traders at The Mac Observer’s Apple Finance Board have started speculating about how Apple might handle this delicate transition. One of the moderators, a Devon-based investor who calls himself sleepygeek (and uses those quaint British spelling conventions), offers a few ideas:

  1. innovative confidentiality agreements with approval agencies.
  2. No change in appearance – so that those encountering the device in advance don’t realise it has new hardware.
  3. Covert hardware upgrades (like macbook 802.11n) so that iPhones sold in the weeks before announcement already have the important new hardware.
  4. Trade in programme – those on contract (and generating revenue share) can trade-in the old iPhone and start a new 2-year contract.
  5. price/model alternation (similar to macbook/macbook pro): new features are announced on a much more expensive model, which becomes the standard at the standard price at the next model change. (link)

How do you think Steve Jobs ought handle the 3G introduction?

yer that would make the iphone owners pretty mad!


http://www.want-it-free.co.uk/

Posted By kate london uk : April 16, 2008 3:31 pm

Yes, government agencies acting in secret in order to protect corporate profits. Why not let the people know what’s in the pipeline so they can make an informed decision? I believe that it was Thomas Jefferson and Ben Franklin who were the biggest champions of free press in our fledgling colony. Too bad they weren’t shareholders, they might’ve sang a different tune.

Posted By KC Mpls MN : March 6, 2008 4:45 pm

iphone apps 3G is the holy grail of smart phone, the applications that will be produced will make this device the best invention like the computer revolution.

Posted By sanejan,bayarea,ca : February 14, 2008 1:28 am

3G is not all that it seems cracked up to be. I have used 2G and 3G devices and there is very little difference when performing multiple tasks.

—-

http://www.soundclick.com/bands/page_music.cfm?bandID=64492

Posted By Yadgyu, Harkeyville, TX : December 18, 2007 6:23 pm

I really don’t think that this talk about 3G and 2G is trying to bring Apple down. It was a shocker to me that Apple actually released the device 2.5G in the USA, let alone Europe where 3G is standard fare.

Battery life is the issue, and hopefully they can fix that.

Also, 3G may not seem significantly faster than 2.5G, but it’s the latency fix that I’m excited about. When a 2.5G phone, or CDMA phone needs data, it literally has to make a ‘call’ to get it. You can’t be on the phone and it takes time to make the connection. a 3G W-CDMA phone will be constantly connected to data, whether you’re on a call or not. Requests for data, given a good signal, are immeadiate, and don’t require the phone to initiate a ‘data call.’

That, and superior call quality given a good signal, is why I like that 3G is coming.

a 2.5G iPhone to me is like the latest iMac being released with 802.11b wireless only, or Bluetooth 1.0, or a honking big CRT monitor instead of a LCD. Since when has Apple adopted old technologies in new devices, except Apple TV and it’s non-HD focus? And we all know how well that did…

Posted By Chad, Austin, TX : December 18, 2007 3:03 pm

…and one more thing.

I’ve been using Apple for 23 years. We had the Mac 128k in our house and just about every Mac after that. I’m a big supporter but I’ve held out on the iPhone, waiting for 3G among other improvements. It’s tough watching my newly converted Mac using friends using and enjoying their iPhones while I sit in wait of slimmer and better things.

Posted By Adam, San Francisco, CA : December 17, 2007 1:35 pm

I don’t care about the iPhone, 3G or not, but 3G will make a difference in more than just data speed. AT&T’s 3G technology (WCDMA) is for voice and data, not just data like Verizon’s ED-VO. 3G call quality is much better than GSM in areas with good 3G signal.

Posted By Dan, Boston, MA : December 17, 2007 11:39 am

@Oranges:

The Software Development Kit (SDK) for the iPhone is scheduled to be released by Apple in February 2008, so expect the development community to have applications that are ready for the general populace available by May or June of 2008 at the latest.

Posted By W. Conner, Portland, OR : December 17, 2007 9:01 am

3G is a non-issue to begin with. To see any real improvement, the service has to be twice as fast. 3G is just a lot of BS from the haters that want to see Apple fail. This is nothing new. Many windoze nerds hate and fear Apple and want nothing more than to see them fail. They come up with all sorts of stupid reasons why the iPhone will fail, but iPhone has more market share in 6 months than their idiotic WIn CE setups have in 6 years.

What would really sell is an iPhone with a cheaper service plan.

Likewise all the FUD about ‘push’ email. Push email is not real email. The last thing Apple is going to do is fall in line behind Microsoft an enable Microsoft’s monopoly to continue with Outlook/Exchange. What iPhone is doing is forcing the Microsoft owned IT groups to open their servers to REAL email which is POP3, etc… OPEN STANDARDS, not Microsoft’s PROPRIETARY servers which have nothing to do with REAL email standards like POP3 and iMAP.

The Apple haters diss the iPhone for not supporting Microsoft Outbreak, when Microsoft can’t be bothered to support it on COMPUTERS not running WIndows. This is a huge purpose of the iPhone, to bust the Microsft grip on email. Email should be based on open standards, not owned by Microsoft.

3G is barely faster than 2.5 G, and incredibily SLOW compared to WIFI which the iPhone already has and no other phone supports.

Posted By Bart, Indianapolis IN : December 17, 2007 8:48 am

Guess they’re already doing that. Dropping excess in Europe.

Posted By mioche : December 17, 2007 6:33 am

Like others here, I just dont care.
I will buy the new iPhone, give the old one to my wife, girlfriend, or my kids!

The iPhone has almost become my MAIN computer (I kid you not) I LOVE this phone!

Such quality – the phone companies must be having a lousy xmas – thats their reward for selling us such GARBAGE in the past.

Now the iPhone shows what CAN be done.

Posted By Harry Wolf, Vancouver, Canada : December 17, 2007 12:51 am

The new IPhone version will have several more features than just 3G. There will be an improved directions/mapping feature, the battery drain issue will be addressed, I am not sure if the new touchscreen with keyboard feedback is ready yet. it will be a reguirement when this moves to more business applications for 2009. It needs to be able to speed type for email very easily. I think they looked at two virtual keyboards, one similar to today’s but one that looked like a blackberry that would only come up on email apps. you’d use the original for web stuff and the other for email- this is not until the business version is released if they go with it. Several more new features as well

Posted By jackimhoff, palo alta ca. : December 17, 2007 12:19 am

Free GPS/mapping, sd Card slot, and a replacable LiPO battery, and the feature set would be complete for me.

2.5 vs. 3G IMO doesn’t make or break it for me.

When are they going to allow 3rd party apps to be developed and loaded on the Iphone, or is Apple&T trying to figure out how to make money off of that feature too?

How will apple make the announcement? Like they always do. Upgrades to existing Iphones will artificially be limited in such a way as to drive up sales for the new featured phones thereby tapping into the new and existing IPhone- smitten user base.

Posted By Oranges : December 16, 2007 9:15 pm

Excellent ways for apple to get through the upgrade without upsetting current iphone owners :)

http://www.free-ipod-touch.blogspot.com

Posted By Jeff, Los Angeles, California : December 16, 2007 7:15 pm

How about using a browser that renders and displays the page so well that most people find its equally fast as using a 3G phone set, but actually works a lot better?

Here’s your next assignment: wonder how Apple will announce iPods with more capacity. Ready, set, go.

Posted By danieleran : December 16, 2007 6:15 pm

I suspect that the arrival of the 3G phone will be accompanied with activation of major new features in the 2.5G phones already out there. A new firmware upgrade and software upgrade would implement what the programmers have been working on. The 2.5G phones may gain many of the features of the new 3G, just not the faster speed. Where is video mode in the camera? Panorama mode? Where is search capability? Easy email of pictures. group addressing, etc, etc. This is a computer, after all.

I half expect GPS and 3G capability to be already in place but unactivated. I expect to buy a 3G phone and continue with it under my old contract if I wish, discontinuing my old phone.

Apple needs to lose AT&T. They are the weak link in an otherwise strong offering. They are in fact really ugly. I doubt that they would be in business if they weren’t a government protected monopoly. Our government divided up the public airways and sold them for maximum profit. Shame on them. Shame on us.

Posted By stustanton, Manhattan, KS : December 16, 2007 5:39 pm

THIS PHONE ROCKS!

As soon as the new one comes out, I’m buying it no matter what. Life it too short. My wife gets the 2.5G. When 4.0 comes out my kid gets the 2.5, wife 3.0 etc, etc!

Posted By Robin B, Bethlehem, PA : December 16, 2007 5:38 pm

I think it’s funny that everyone assumes that the people buying the iPhone are all gadgety savy. I told my sister and a person in my office, who both bought the iPhone, about the 3G coming out, and what they thought about it and I got the same response…’oooohhh really? what’s that?’

Posted By Greta, Chicago Illinois : December 16, 2007 5:19 pm

I find these articles very frustrating, for 2 reasons:

1. Has ANYBODY done a side by side comparison of web-browsing with iPhone’s 2.5G and a 3G phone? A week ago, I saw a german tech site comparison with an iPhone and a Nokia 61 something. There was literally NO DIFFERENCE! And the iPhone was loading full web pages and not “mobile” web pages!

2. I live in LA, and ATT’s 3G service is still far from optimized, widespread and generally usable. Again, a few weeks a go I ran across an article on Macsurfer that compared EVDO-RevA and 3G cards for laptops (tested in LA again). The results for 3G were abysmal!!! 180K download speeds and dropped connections, while the EVDO connection was close to 1MB.

Bottom line: I am very happy with my iPhone and EDGE, and I will upgrade ONLY when there is decent, tested and true 3G service available. Period. Can you imagine if the iPhone had been launched with battery draining 3G plus spotty and slow 3G service? Can you say dead on arrival?

Posted By Marsman, Pasadena, CA : December 16, 2007 4:49 pm

When you say “quaint British spelling conventions”, you mean spelling things correctly, right?

Posted By G Clooney, Los Angeles, CA : December 16, 2007 4:46 pm

Grow up all of you…it is just another electronic toy to waste your time and money on. Find a life and try and disconnect from always being connected — you might find you can live with much less and enjoy life much more.

Why have your office follow you everywhere? Enjoy life outside a 2 1/2″ screen, it is much more interesting and fun!

Posted By Mark, Portland Oregon : December 16, 2007 4:28 pm

Some comparisons between the browsing speed of the iPhone on a 2.5G network and that of other phones on 3G are starting to surface, e.g. this one here done by some German guys:

http://www.applephoneinfo.de/2007/11/edge-gegen-umts.html

(summary in English)
http://www.ipodobserver.com/story/34035

The reason why “common” 3G (not HSDPA) is painful and really not too far from EGDE in speed has more to do with the (again) painful UI of the phones available today on 3G networks than with the network nominal speed (however latency may also be a big issue here).

So I’ve ended with a Nokia N70 which takes more than 30 seconds to open a normal web page with some images in, and I am on a 3G network with full strength signal (i.e. in airports, major railway station, city centres etc.).

Back on the UI responsivity, just think that my N70 sometimes takes 2-3 seconds to change from one screen to another one (not browsing the web), and this explains the paradox why in some tests 2.5G ends up to be “faster” than 3G.

I haven’t seen an iPhone yet, but the UI of the iPod Touch is light years ahead (and faster) everything I’ve seen in all other phones. It’s that simple.

Posted By Daniele Grassi, Prato, Italy : December 16, 2007 4:16 pm

Are all of you nuts! No comparison with edge vs 3G although it’s still the inferior att network either way.

Posted By Eric Cartman, phoenix,az : December 16, 2007 2:37 pm

isnt this the same column that said you wouldnt support the iphone? worthless bs I guess is typical huh….oh well another worthless bs column.. just what we need.

Posted By edtajchman : December 16, 2007 2:23 pm

What’s interesting to me is just how many options there are for Apple to release a new upgraded iPhone. The ultimate in control is pricing control, and Apple can manipulate the pricing anyway they want to retain current customers and bring in new ones. Since their COG’s is so low, they have lots of pricing flexibility. Since they control both the hardware and software – and the software update cycle – they control the ability to roll out new product in perfect sequence with their controlled PR machine. Kind of marvelous, really…

Posted By Ben Dowling, Sherman Oaks, CA : December 16, 2007 2:12 pm

I do not buy the Argument that People will stop buying the iPhone in its current model because a 3G is coming. This is technology. It’s only a matter of time before 3G then 4G or LTE will be next. So most people do not go into that much detail when purchasing a phone. The iPhone 2.5 G sales will definitely slow down after xmas but that ’s normal and Apple has it all calculated in it’s supply chain.
If 3G is gonna b out, it will be released with a higher monthly subscription for example (comment by Keven H. above). That will keep interest in 2.5G especially since most use the iphone on WIFI for the internet anyways. You use EDGE to check email or stocks, maps or weather and that’s plenty of speed.

Posted By Freddy, Los Angeles, Ca : December 16, 2007 2:07 pm

I doubt Apple will let you you trade in your old phone. They have never done that on the past, why would they start now?

All this 3G talk. The edge certainly isn’t surfing at the speed of light, but (edge) 2.5 to (3G) 3.0 doesn’t sound like that big of an improvement. Wifi is a definitely faster than the edge, but how much faster is 3G over the edge? I have a feeling it will be a letdown when I get a new 3G iPhone expecting a major speed increase only to see a barely noticable 8% speed bump or something similar. 50% faster I might get a little excited over, but a single digit improvement in speed would make all this hype over 3G a waste of time for me. Does anybody have link to someplace that compares the speed difference between the two?

As far as releasing the new iPhone goes, Apple will probably handle it the same way they have hewn handling all of their other products. They will announce the new iPhone at a conference and it will be available some time shortly after that. Apple will try to make sure that existing supplies of the iPhone 1.0 are nearly depleted before the announcement to make sure they aren’t left with too much of the old product lying around. When the new iPhone is released they will list the old iPhone on their specialty priced items page at a reduced price to clear inventory. Of course some people will put off buying the first generation phone in order to get the new one. That’s a game we will play for the rest of time with every product made known to man. I’m currently on my fifth generation of computers and something tells me I haven’t bought my last.

Posted By Nodack Phx, AZ : December 16, 2007 1:44 pm

I couldn’t care less. I’ll buy the new one the first day; sell or trade in the old one ASAP, and go on my way.

This phone is now indispensable to me.

Posted By Phil Allen, Houston Texas : December 16, 2007 12:32 pm

Ideally, the current version of iPhone wold have a “software defined radio” (SDR) that would seamlessly transition from 2G to 3G. Not likely, but DO look for SDR’s in future releases.

Posted By Ototo Castro Valley, CA : December 16, 2007 12:24 pm

You have to wonder if the assumption that an imminent 3G phone will choke off sales of the current iPhone is even correct. I would suspect that for many people, the difference between 3G and 2.5G isn’t an issue at all. And it’s not like Apple has never made a major product transition before (68k to PowerPC, PowerPC to Intel), and hasn’t learned anything from those experiences.

A big drop-off in first-generation iPhone sales due to the announcement of a 3G iPhone only seems like a certainty if you live the reality-distortion field where everyone is always chasing the latest-and-greatest technology.

Posted By Jim Winstead : December 16, 2007 12:21 pm

FYI, AT&T does provide 3G. I had been using a 3G phone with AT&T a year before I switched to the iphone.

John

Posted By John, San Jose, CA : December 16, 2007 12:18 pm

AT&T charges $20 a month for EDGE. If they add the option for 3G at an extra $20 a month (and make this pricing public well in advance of the 3G iPhone availability) and still keep the EDGE plan available, new iPhone buyers can make the choice.

On my iPhone, EDGE is plenty fast so I wouldn’t let the 3G option stop me from purchasing another non-3G iPhone if I knew the 3G service would cost me more.

Frankly, I’m much more interested in built-in GPS in the iPhone and an upgrade to Google Maps to take advantage of the GPS data. Now, that is an upgrade worth deferring a purchase for. But, I wouldn’t defer a purchase of an iPhone just because 3G support was coming soon.

Posted By Kevin H., Burke, VA : December 16, 2007 12:06 pm

They’re absolutely going to tier the product line. The original price of the iPhone will become the ‘upper’ tier, just like the iPod product line calved when the ‘next’ versions came out. We’ll see a $599 iPhone initially with 3G, probably double the storage, and a few other goodies like video recording (which we’ve seen hackers enable on the current one)…maybe GPS, maybe some other new bit of software functionality that needs higher off-wifi bandwidth. Then, on the next rev, a subset of these improvements will migrate down the product line – probably 3G only – and the others will remain to differentiate the product.

This way, even though Apple has to provide information on a coming model, its higher price point will limit the cannibalization of sales, as will the long lead time due to FCC, while the ‘true believers’ who bought the original at the original price with no hesitation will still pursue new one.

Posted By JB, Cambridge, MA : December 16, 2007 12:06 pm

I think the newer phones might be more expensive as they might have other features that cost more to produce, or they’ll lower the price of the existing iPhones just before announcement.. In terms of trade-in, I would hope that Apple does a trade-in program of some kind, but what about the contract? If AT&T doesn’t do 3G, then a different carrier must be used and the contract must be re-created with the new carrier.

Kind of a sticky situation.

Posted By David, Sacramento, CA : December 16, 2007 11:17 am
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Philip Elmer-DeWittSilicon Valley veterans like to joke that Steve Jobs must be surrounded by a reality distortion field; if you get too close to him, you start to believe what he's saying. Thanks to the success of the iPod, the launch of the iPhone and the renewed interest in the Mac, Apple has made believers out of millions of customers - and made a lot of investors rich. But Philip Elmer-DeWitt believes that an ounce of skepticism never hurts when writing about the company. He should know. He's been covering Apple - and watching Steve Jobs operate - since 1982, first for Time Magazine, then for Business 2.0, and now for Fortune.
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