Originally Posted by Jetz
The iPhone will plateau eventually, for the simple reason that their exclusivity deals with carriers simply limits their market potential. Not everybody wants to sign up with the Apple approved carrier because the iPhone usually comes with longer than average contracts and higher than averagre tariffs/rateplans.
That's what you wrote and what I addressed but now you write.
Sure they can. But like I pointed out in my example for Canada, ending exclusivity doesn't always make the iPhone any more affordable.
Okay, so affordability; we don't really care about exclusivity after all. So let's address affordability.
1. The price floor for an iPhone globally is free (including the subsidy); in other words, Apple has no problem with carriers marketing an iPhone for free (with contract). In the US, the floor is $99. By itself, the handset price can't get any more affordable than free, so we have to look at the cost of the data plan.
1a. The price of an iPhone is based on two things: Apple's desire for gross margin, and what the market (including carrier subsidy) is willing to pay. The phone will keep getting cheaper to make (if features don't change); it's up to Apple whether it wants to keep selling it. In the case of the 3g, they said yes. For the 2g, they said no.
2. So the plan. Looking around the world, plan costs vary greatly - in Hong Kong, it's dirt cheap. In Canada, it's pretty expensive. The cost of labor far outweighs the cost of equipment in building out the network, so going to 3G is not triple the cost of building out the network in the first place. And even Africa and Haiti has cell phone networks, so companies/governments will do it. Now, the carriers will charge what the market will bear - in most cases, carriers will be willing to recoup their capital "build-out-the-network" investments over time, since they can charge monthly for service forever. So where do we have similar examples to see what "carriers" will do and what the market (consumers) will do?
The most obvious and applicable recent examples are wired broadband service and cellphone service. (Going back further, one could look at cable TV, or landline telephones, or even electricity.) Let's note two things first: Different countries adopt these services at different rates. And not all countries have broadly adopted wired broadband, just like some haven't even adopted PCs - most of these have gone straight to cell phones.
So the example. For the countries that have adopted broadband, the pattern of adoption has been the same. Early adopters, followed by lots of naysayers saying it will never be broadly adopted, and then gradual broad adoption over a period. In the US, go back to 2001, and you'll find plenty of analysts/forecasts saying that no one will pay that much (then $50, now $40) just to get on the Internet, especially when dial-up rates were going down to $10 (or free with the purchase of a computer.) In Feb 2001, only 6% of adult Americans. But by 2009, it was 63% of adult Americans. Even among low-income Americans, it's risen to 35%. (See www.pewinternet.org
for study details.) Why did all these people do so? Because the Internet increased in value over that time.
Now look at cellphones, not smartphones. Globally cellphones have been adopted as fast or faster than any other technology, faster than PCs, faster than Internet (dialup or broadband). (Read communities-dominate.blogs.com, the blog of Tomi Ahonen, a sometimes visitor here, if you need more info on mobile.) So 60%+ (4.6b out of 6.8b, some with multiple phones) of the world's population understand the value of 24/7 voice communications (and even SMS) and are willing to pay whatever the rate is in their country to get it. (The US was a laggard at cellphone adoption, and also of SMS adoption.)
Moving on. In the US, 19% accessed the Internet from their cellphone back in Dec 2007. Two years later, 32% did (altho a good chunk using WAP over their non-smartphone!). In Europe, the forecast is that 50% of cellphones sold this year will be smartphones. When will people start buying more smartphones? When the value gained by 24/7 access to the Internet or apps is worth more than the incremental cost of adding a data plan (whatever the cost is in the country you're in). And there are lots of people increasing that value everyday, just like there was from 2001 to today (thus causing people to invest in wired broadband).
Broadband has passed 60%, but even if the smartphone adoption rate ONLY gets to 35% worldwide, that's almost 2 billion people. For comparison, there are only 1.2 billion PCs in use worldwide. Last year, there were 1.13b cellphones sold, of which 175m were smartphones. There were only 270m PCs sold. Just about everyone expects smartphones sold to pass PCs sold in a couple of years.
Because of this scale, if Apple just managed to go from 14% of smartphones today to 25% two years from now, it would increase sales from 25m to 60m a year; that would top Apple's iPod record of 55.4m in 2008 (when it held 50-70% of most major "media player markets" worldwide), and still only be 25% of a smartphone market, that itself is, at that point, only 25% of the whole cellphone market where people buy new phones every 2-3 years.
So yes, there is a ceiling but it's a long ways away. I'm not being an Apple fanboy; Apple could blow it with slow innovation and high prices. Regardless, mobile is really the new gold rush; Apple knows it, Nokia knows it, Google knows it, (Microsoft doesn't act like it knows it.)
BTW, I'm not touting anything new; the Internet is full of data and analysis and forecasts. Go read for yourself.