Apple's real iPhone vulnerability

by Dirk Knemeyer

Today the Droid X was released, Android's latest salvo in the smartphone wars.

I'm taking an interest in Android phones because, as an iPhone user, I've been waiting for them to put the white version of the iPhone 4 on sale. Well, they still haven't done it. Along with the well-publicized reception issues I've become more and more restless. You see, I have an iPhone 3G, an old model that has terrible battery life. That battery life has been the bane of my existence, as I am traveling or at conferences with - after just a few hours - a useless brick in my pocket. So I had some internal "pent-up demand" for a new smartphone that the iPhone 4 was supposed to fill. Now, I could break down and get a black one, but with the signal problems what is the point? So my eye is straying ever-more over to Android options.

Anyway, the point of this is not to discuss my personal phone buying plans but rather to frame why I'm reading about Android phones with some personal interest. And as the review of the Droid X led me to look at other Android phones, and then various carriers, it struck me where Apple's real vulnerability is: AT&T.

Now, before you say "duh!" let me be clear: I'm not saying this because AT&T sucks. I'm saying this because Apple is using only one single distribution channel (AT&T) of many (Verizon, Sprint and T-Mobile being the large U.S. alternatives). This was not a barrier when the iPhone was the newest and coolest product, essentially the only credible offering in its product category. Nothing could compare. It was irrelevant which provider you had because they could not offer anything even remotely close to the iPhone. If you were in the market for that kind of industrial pr0n then changing to AT&T was the only option.

Over the last couple of years a funny thing has happened: the phones being offered by Apple's competitors are just as good as the iPhone. Sure, I and many others would prefer the Apple product for its App Store and the infrastructure that ties into the rest of our Apple ecosystem, but that is now really the primary difference between the phones. Apple's competitive advantage is relatively slim. Why should someone switch carriers now? There really isn't a compelling reason to do so. Thus, Apple is increasingly narrowing its future market to existing AT&T customers.

People have long said that AT&T will be what sinks the iPhone. I'm not sure what they had in mind was Apple's product becoming A, not THE, category leader and its reliance on a single distribution point slowing and perhaps eventually reversing its growth. Only time will tell how this complicated and multi-faceted story plays out, but at this point I posit that Apple's tethering to AT&T as their sole domestic U.S. provider threatens to tilt the scales toward Android in a potentially disastrous - for Apple, anyway - way.

Topics: apple, iphone, android, Analysis, Blog, google