Monday, July 21, 2008

3G iPhone: Revolution or Evolution for Internet Radio?

I happened to walk by a few stores selling the new iPhone last week. They instantly sold out and pretty much everyone in line had been there since the store opened its doors. There was even some dude who was standing by himself since 3pm the day before. I'm sure there were several others like this guy around town at other stores. I never see women doing this though...

Here in Canada there is only one wireless carrier that can sell the new iPhone. Namely, a company called Rogers. Since they're the only GSM carrier in Canada they basically got the iPhone by default. (Interesting factoid, Rogers was founded by Ed Rogers Sr. who invented and made a fortune from the world's first batteryless radio - prior to Rogers' 1925 invention, radios required expensive batteries). Rogers flouted their monopoly position by gouging customers, and generated a lot of bad will which they're still recovering from. They backed down a bit, and offered a 6GB plan for an additional $30 per month. But the cheapest plan costs $60/month, and only gets you 150 minutes of outgoing talk-time. Most people will want at least 300 minutes talk time and will have to spend $75/month for that. You'll probably also want call display, so add in another $15/month. Oh, but we still need to add in the dreaded System Access Fee which is another $6.95, and of course the 911 service fee for $0.50. We're now up to $127.45 per month plus tax. But not so fast, you still need to pay for the phone itself ($199 for the 8GB model, and $299 for the 16GB model). To be safe, I recommend the 16GB model. There is also a $35 activation fee. This gets us to $324. If I add in all the taxes (federal GST + Ontario PST) I get a whopping $366.12 plus $144.02 per month. Oh, and that requires a 36 month contract. Damn!!! To put things in perspective, I can get a brand new Kia Rio for zero down and $167.06 per month.

Looking at the economics, it's hard to imagine the iPhone will be a truly mainstream device for some time to come. The biggest problem of course are the wireless carrier fees. While I suspect the carriers will try to provide more value for the price (e.g. increase your data quota), I'm not sure if prices will decline so quickly.

But there are other problems with the iPhone. For starters, it doesn't provide decent support for background applications, so you can't really listen through an Internet radio application and surf the web at the same time (there may be workarounds to this that I'm not aware of though). The iPhone also lacks a proper QWERTY keyboard like the Blackberry's have. The design is so pure I wonder if it ever will. I know for a lot of people this is a major showstopper.

I'm not trying to poo-poo the iPhone. It is easily the greatest smart phone ever created. No other device of similar form factor behaves nearly as well, and is as easy to use. The iPhone represents a benchmark and toehold for practically all future cell phone development. Just the touchscreen technology alone with its pinch gesture is incredible. It certainly has the potential to usurp the PC as the de-facto computing device. Steve Jobs may have the last laugh after all.

But will the iPhone provide the much needed Internet radio lift-off that we've all been waiting for? I certainly think it will be a shot-in-the-arm. Internet radio is an "application" that does a nice job of showing off the 3G bandwidth improvements, so I think a lot of people will take advantage of this. However, the poor support for background applications may hinder its adoption.

Ultimately, I see Internet radio as a niche application until the advent of dirt-cheap wireless data. The base fees for wireless data alone relegates these services to the wealthy (or those who live outside their means). The roaming fees are even scarier, and if you've got your Internet radio tuner going while driving your car outside of the city, you may be in for a nasty surprise after your next wireless bill rolls in.

I still stand by my guns that WiMax is really the only viable path we have for mainstreaming Internet radio. If things go according to plan, there will be no distinction between wireless broadband and wireline broadband. We'll also see a slew of new hardware devices to further simplify Internet radio's adoption. The bad news: none of the telcos or cablecos are in any rush to see this happen.

Stay TUN3D.

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