Apple COO talks about iPhone, 3G, and the Cingular partnership

[AppleInsider]

Speaking at the Goldman Sachs Technology Investment Symposium this week, Apple's second in command Tim Cook talked at length about the upcoming iPhone, revealing some of the methodology that went into the product's development as well as the executive decisions that lead to the company's partnership with Cingular.

The 45 minute Q&A session was recorded and made available as a streaming QuickTime download from Apple's website. However, the portion of Mr. Cook's speech relating to iPhone has been transcribed by AppleInsider, below, for reader appreciation.

Q: Almost from the second Steve stepped off the stage at Macworld there are people in the press and other people basically coming up with reasons why Apple can't succeed in the phone market. Can you talk a little bit about why you think Apple will be a success?

A: Well, I think the iPhone is a revolutionary product. And Steve mentioned this at Macworld. And I think this is a very, very good point. Revolutionary products only come along so often. You know, Apple had the Macintosh in 1984 that reinvented the personal computer industry. The iPod in 2001 which reinvented the whole music industry. And we think the iPhone is that class product for the cell phone industry.

Step back and look at the [iPhone] and think about what it is. It's a very small, thin, lightweight device. It's a revolutionary cell phone. It has visual voicemail, which if you're not familiar with that, essentially looks like e-mail. So you can select precisely the voicemail that you want to hear, not the order they happen to come in. It's the best iPod Apple has ever done. And it's this really cool internet device that has desktop class email, browsing, maps and searching, all in one product. And so I think people are going to be amazed and delighted over it. So we'll have to see. Obviously there are people who would prefer us not to be successful in this. But I think this is a revolutionary product. And we'll see what customers think because that is the most important thing.

Q: Your stated goal for calendar 2008 is to ship 10 million units, which is about 1 percent of the overall market. But given the functionality and price-point of the product, it eliminates most of the low end of the market. How do you look at the available market for the first-generation of iPhone and what kind of market share do you think you could take in that market?

A: The traditional way that all of us were taught in business school to look at a market was, you look at the products you are selling. You look at the price bands that are curving the market. You think about the price band that your product is in. You assume that you can get a percentage of it. And that is kinda how you get to the addressable market.

That kind of analysis doesn't make really great products. The iPod would not have been brought to market if we had looked at it that way. How many $399 music players were being sold at that time? And so, today in the cell phone industry, a lot of people pay zero for the cell phone. Guess why? That's what's it worth! And so, if we offer something that has tremendous value, that is sort of this thing that people didn't have in their consciousness -- it was not imaginable -- then I think there are a whole bunch of people who will pay $499 or $599. And our target is clearly to get 10 million. And I would guess some of those people, and there are probably some in the audience, that are today paying zero because it's worth zero or going to pay a bit more because it's worth it.

Q: Could you go through some of the thinking of not putting 3G in the phone given that it is pretty much leading edge technology in every other aspect?

A: Our thinking first and foremost was that we wanted GSM. Because GSM is the world standard and that was one of the factors in selecting Cingular. Secondly, the product, as we announced, has Wi-Fi capabilities. And so many people, like in this room I'm sure there is Wi-Fi in this room as there are hot spots everywhere -- at your home, where you have coffee, your place of work, etc., etc. -- they're going to use Wi-Fi. And between these spots we are going to use EDGE because it is widely deployed. And we are confident it will give the user a great experience.

Q: Do you expect iPhone to cannibalize iPod. If so, when might that start to kick in?

A: You know, it's too early to tell. But I would make this point: We've sold 90 million iPods. 90 million. It still amazes me saying it. And these are being sold for a wide variety of usages. There's a wide variety of form factors. A wide variety of capacities. And a wide variety of price points. And so, you know, there a lot of people who desire the iPod, so we'll just see what happens.

Q: Can you talk a bit about -- this has been an area of controversy -- some of the plus and minuses of using only one carrier, an exclusive carrier, in the US.

A: Sure. Our thinking on selecting Cingular was 1) We looked at the carriers in the US and felt that Cingular was the highest quality. And that was very important to us from a customer experience point of view. 2) They were the most popular. They had 61 million subscribers. 3) Our goal was to use GSM -- our decision was to use GSM -- and that's what their network was based on. 4) The deal that we struck allows Apple to do the things that Apple is really good at, and it allows Cingular to do the things that Cingular is really good at. And so I think it is a really great partnership.

Q: This is a new product category for Apple. Some of the times in the past you've had a little bit of tough time ramping up given the initial demand for some products. Can you talk a little about what you're doing to make sure you can meet day one demand?

A: Sometimes this issue is a good issue. But in order to talk about day one demand and whether we have enough product, you have to know demand and you have to know supply. And let me be very frank: I don't know either of them today. Clearly, the customer response is significant on iPhone. A lot of people anecdotally are telling me [inaudible]. And on the supply side, as many of you know, we did 21 million iPods last quarter. So we have a reasonable amount of operational expertise on ramping and doing fairly well there. But what the first day is going to be like, I don't know because it's too soon to tell what the demand and supply will look like.

[ View this article at AppleInsider.com ]

[samurai1999]

Blah Blah Blah!

GSM is great! Cingular is great! EDGE is great!

Nothing new here!




First post again!

[Guybrush Threepwood]

It sucks he was so nonchalant about leaving 3G out of the iPhone. The only people that seem to be okay with it are him and Steve Jobs.

I don't give a shit about wi-fi. At home, school, or work I have a goddamn computer with a broadband connection. It's when I'm not at those place is when I need the iPhone's internet.

Fucking EDGE network...

[CosmoNut]

The Segway was supposed to be a revolutionary product too. We'll see if the iPhone stays a niche product like the Segway has.

[Guybrush Threepwood]

Don't forget the Pippen.

[JeffDM]

He's not totally off base though. I don't think they can afford to belittle their launch partner before the launch. Maybe they can proceed to backstabbing a couple years from now.

One thing I do take issue with is that I really don't think that the phone that you get for $0 means that it is worth $0, that's because it's been subsidized by the subscription to the tune of up to $200. The best phone I've ever used, in terms of signal strength, battery life and call quality was totally plan-subsidized. It doesn't play music or much of anythign fancy, it's just a solid device without superfluous features.

[stormj]

Originally Posted by Guybrush Threepwood

It sucks he was so nonchalant about leaving 3G out of the iPhone. The only people that seem to be okay with it are him and Steve Jobs.

I don't give a shit about wi-fi. At home, school, or work I have a goddamn computer with a broadband connection. It's when I'm not at those place is when I need the iPhone's internet.

Fucking EDGE network...

I so agree with you. But, the thing is, there WILL be a 3G iPhone. This is not the last version or the only version, and I imagine it was a long time coming. I don't want a version 1.0 anyway.

[imacFP]

Originally Posted by Guybrush Threepwood

It sucks he was so nonchalant about leaving 3G out of the iPhone. The only people that seem to be okay with it are him and Steve Jobs.

I don't give a shit about wi-fi. At home, school, or work I have a goddamn computer with a broadband connection. It's when I'm not at those place is when I need the iPhone's internet.

Fucking EDGE network...

What else can he be? They went with Cingular because Verizon said no and Cingular was willing to do it Apple's way. I think T-Mobile was considered too but they felt there weren't right. I'm sure they have plans on allowing 3G once Cingular can do it. They've said as much. I wish he'd something new too, but everything he says is caculated for effect and to stay with the party line.

[samurai1999]

Originally Posted by JeffDM

He's not totally off base though. I don't think they can afford to belittle their launch partner before the launch.

Obviously, he's going to back Cingular at this stage, but the article title should have read 'Apple COO tows company line on 3G & Cingular' or 'Apple COO says nothing new to Goldman Sachs' or 'Apple COO says something dumb about supply & demand'.

[rickag]

Where's all this negativity coming from? It's not even on the market yet.

[Kavik]

Originally Posted by samurai1999

Blah Blah Blah!

GSM is great! Cingular is great! EDGE is great!

Nothing new here!

Haha...I was thinking the same thing after reading this article!

[Shadow Slayer 26]

3G doesn't really make a difference to me. I don't use the internet or email much. Half the time I want to use it I'm in an area that has Wi-Fi. I don't have a laptop though and I'm on the go a lot. I mean A LOT. Hell even when driving down the street I could probably get a wi-fi connection because in my house my iMac picks up 3 (sometimes 4) unprotected connections that I could use. And then there are starbucks at every corner so I could probably get a connection anywher!

Besides I don't want to pay a hefty monthly fee for a data plan anyways. Just as long as my iPhone can do IM/texting over Wi-Fi I'll be happy...though texting is a stretch.

[gregmightdothat]

Originally Posted by samurai1999

Obviously, he's going to back Cingular at this stage, but the article title should have read 'Apple COO tows company line on 3G & Cingular' or 'Apple COO says nothing new to Goldman Sachs' or 'Apple COO says something dumb about supply & demand'.

Something dumb? It's spot on. When releasing a product unlike any other, you can't try and shoehorn it into price points for existing products. The result is that you cut down your product so much to meet those price points that you're never successful. Your price point needs to depend on your products value.

[Booga]

Originally Posted by Guybrush Threepwood

It sucks he was so nonchalant about leaving 3G out of the iPhone. The only people that seem to be okay with it are him and Steve Jobs.

I don't give a shit about wi-fi. At home, school, or work I have a goddamn computer with a broadband connection. It's when I'm not at those place is when I need the iPhone's internet.

Fucking EDGE network...

I'm okay with it. I don't want to lug around a laptop everywhere just for doing a little surfing or email. And everyplace has free wi-fi these days. The only thing that sucks for me is that our wi-fi at work uses two-factor authentication, and I doubt the iPhone supports the RSA fobs.

But generally, a few hundred Kbps is more than enough for me to fill up the little screen with surfed goodness for those areas without wi-fi.

[TBaggins]

Originally Posted by Tim Cook

A: Sure. Our thinking on selecting Cingular was 1) We looked at the carriers in the US and felt that Cingular was the highest quality.

Translation: Verizon turned us down.

Timmy, no need to spin. No one's buyin' into it.


.

[mrjoec123]

Apple went with GSM because they wanted one product that would work in most of their world markets. CDMA just doesn't exist in Europe.

They went with Cingular becuause Cingular has way more customers than T-Mobile, and Cingular agreed to their demands. They incorporated the needed backend network upgrades for visual voicemail. And, more importantly, they allowed Apple to be in 100% control of the software, something that NEVER happens in the cell phone industry. Ask Palm how often their products have been crippled or delayed because of carrier demands.

Cingular's 3G network is only available in a very limited number of cities. And even then it's not exacly accessible everywhere within that city. So you end up paying $60 a month for service that defaults down to 2G EDGE speeds anyway. And it eats the ever-living crap out of your battery, too.

In a year or two, when 3G GSM is everywhere, the kinks are worked out, and the price comes down a little, it'll make more sense for Apple to release a 3G iPhone. Right now, it doesn't make a whole lot of sense.

And let me ask this: How many phones on the market are GSM, have a touch screen, have WiFi, and are 3G? What do they cost? How do they stack up to iPhone?

Treo 750: 3G, No WiFi, $399 2yr contract
Blackjack: 3G, no touch screen, no WiFi, $199 2yr contract
Blackberry 8800: 2G, no touch screen, no WiFi, $299 2yr contract
8525: has everything, $399 2yr contract

So the 8525 is the only thing on Cingular right now that could be considered close. And with 3G, and $100 cheaper, that's a big plus. But then consider that the 8525 has 512MB of memory, as opposed to iPhone's 4 or 8 GB.

Personally, I think having more internal storage, especially on a device that will end up being an iPod replacement for a lot of people, is more important than 3G.

And there's no way to put a number on the interface/ease of use factor.

iPhone may not have ALL the features that everyone wants, but it has a feature set that will appeal to a lot of people. And the overall user experience will drive more people into this market than ever before.

[TBaggins]

Originally Posted by mrjoec123

Apple went with GSM because they wanted one product that would work in most of their world markets. CDMA just doesn't exist in Europe.

They went with Cingular becuause Cingular has way more customers than T-Mobile, and Cingular agreed to their demands. They incorporated the needed backend network upgrades for visual voicemail. And, more importantly, they allowed Apple to be in 100% control of the software, something that NEVER happens in the cell phone industry. Ask Palm how often their products have been crippled or delayed because of carrier demands.

Cingular's 3G network is only available in a very limited number of cities. And even then it's not exacly accessible everywhere within that city. So you end up paying $60 a month for service that defaults down to 2G EDGE speeds anyway. And it eats the ever-living crap out of your battery, too.

In a year or two, when 3G GSM is everywhere, the kinks are worked out, and the price comes down a little, it'll make more sense for Apple to release a 3G iPhone. Right now, it doesn't make a whole lot of sense.

And let me ask this: How many phones on the market are GSM, have a touch screen, have WiFi, and are 3G? What do they cost? How do they stack up to iPhone?

Treo 750: 3G, No WiFi, $399 2yr contract
Blackjack: 3G, no touch screen, no WiFi, $199 2yr contract
Blackberry 8800: 2G, no touch screen, no WiFi, $299 2yr contract
8525: has everything, $399 2yr contract

So the 8525 is the only thing on Cingular right now that could be considered close. And with 3G, and $100 cheaper, that's a big plus. But then consider that the 8525 has 512MB of memory, as opposed to iPhone's 4 or 8 GB.

Personally, I think having more internal storage, especially on a device that will end up being an iPod replacement for a lot of people, is more important than 3G.

And there's no way to put a number on the interface/ease of use factor.

iPhone may not have ALL the features that everyone wants, but it has a feature set that will appeal to a lot of people. And the overall user experience will drive more people into this market than ever before.

[othello]

Originally Posted by Booga

And everyplace has free wi-fi these days.

NOT true.

[samurai1999]

Originally Posted by gregmightdothat

Something dumb? It's spot on. When releasing a product unlike any other, you can't try and shoehorn it into price points for existing products. The result is that you cut down your product so much to meet those price points that you're never successful. Your price point needs to depend on your products value.

The dumb bit was the last question and the waffly answer - it doesn't say anything - except supply & demand are unknowns
- a bit like Rumsfeld's 'known knowns, known unknowns & unknown unknowns' speech from yesteryear!

(not that I'm comparing him to Rumsfeld BTW! - I'm not that cruel!)

[mrjoec123]

Verizon would never have allowed Apple to use WiFi. They especially would not have allowed Apple to auto-detect WiFi and default to that instead of their EVDO network.

Ultimately, if Apple had worked out a deal with Verizon instead of Cingular, the product would have been crippled. And the entire European and several other world markets would have been shut out completely.

Verizon wants to be quick to tell the world that they "turned down" iPhone. But more likely, the two companies simply didn't see a mutually beneficial deal in the cards. Verizon wasn't going to get to control Apple's software and features. Jobs wasn't going to get to make the iPhone his way. So they parted ways.

[physguy]

Originally Posted by Booga

I'm okay with it. I don't want to lug around a laptop everywhere just for doing a little surfing or email. And everyplace has free wi-fi these days. The only thing that sucks for me is that our wi-fi at work uses two-factor authentication, and I doubt the iPhone supports the RSA fobs.

But generally, a few hundred Kbps is more than enough for me to fill up the little screen with surfed goodness for those areas without wi-fi.

I also have to agree with this. I was very glad to see 3G NOT included as long as there was WiFi. I don't want to pay the outrageous fees for the 3G data plans, when a lot of WiFi is free, so why should I pay for the 3G hardware.

[scotty321]

Blah blah blah. Apple's getting a little ahead of themselves here -- they're soooo sure the iPhone is gonna be such a big hit. Well let me tell you something: a smartphone is not a smartphone unless it is open to 3rd party applications. Otherwise, it's just an overpriced cell phone that nobody's going to pay for, with a minor amount of eye candy that nobody cares about. Not to mention the fact that it has a virtual keyboard which is 100 times harder to type on than a real keyboard. But most importantly is the lack of 3rd party apps, and Apple's insistence that it will not open up the iPhone for 3rd party apps. Unless I can run all of my 3rd-party business apps on the iPhone that I can currently run on my Treo 650, there will be NO SALE to me nor any of my clients. I give the iPhone a BIG THUMBS DOWN.

[e1618978]

Originally Posted by scotty321

I give the iPhone a BIG THUMBS DOWN.

The 3rd party apps that I have loaded on my P800 crash the phone, so I am happy about an apple certification process for 3rd party apps.

[scotty321]

Originally Posted by e1618978

The 3rd party apps that I have loaded on my P800 crash the phone, so I am happy about an apple certification process for 3rd party apps.

What Apple certification process? I've talked to high-profile application developers for the Treo, and they have said that Apple is NOT letting them certify their apps at all! (At least for now.) Plus, the 3rd-party apps I have on my Treo 650 have not crashed my device: Pocket Quicken, FileMaker Pro, Vindigo, DocumentsToGo, DirAssist, CityID, several games, and more.

[g3pro]

Originally Posted by scotty321

Blah blah blah. Apple's getting a little ahead of themselves here -- they're soooo sure the iPhone is gonna be such a big hit. Well let me tell you something: a smartphone is not a smartphone unless it is open to 3rd party applications. Otherwise, it's just an overpriced cell phone that nobody's going to pay for, with a minor amount of eye candy that nobody cares about. Not to mention the fact that it has a virtual keyboard which is 100 times harder to type on than a real keyboard. But most importantly is the lack of 3rd party apps, and Apple's insistence that it will not open up the iPhone for 3rd party apps. Unless I can run all of my 3rd-party business apps on the iPhone that I can currently run on my Treo 650, there will be NO SALE to me nor any of my clients. I give the iPhone a BIG THUMBS DOWN.

Wrong, you're an idiot.

[e1618978]

Originally Posted by scotty321

What Apple certification process? I've talked to high-profile application developers for the Treo, and they have said that Apple is NOT letting them certify their apps at all! (At least for now.) Plus, the 3rd-party apps I have on my Treo 650 have not crashed my device: Pocket Quicken, FileMaker Pro, Vindigo, DocumentsToGo, DirAssist, CityID, several games, and more.

http://iphonespy.com/steve-jobs-clar...iphone-22.html

[starwxrwx]

From an Australian perspective (and I had thought we were ahead of the US in the mobile phone field but perhaps not):

3G - essentially we don't even have 3G GSM (I think 3 is 3G GSM but limited coverage and crap plans+lock in phones), so who cares.

Wi-fi - we barely have any (free) wi-fi hotspots either.

'Smartphone' - I don't work in the corporate world, but I've never even seen a Treo in the flesh.

3rd party apps - who cares? If the phone UI is great to begin with would you need them?!

Even though it is compared to smartphones, I think the iPhone is NOT aimed at being a smartphone, but rather a well designed and easy to use standard phone with extras + iPod.

I'd be happy to pay $500-odd for it to work simply as a 2G GSM phone + iPod that syncs effortlessly with my computer. My latest iPod nano was $219 and my RAZR was $360- that's $579 (AUD of course)! And I have no doubt after two years both will be replaced.

[Guybrush Threepwood]

"Scotty doesn't know! Scotty doesn't know!"

[Wally]

Originally Posted by g3pro

Wrong, you're an idiot.

Aggreed. Anyone who passes judgement (good or bad) without actually having used the product has no grounds for complaint. Wait til June. Go to the Apple store and check the phone out... then bitch about it.

[JeffDM]

Originally Posted by starwxrwx

3rd party apps - who cares? If the phone UI is great to begin with would you need them?!

That doesn't make any sense. A UI is not an app.

[solipsism]

Originally Posted by Guybrush Threepwood

It sucks he was so nonchalant about leaving 3G out of the iPhone. The only people that seem to be okay with it are him and Steve Jobs.

I don't give a shit about wi-fi. At home, school, or work I have a goddamn computer with a broadband connection. It's when I'm not at those place is when I need the iPhone's internet.

Fucking EDGE network...

If Apple does sell 10M units through 2008, which will probably be at a 6% increase to Cingular's current subscriber base, as well many cusmters moving from a more basic plan to a data plan (me included) because there is finally a worthwhile smartphone, then I'm certain that you'll see Cingular vigorously improve the coverage of it's 3G capabilities. Plus, the iPhone definitely be 4G capable by then anyway.

How long before other networks and manufactures start collaborating for the good of the customer? How long before others offer Visual Voicemail? F@#k HSDPA at this point, relish in the paradigm shift Apple as set it motion. regardless of your phone or carrier choice, all cellphone users will benefit from Apple's iPhone.

[starwxrwx]

Originally Posted by JeffDM

That doesn't make any sense. A UI is not an app.

Sorry, that wasn't very clear. What I meant was, if the default applications and the overall user interface are as polished as they seem, what is the purpose of 3rd party apps?

If the purpose is to provide functionality beyond phone calls, text messaging and web browsing (and everything else the iPhone can do), what functions do you need? Why not call for them to be included rather than 3rd party application support?

I don't think I've ever used a phone that can load 3rd party apps (and hence I really can't comment on the whole smartphone idea - but again I don't see the iPhone as a smart phone really) but what is it people are so desperate to load on?

[BlackSummerNight]

I'm getting a iPhone, but I don't see how they are calling it a smartphone. It they have some type of kick ass office suite to go with it, and some other type of business apps, I would agree. But they don't have either of those for the Macs, so I doubt they do. I think the iPhone is going to be a kick ass gadget phone, nothing more, nothing less. I just don't like carrying around a cellphone and a iPod, that's why I'm getting one.

[aegisdesign]

Originally Posted by e1618978

The 3rd party apps that I have loaded on my P800 crash the phone, so I am happy about an apple certification process for 3rd party apps.

I've a p910. It's pretty rare that it ever crashes an app. Maybe you're trying to use p900/910 apps on your 800. They often don't work reliably.

The p990 has a certification process for apps now as part of SymbianOS 9. That crashes even more than the p800 did. Total crap.

[donlphi]

I just hope Apple finds it in their heart to allow Slingbox (the greatest invention ever) to function with their iPhone

OR

Apple turns the APPLE TV into a similar product... PERHAPS THE MISSING iPhone APP?

That would make Apple TV amazing and the iPHONE even more amazing. You wouldn't have to save any movies on your phone, saving all of that space for things you want to do on the airplane, like watch ONE movie or a couple episodes of a TV show, listen to an album you recently downloaded from iTUNES.

[e1618978]

Originally Posted by aegisdesign

I've a p910. It's pretty rare that it ever crashes an app. Maybe you're trying to use p900/910 apps on your 800. They often don't work reliably.

The p990 has a certification process for apps now as part of SymbianOS 9. That crashes even more than the p800 did. Total crap.

My P800 crashes by itself about once per week - the app that I loaded that crashes every time is a MAME player for playing Pacman and Galaga.

[Slewis]

I just remembered that it's this year that Google plans to build Free Wifi into San Francisco...

The sad part is, I probably won't get much use out of the iPhone's EDGE network, 3G is not a big loss for me at all.

Sebastian

[physguy]

Originally Posted by BlackSummerNight

I'm getting a iPhone, but I don't see how they are calling it a smartphone. It they have some type of kick ass office suite to go with it, and some other type of business apps, I would agree. But they don't have either of those for the Macs, so I doubt they do. I think the iPhone is going to be a kick ass gadget phone, nothing more, nothing less. I just don't like carrying around a cellphone and a iPod, that's why I'm getting one.

What business apps are you looking for???

There will be
Calendar
Contacts
e-mail (great e-mail)
browser (great browser)

And, I've said this elsewhere, with Safari on the phone you have (will have soon - its committed to) docs.google.com so you have
Word
Excel

This is more than I will need.

[aegisdesign]

Originally Posted by physguy

I also have to agree with this. I was very glad to see 3G NOT included as long as there was WiFi. I don't want to pay the outrageous fees for the 3G data plans, when a lot of WiFi is free, so why should I pay for the 3G hardware.

Same price here in the UK, 3G or not, although I noticed a couple of days ago when looking to switch carriers that some of them are now banning CSD from the included minutes which is slightly annoying.

Best deals at the moment are around £7.50 for unlimited data on t-mobile and 3.

I don't agree with Cook about using Wi-Fi. If I've got Wi-Fi then I've usually got my computer with me. If I've not, then I'm usually miles away from Wi-Fi with just my phone. If I'm miles away with my computer then 3G is also handy too.

But then it doesn't have Java or an ssh terminal so I can't access my servers anyway. Hmmm.

[aegisdesign]

Originally Posted by e1618978

My P800 crashes by itself about once per week - the app that I loaded that crashes every time is a MAME player for playing Pacman and Galaga.

I've got MAME on my p910. Never crashed.