The Case for the iPhone 3GS in 2013
My mom went phone shopping the other day, which meant I went phone shopping. She'd had an AT&T iPhone 3GS since launch, back in 2009, and the battery was starting to nod off inappropriately in her purse, and that day the digitizer had begun, periodically, to stop digitizing. She'd been frustrated about her bill for a while, and while her 3GS was complaining about kids today and driving its Buick around increasingly erratically a friend of hers had begun bragging about how little she was paying on Cricket.
So she did the math—on her nodding-off 3GS—and we went to Best Buy and bought an iPhone 4S from the Virgin Mobile aisle. She is now very excited to tell people how little she is paying, though she doesn't like asking Siri Wolfram Alpha questions nearly as much as I did.
My mom wasn't going to get an Android phone—she likes the apps she has, and the ease of moving between the iPhone and her iPad, etc.—and I'm not going to get an Android phone, because they'll have to pull the HP Pre 3 out of my cold, dead, gesturing hands. But in that Virgin Mobile aisle, staring a Motorola Triumph in the digitizer, I realized that a lot of people would.
The Motorola Triumph is not an especially attractive phone; it's still running Android 2.2, somehow, and it straddles the line between handsomely unadorned and the computing equivalent of those generic cans marked BEER and COLA you see in 1970s sitcoms. (When people say "you can't patent a rectangle" it's the Triumph they're thinking of on those applications.) But it's got a big, clear screen, a processor that won't drive you toward self-harm, and the overall appearance of a serious-business smartphone, or at least something that will play Angry Birds.
It was $230, more than $400 cheaper than the 4S she ended up buying.
Right now Apple has remarkable leverage over the carriers—unprecedented leverage. Dan Hesse will be eating out of big barrels marked CHEESE for months, all so that Sprint can afford to break even on iPhones like AT&T and Verizon. If that BGR article from last week is right, the cracks are starting to show in that relationship.
At the same time, people are starting to tell their friends about their $30 a month prepaid smartphone plans. My mom is the kind of person who very pointedly would not drink a COLA; I'm not sure she's ever seen a generic soda. But Virgin Mobile has gotten into her circle, and now all of her friends are thinking about it. The cracks are starting to show over here, too—people like to be the Smart One in their peer groups, and suddenly the Smart Ones are realizing that subsidies are a bad deal, and that prepaid carriers aren't all gas-station card carousels and episodes of The Wire.
I think Apple knows that the carriers are going to do everything they can to chip away at their subsidies, and I think Apple knows that subsidized-phone contracts as the dominant form of cellphone ownership are a weird anachronism, one that won't last forever. But right now their cheapest prepaid phone is two years old and costs $500—it's a certified-pre-owned BMW when a lot of people would rather have the new Fusion with the sunroof-and-speakers option ticked.
A shift to prepaid, right now, would leave Apple either stuck in the late-90s-Macintosh super-premium market or forced to come down hard on the profit margins it's been building up since Tim Cook blew up their supply chains. There are a few ways around this (an iPhone 4-class phone with the cheaper screen and materials of the iPod Touch, maybe?) but the iPhone 3GS already exists—even in CDMA variants, globally—is broadly iOS 6 compatible, and is at this point probably cheap enough to compete even in emerging markets. The chatter about the iPad mini having a bulked-up 3GS-density screen seems even more suggestive of the potential to keep 3GS-class devices around longer.
What's strange about the 3GS in 2012 is that nobody should want to be tied to one for another two years. It's been shedding features left and right, it's slow under stress, and that it was still supported at all was perhaps the biggest surprise in the entire iOS 6 announcement. It was six months old when the Nexus One came out.
On the postpaid carriers it makes no sense as a product; it appeals exclusively (and cynically) to the unfortunately large swath of smartphone-intenders who do not realize how little they're paying for the phone and how much they're paying for the right to send a megabyte's-worth of texts every six months.
But that's a market problem, not a product problem, and Apple has to know that market is disintegrating. On the shelf next to the Triumph, for $199 out the door, the iPhone 3GS looks like Apple moving into a new product segment—and future-proofing their iPhone strategy, somehow, with a phone that's older than the Motorola Droid.