Another view, albeit from someone who is a half glass full guy. He does make some good points though.
Beware the iCannibal
By Tero Kuittinen
* In reality, the iPhone's strength is as a high-end iPod replacement.
* Its mix of high- and low-end phone features is stirring speculation of an upgrade.
* If an upgrade comes within a year, and it may, it could eat into current iPhone sales.
The early response to Apple's iPhone really emphasizes how divisive this device is.
It has great appeal to iPod fans and consumers who are not used to high-end phones. Conversely, it is also raising the hackles of smartphone fans. The controversial early feature set is now feeding a buzz explosion leading to widespread speculation about an upgrade three days after the launch. This poses a clear threat to product longevity.
iPod Deluxe
I see the greatest flaw of the prelaunch media hype in the way it positioned the iPhone as an unusually flexible and functional smartphone. In reality, the great strength of the iPhone is its role as a high-end iPod replacement. The combination of the gorgeous touch-screen and an innovative user interface is impressive. Many applications expand and complement the iPod user experience.
But at the same time, the first-generation iPhone has turned out to be an exceptionally limited and carefully walled garden -- it is a major step back for many people who are used to the diverse feature set of a modern high-end phone.
The lack of photo-messaging, instant-messaging, video capture and 3G data transfer speed has already been widely discussed. But the list of absent phone features seems to go on and on. Most camera-phone users depend on easy and intuitive file transfers via Bluetooth. But the Bluetooth functionality of iPhone is crippled, reducing it to a simple headset support role.
Creating your own ringtone is one of the most popular new features of mid- to high-end models -- iPhone does not allow it. Sending photos is bizarrely awkward; you cannot add them to the email you are writing, so you are forced to send each photo individually from the camera application.
Each of these missing or misbegotten features may seem esoteric to mainstream consumers, but as a group, they are a clear setback for people who are used to owning high-end phones.
Is this a problem? Not if Apple can tap into the iPod fan base and connect with consumers who are unfamiliar with high-end-phone feature sets. It is possible to cobble a coalition of buyers from these two pools and simply shrug off the mixed response from phone fans. But this feat is going to be far tougher than simply attracting a wide range of both iPod and high-end-phone fans.
The iPod fans are already Apple customers. Apple may lure people who are fond of $400 iPods into upgrading to the $600 iPhone. However, that does not have the same impact as attracting consumers who do not belong to the iPod family.
Dangerous Buzz
As mentioned, the iPhone feature set is a curious mix of cutting-edge and near-obsolete. This is now feeding a frenzy of speculation over the iPhone 2. Apple has created a media machine devoted to iPhone-related news -- and it is already moving on to speculating when the 3G version of the iPhone is going to be launched, in which markets and at which prices.
The problem inherent in delivering a 2G phone in a world where nearly all high-end models feature 3G support is that the life span of the product is hard to predict. Apple probably has to deliver a 3G version of the iPhone to European carriers by December 2007, since the operators there are unlike to accept an EDGE version. The new device is likely to fix the early problems, such as the crippled Bluetooth support and the camera that is unable to deliver video capture or zoom.
Will U.S. consumers continue buying the first-generation iPhone as media coverage on the upgrade device ramps up this autumn? There is a reason most smartphones are so heavily featured: The vendors are trying to future-proof the devices to keep them alive for at least 12 months. That's why the leading European and Asian smartphones this summer feature three- to five-megapixel cameras, HSDPA data upgrade, GPS support, etc. U.S. consumers are currently comfortable with BlackBerry-level features, but the competitive environment is notably harsher in London or Hong Kong.
By end of 2007, Apple will have to add the basic features the first version of the iPhone is missing and boost up the current level of the smartphone feature set. And, of course, keep the U.S. consumers buying the inferior first version of iPhone while the media machine churns out endless updates on iPhone 2 speculation and rumors.
I don't think it's doable. The speculation about iPhone 2 is already running rampant on tech-oriented Web sites -- three days after the launch of iPhone 1. This is exceptionally rare in the phone business; it's a direct result of opting for the low-spec approach on many features, while offering a cutting-edge display, an operating system and processing power.
The European launch date for the 3G iPhone is highly unusual; smartphones do not usually get major feature upgrades in five months. The eclectic feature mix of the iPhone not only seems to be designed to maximize the cannibalization of high-end iPods -- it may well position the device as a prime candidate for cannibalization by iPhone 2.
