My friend and fellow mesh 2008 organizer Mark Evans has a post about the iPhone and how it is just one part of a “razor and blades” market model — i.e., the carriers subsidize the phone as a lure, in order to sign you up for long-term contracts at usurious rates. Of course, in the typical razor and blades business, the same company benefits from both the giveaway and the ongoing revenue. In this case, however, Apple benefits from the giveaway — since it means that more people buy iPhones — but the carrier benefits from the ongoing revenue (Apple used to get a piece of that, but it has changed its model, which is part of the reason why its stock took a hit following the announcement at WWDC).
As I was reading Mark’s post, I was thinking about all of the talk following Steve Jobs’ keynote, about how the iPhone has become a platform now, meaning it is becoming more and more like a PC and less like just a communications device. This is clearly the future: a handheld that has a great browser, GPS with location-enabled services, integration with MobileMe cloud-computing type features, etc. Sounds cool, right? Except that (for Canadians in particular) users have to pay through the nose for every one of those bandwidth-gobbling services. For your average bandwidth-shaping and usage-cap throttling ISP, it’s a wet dream: charge per usage of everything, not just a flat fee.
What if when you used your computer, you not only had to pay for the bandwidth itself, but had to pay your provider every time you used Google Maps, or every time you sent a text message or a Twitter post or uploaded a photo? For a lot of people using regular cellphone plans (or the fake “unlimited” plans that redefine the word “unlimited”) that is an unfortunate reality. I love the idea of the iPhone — but I hate the feeling that if I were to use one, I would get taken to the cleaners in ways that I haven’t even thought of yet.
Update:
As Bob Warfield of Smoothspan notes, and Piper Jaffray is speculating, Apple is also potentially the beneficiary of the razor-and-blades approach, through the Application Store.