So unless you’ve been living in the cave this last… uhh.. day or so, you know that Apple introduced the iPhone at MacWorld. This is interesting for me because of my recent work experience at EarthLink.
As I mentioned, EarthLink has made a huge bet on the success of Helio (as well as Muni WiFi and voice services). Looking at the history of MVNOs, things aren’t that pretty and I think Helio is going to be a dud. Here is why.
As most folks know, I’m far from being an Apple-fanboy (I’m still irate over their decision in the mid-80s to stop developing the Apple II line – but I’ll go into this more in another post). In this case, I think this partnership (Apple + Cingular) is going to trounce all competitors including Helio.
The premise of Helio is accurate, I think – the new generation of Internet connected individuals wants the latest version of gadgets that folks overseas get. In the case of Helio, this manifested itself as a commitment to deliver new handheld devices on a fairly rapid pace (every six to twelve months or so).
In the case of Apple and Cingular, Apple has focused mainly on the hardware and software while Cingular manages the network (which is presumably stronger now that AT&T has acquired BellSouth and owns 100% of Cingular). The iPhone runs OS X which presumably means that people will be able to write applications for the phone. As far as I know, this has never been done in a phone before. So now, as people come up with new ideas for ways to use their phone, they’ll be able to implement them. One just popped into my head – why not use the bluetooth or WiFi functionality of the phone and find friends (who would also have to have the iPhone) who are nearby? Okay, so you’ll probably see your friend if they are within 30-100 feet of you but you get the idea.
So now that Apple has probably gotten a winning package together, they’ll just keep improving the innards and display. Higher resolution display. More storage space for the inside (announced at 4GB and 8 GB currently). Better wireless modes (bring in 802.11n once that becomes power efficient). Faster processor. The list goes on. Manufacturing for Apple will come at a significantly cheaper cost structure than for Helio because a lot of the functionality will remain the same from generation to generation. For Helio, this just isn’t the case. Their phones have changed dramatically (at least from appearance, I don’t know about the innards) from revision to revision.
By having Cingular be a full and exclusive partner, and not just the MVNO network carrier, the offering structure is going to be significantly better than what Helio (and other MVNOs) can provide. Helio (or any MVNO) is beholden to someone else for their cost structure. So it is likely that if an MVNO is offering something like free talk minutes or unlimited data usage, they are still paying the network provider on a per minute or per byte basis. That means the heavy users (the ones that you want because they probably won’t jump ship) actually cost you a lot to serve as an MVNO but as a network owner these heavy users are just the cost of serving customers. In the Apple and Cingular case, Cingular has a vested interest in providing great service to these folks. So if unlimited data access has to be a part of the service, it will be. The interesting thing here (and which I haven’t found anywhere) is how long this exclusive arrangement will be in place. There might be a time commitment (a year or a few years) or a roll out commitment (XX millions of units sold).
So the bottom line is, I think the Helio investment is going to be a dud for EarthLink and SK Telecom. The bottom line reason being that I think the Apple and Cingular partnership will trump any competing MVNO any day based purely on deal economics.
{ 3 comments… read them below or add one }
Well,
I wouldn’t say that Apple iPhone is the first phone for which Apps have been written. There have been toolkits and Apps available for phones running on Symbian, PalmOS as well as Windows CE. There are also apps on Motorola’s FlexOS platform with support of Java at a smaller scale. The difference that Apple iPhone is going to make is, that for the first time such a phone is going to get such a publicity. There are other things in favour of Apple iPhone too, Primarily Cost. The iPhone is more like a PDA Phone with an MP3 Player (or MP3 Player on a PDA phone). If it is compared with similar offerings, iPhone is not coming cheap. But compared to highend PDAs, it may be able to offer some of those features at a cheaper rate. Plus there is a ready platform with built toolset and Accesories (such as iTunes, IPod docks) which it is going to leverage on. In long term future, We may even see iPhone running on a non-cingular network (well, think about it, who uses cingular outside USA?) and even unlocked versions. I would have purchased a Helio if it was available unlocked and for GSM network.
I think the bottom line is, that helio will sell more than ipods just compare the price within each other, it is true that ipod has many features and countless functions to make it more entertaining besides being a phone. But consumers on the other hand would look at the helio for 4 important things, which are 1st: Designed for Myspace, 3G Broadband Speed, Integrated GPS, and Price.
Not everyone in the market can afford an Iphone, and helio provides 3 different types of devices from $100 to $225, all those kids that have a part time job or have to ask their parents to buy one from them would hardly think of getting an Iphone that goes for more than $500. Plus the helio, has a few features such MP3, Messaging, and Internet, they might seem incompetent against the IPhone but they do count.
In conclusion, why buy an Iphone for yourself when you can buy 3 – 6 helios for you and your friends? and at the end: Do you need a phone or a Computer?
did you get a chance to see the new post about losses at Earthlink (http://news.zdnet.com/2100-1035_22-6156711.html) primarily attributed to Helio? I think that SK Telecom does gain from the venture by pushing all its R&D costs over to Helio and still using the knowledge to build other phones which may be sold to other companies. Earthlink should probably also look at bundling the services, which it may not be doing right now.