WWDC: Dissecting the iPhone, Part 2

In this second part of BetaNews' interview with analyst Carmi Levy yesterday, he discusses the iPhone's pricing, as well as the importance of Apple's mobile synchronization service, MobileMe.

When the original Apple iPhone was released last year, there were two glaring omissions which analysts spotlighted right away: One was the lack of support for third-party applications, which some just plain couldn't understand. Obviously, that part was addressed yesterday.

But the second was the lack of services that would enable businesses to purchase iPhones and integrate them into their office networks. Apple addressed that omission as well yesterday, and we spoke with AR Communications Senior Vice President Carmi Levy about what that gap-plugging finally means.

Ed Oswald, BetaNews: I think what the real buzz over iPhone 3G is its competitive pricing. $199 puts it right at that sweet spot does it not?

Carmi Levy, AR Communications: It certainly does. The $199 8 GB model, in particular, brings the iPhone just close enough to discretionary purchase territory that the average person looking for a higher-end smartphone or even a midrange conventional handset might reasonably consider stretching the budget for it. The new pricing structure suddenly and significantly expands the pool of potential iPhone buyers and virtually guarantees that Apple will hit its goal of selling 10 million by year's end.

BN: Makes sense. Since we're talking subsidies, do you think the iPhone will ever be "free?"

CL: I don't think so. However, as it did with the iPod before it, I expect Apple to follow today's announcement with pared down iPhone-branded handsets that appeal to more cost conscious market segments. iPhone nano, anyone?

BN: There has certainly been some rumors to that effect on sites like AppleInsider and the now-defunct Think Secret. Do you think the new iPhone may help boost the industry in general?

CL: You could say that. The 3G iPhone will raise awareness of the benefits of 3G and will help accelerate the transition to the technology. Handset makers who have already brought lesser known devices to market in recent months will benefit as their offerings increasingly move mainstream.

BN: Let's touch on the other major announcement out of WWDC, that being MobileMe. What do you make of this?

CL: I'm sure I'll get some hackles for saying this, but the 3G iPhone isn't the most important thing Steve Jobs announced today. The real big news out of the WWDC keynote isn't as much the hardware as it is the online services.

BN: How so?

CL: I'd call it the linchpin of today's announcement. Just like BlackBerry users at both the consumer and enterprise level are loathe to give them up because they have invested in the platform, MobileMe will similarly glue iPhone users to Apple and keep them buying future generations of hardware and related services.

BN: Certainly didn't think of it that way, but RIM has done well with the BlackBerry service, which is probably even more important than the phone itself. It does seem to make .mac -- well, MobileMe as it will now be called -- suddenly a useful product.

CL: Yes, the value proposition is finally viable. Push e-mail, contact management, and scheduling are compelling capabilities for consumers who have up until now envied enterprise users who virtually had exclusive access to push-based technologies. Cross-platform and browser-based functionality allows Apple to leverage its growing influence in desktop and mobile markets.

BN: It's "Exchange for the rest of us" as Jobs put it Monday. But won't it require some changes in how Apple rolls out products?

CL: Yes it definitely will. A once-a-year announcement of new services or increased storage for MobileMe subscribers won't suffice: Apple has to shift to the same ongoing rollout model already adopted as gospel by established Web 2.0 players. It's a lesson that Microsoft is learning as it shifts from its traditional business model to an online one. Apple must undergo a similar transition if it is to compete effectively in the online services space.

BN: Carmi, thanks for your insight on Apple's latest announcements, and I'm sure we'll be checking back with you again in the near future.