IPhone: Never Give A Sucker An Even Break

Fortune Magazine, now in its 76th year, has floated the ballon that the iPhone from Apple (AAPL) could change the complexion of the cell phone industry.

Among the notions in "How An iPhone Could Rock Wireless" are that Apple could start its own cell phone company buy purchasing network capacity from a company like Cingular. That would, of course, make Cingular happy and it would not bother to try to give Apple a special whipping for taking its customers using its own network. Apple could also sell its phone through carriers like Verizon and Spint the same way that Nokia or Motorola do.

Cell phone companies buy phones from companies like Motorola and then practically give them away to get new customers. The loss on each phone can be a couple of hundred dollars. Fortune posits that the iPhone will be such a desireable item that Apple will be able to charge for it. Perhaps $300. This new model would allow cell phone companies to start to charge for their phones, especially MP3 models, because Apple will have blazed that trail.

Nuts.

Consumers are not dump enough to pay a lot of money for any cell phone. Not without a deal on their wireless service. Also, companies like Nokia already make phones that have music download capacity. Why should they make way for competition from Apple?

When Apple introduced the iPod, MP3 players were fairly rundimentary. There was also no huge "store" like iTunes where songs could be purchased for a small, uniform price. By contrast, there are a number of stellar cell products like the Motorola RAZR and there are several large cell providers in the US who already offer the consumer low-cost, highly reliable service for talking and for downloading music.

The iPhone enters the market with few of the advantages that the iPod had. Consumers are not suckers. They know a good deal when they see one, and the current cell phone companies have eaten up that space.

Douglas A. McIntyre can be reached at [email protected]. He does not own shares in companies that he writes about.