AT&T's iPhone Deal with Apple

AT&T Gets a Fuzzy Signal on Apple's iPhone - WSJ.com

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Recently, there has been a flurry of reports like the link above discussing the possibility the iPhone was a "bad" deal for AT&T. Most of the commentary I've seen seems to take this at face value, even while some disagree with the conclusion. I have yet to see a discussion regarding the possibility of AT&T beginning to spin Wall Street's perception and expectations of the deal prior to the loss of their iPhone exclusivity. And I think this is the most interesting angle.

Some of the facts discussed are interesting in how the WSJ article seems to spin good news into bad. For instance, the article mentions that of the 10 million iPhone activations, "only" 40% were new customers switching to AT&T. That means 4 million new expensive iPhone accounts activated after switching from other carriers (or possibly new cell users). This seems like fairly good news for AT&T.

Concern is also voiced on the relative profitability of iPhone customers due to the ~$400 subsidy on the phone purchase. It is estimated that AT&T brings in $2000 per customer of a two year iPhone contract after the subsidy. The concern centers around two areas: 1) the relatively larger subsidy compared to other "smart" phones with the same high cost data plans, potentially making the iPhone slightly less profitable , and 2) iPhone owners' heavy use of the AT&T data network has caused problems. While the higher subsidy is a real factor, the iPhone's ability to bring in new customers and convert customers to high cost data plans is ignored in this analysis.

I think the affect of the iPhone users on the AT&T data network highlights an issue with the cell carriers: while the cell carriers sell "unlimited" data plans, their data networks are not engineered for actual heavy use. They were designed and built with the prior generation of devices in mind. I think the underlying assumption was that typical cell devices would only be used for e-mail or other spot use. Models before the iPhone were awkward to use for extended periods of time and were not very good for general purpose web browsing. But the iPhone (and some other recent smart phones) has exposed the fallacy in this thinking. If the cell carriers actually believe in a future where handheld (cell-based) devices are primary (or even significant) tools in the use of the Internet, they will need to engineer and build their networks for that load. AT&T is apparently far behind here.

I think there are two factors more at play in the recent articles: 1) AT&T is sensitive to recent criticism and outright jeering over their data network and coverage, and primarily 2) AT&T will soon see the news officially break that it lose its iPhone exclusivity, and they do not want to see their stock collapse when this occurs. So I think it is not unrealistic to think AT&T may be engaging in some spin control to prepare for a time when they lose iPhone exclusivity and many (most?) of those "only" 40% of switching, new customers buying high cost data plans. By minimizing the financial value of the iPhone to AT&T, they attempt to reduce the perceived damage when the news breaks that they are losing the exclusivity.

John Scalzi's Guide to the Most Epic FAILs in Star Wars Design

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AMC - Blogs - SciFi Scanner - John Scalzi's Guide to the Most Epic FAILs in Star Wars Design

Some bad design and flat-out illogical decisions can be forgive, if the story is good and especially if the good story does not depend on the bad design to hold it up.

But take a bad story, and the bad designs and decisions are too distracting and cannot be tolerated. And "suspension of disbelief" is virtually impossible when it is built on a foundation of impossible illogic.

In this case, the original Star Wars stories could slip by in most cases, because it really was fantasy and not science fiction. But mainly because of basically good stories and good characters.

In the later prequels, not so much. All the problems including both original and new bad designs and decisions were too much to be supported by the poor stories and weak characters (and caricatures).

Thoughts on the State of Computer User Interfaces and Metaphors

stevenf.com - WARNING: A long, rambly exploration of the state...

I have felt the same thing. When the hardware struggled to do much of anything, the desktop metaphor was an appropriate goal for the user interface. But now, the hardware is not the limiting factor. Inertia is. People are comfortable with what has come before.

But even the desktop metaphor is strained. Does anyone work on a physical desktop that is only 15 inches in size? Most desks are much larger, but there has not been much improvement in screen size to match the physical model of the desktop metaphor.

As a geek, I look forward to real improvements and hopefully a revolutionary change in user interface.

Mini Payments Are the Future

I believe the future of digital media purchases lies in numerous small cash payments as opposed to a few large scale purchases or token purchases. As examples of future and past, I offer iTunes and Microsoft Office.

iTunes Music, Movies, TV Shows, and Applications

Where iTunes excels is in making things easy to find and easy to purchase. By keeping the unit price low, Apple prevents each purchase from becoming a serious decision. $1 or $2 or even $3 are readily made impulse decisions. The downside is so low, there is almost never a reason to argue against any individual purchase once you have considered it.

If you want something bad enough to actually complete a search for it, you will most likely buy it. There is no commitment associated with such a small purchase. If you find a better app, or another song, there is no regret at that $1-2.

Microsoft Office and Other Expensive Suites

As a contrast, the major investment in Microsoft Office or other large suites forces careful consideration due to the commitment involved. After spending hundreds of dollars on a software package, almost anyone would regret being forced to replace it with another expensive suite performing the same function.

In the past, Office, in particular, has relied on bundling, large enterprise purchases, and proprietary file formats. Bundling becomes more difficult with the average PC price coming down precipitously, and included software and OS licensing becomes a larger fraction of the total cost. Large enterprise purchases have become more difficult due to the lack of new, interesting, and competitive features. And proprietary file formats will eventually go out of style in favor of open standards and previous de-facto standards.

Other expensive suites may be slower to feel these pressures as many, such Adobe's Creative Suite, are used by professionals directly charging for their time. Those suites tend to add additional useful features and functionality, but I believe even they will be vulnerable to numerous smaller packages as integration improves.

Google Does the Math

Google spotlights data center inner workings

It is fascinating to see how how Google can use logic instead of "industry standards" to design and maintain such a robust system. Where most companies will use conventional wisdom, Google does the math.

Their systems do not use off-the-shelf software, and they use mostly custom hardware. And they understand how it all works together, because they designed it that way.

Most outfits use the "nobody gets fired for buying IBM" mentality. They go with a conventional and safe choice rather than risk an analysis they will be responsible for.

Related material:

• Reality Check: What does Gartner really DO?
• IT Wars: When we fight over IT, nobody wins.

Great File Systems Article at Ars

Here's a great article on the history and features of various file systems at Ars Technica.

When will companies learn? Standards should be standard.

Sony may start movie download service - Yahoo! News

I think it is quite comical to watch the big content companies flail about trying to wrest power from Apple in music and video.

What seems intuitively obvious to the casual observer is this: all file formats should be based on open standards. If there was a firm standard in place, all these companies could do their own download stores and compete on quality of product and quality of interface.

Without an open standard that can be relied on, only a few distributors will rule the market as they do in the brick and morter market. In this situation, the individual provider stores are doomed to fail, because they do not have all the content and they (usually) have horrible interfaces.

If we had firm standards in place for data files, we could count on software companies to compete on the value their software added. As it stands, the large companies rely heavily on lock-in to hold their customers hostage. The file format is one form of lock-in and the interface is another.

The same goes for media files. Companies like Microsoft and Sony have repeatedly tried to take control of the media file standards with WMV and ATRAC. They do not do this to make a more convenient world for their customers; they do it to lock their customers into their "store", where they effectively would no longer compete on quality or features.

Some good counter examples are JPEG, MP3, and TEXT. These are fairly firm standards that are available and allow numerous products to compete on the quality of their features, functionality, and interfaces. These are healthy markets.

Look at DOC, XLS, WMV, and ATRAC (before it was EOL'ed). These are not healthy markets, even after all the effort that has been invested.

Which makes more sense in the long run?

Governement Finally Using Technology to Do a Better Job

CBC News In Depth: Technology: Data mining

It actually frustrates me to understand this type of thing is still not commonly being done. I do not know why our various systems and technologies are developed in vacuums. These data silos do not seem to take into account the other related systems and data.

We have massive amounts of data, and we have the technology to deal with it, but we do not put it all together.

Apple vs. Intel Inside

Derek Powazek – The Columbo Technique

I think this guy is on the right track. The really interesting question is not whether Bob Keefe asked a stupid question, when he had a shot at Steve Jobs. The interesting question is: why have all the other PC makers always been happy to take a little marketing money and put dumb-ass stickers all over their products?

Why would a product maker put a list of ingredients on the product? I could (almost) understand putting that information on the shipping box. But putting it on the product is what a simple assembler would do. A company that simply takes the parts from various vendors and snaps them together.

When you snap parts together, you can only compete in a few areas: price (including supply chain), temporary exclusive access to parts, status, and maybe service. You can't innovate or do anything different, because you are constrained by the same parts list as your competitors. Any and all innovations come from the makers of the parts.

When Apple adds it's "pixie dust", it results in a product that is greater than the sum of it's parts. They need to stand out, and they try to design complete products that improve what users can do.

This is the big philosophical difference between Apple and the beige-box makers. Apple creates a product. The PC makers assemble a product.


Additional links:
Bob Keefe: 'Intel Inside' Logo Stickers Absent from New Apple iMacs

Information Arbitrage: The Dumbing Down of American Culture

Information Arbitrage: The Dumbing Down of American Culture

A friend of mine sent this to me a few days ago, and I found it very interesting. Maybe you will too.

Towards the Attention Economy: Will Attention Silos Ever Open Up?

Towards the Attention Economy: Will Attention Silos Ever Open Up?

Good read. This localization and "ownership" of information has always been frustrating for me. The data should be standardized, freely accessible, maximally flexible, and secure. Having different service providers to to hold you data data hostage in order to keep get impressions is counterproductive in the long run.