A Better "Cheap iPhone" Theory

Here’s another wild, baseless, probably completely wrong and embarrassingly unfeasible “cheap iPhone” theory to chuck into the mix… It’s one I’ve seen floated, but never properly explored. It appeals to me, so I thought I'd try and make a decent case for it.

What’s the problem?

Apple already offers lower spec’d iPhones that cost less than the latest model on contract. But these are old models, still more expensive than most rival Android handsets when bought outright, and more expensive than most people would be willing to pay – especially in developing markets. If Apple wants to continue to compete, so people say, they need to release a budget iPhone for the prepaid market.

Budget iPhone

What’s the answer?

The obvious answer is to release a plastic iPhone with bearable specs. This is conventional wisdom’s preferred solution, but not mine. I'm hoping it's not Apple's either.

We know that Apple will not want to sacrifice profit margins for market share. We know that, historically, they rarely release products noticeably “worse” than their predecessors without a compelling trade-off (e.g. the MacBook Air or the iPad Mini). Apple probably wouldn't admit to “cheap” being a compelling trade-off in itself.

We know that Apple wants to be seen as a company that doesn’t follow the competition, but “skates to where the puck is going to be”. They have expressed a willingness to cannibalise their own products, but we don’t know if they’d be prepared to pull the rug from under current iPhone sales by releasing a cheaper, fundamentally identical, alternative when it’s such a huge earner for them and sales continue to go up.

That wasn’t an answer…

So here’s the challenge: how can Apple release an iPhone with affordable upfront costs that lives up to the brand’s reputation for quality and pushing things forward and without making such a device too compelling as an alternative to the ‘true’ iPhone.

Easy.

By announcing the iPod Touch with 3G[1].

iPod Touch

Costing £349 for the basic model, it's £100 more than the non–3G model. A standard price difference within the iPad range.

This alone wouldn't mean much, but imagine if, at the same time, Apple unveiled the long anticipated “VoiceTime”. iOS users would then be able to send and receive text messages, video calls and voice calls over a 3G network. The iPod Touch becomes a phone (sort of).

Of course, there’s a huge flaw with this. Communication would be restricted to other iOS users. And that’s hardly a sufficient replacement for a proper phone... Unless...

Apple also releases iMessage, FaceTime and VoiceTime apps for Android[2], meaning any iPod Touch 3G user could potentially connect to most smartphone users in the world.

Yes, this is still a limited solution. Potentially connecting to that many users is miles away from actually connecting to that many. Even then, smartphone users are hardly the norm and 3G networks hardly ubiquitous. This is true even in some developed countries, let alone developing ones.

You’re saying this idea stinks?

Do these obstacles mean the iPod Touch 3G is a non-starter? Not at all. Though I can understand why other brands haven’t pushed such a device.

Remember, Apple is the company that launched the iPhone without 3G and without an App Store. The 1st Gen iPod could only be synced with a Mac via FireWire. Against all expectations (and supposedly common sense), Apple released an "underpowered" tablet that only ran blown-up iPod Touch apps.

Apple, perhaps uniquely amongst the relevant players in the market, have the clout to get carriers to promote a device that could up-end their business. They have a proven ability to motivate developers and other interested parties and the iPod is a strong enough brand to encourage consumers to take a chance on a brave new concept.

But it just won’t work!

Of course, there’ll be stories from early adopters saying how their car broke down and they had to iMessage their friend to call their partner’s landline to ask them to phone the repair service because the AA doesn’t have a call centre equipped for VoiceTime.

It’ll invariably be deemed too expensive: a useless toy, a phone without a phone, a complete and utter failure.

But think about it. How do you think the smartphone industry will look in the future? Will we still be paying carriers for minutes, spending 11p a text message and fighting for our rights to use our data any way we want? Is the contract/subsidy model the best deal consumers can get? Will we still rely on random eleven digit numbers to contact each other, rather than proper names, proper identities? I think not.

Likewise, will data-enabled smartphones become the standard for mobiles? Will data networks continue to spread until they’re as widely available (if not more so) than cellular networks? I think so.

If you agree, then we both can see where the puck is going to be. And if we can see it, Apple probably sees it too. So why would they skate anywhere else?

We get the point. Wrap this up already

iPod Touch and iPhone 5

The iPod Touch with 3G would be a forward-thinking, premium, phone-capable device that costs roughly the same as high-end prepaid Android devices without sacrificing margins. It’ll cannibalise iPhone sales, but slowly over time as the market adjusts. It won’t be seen as a crappy iPhone and it’ll have the advantage of being thinner and lighter (and with colours). It’ll seem out of place now, but will fit in with where the industry is heading. It’ll be derided by analysts as a pointless waste of money, but Apple will sell millions.

It’s the only answer to the “cheap iPhone” question that makes sense to me, given what I can guess about Apple’s ongoing strategy. Though that is to say, I can't guess much.

Of course, this is idle speculation and they will probably just make a cheap plastic iPhone and sell billions.

Still, I find this possibility far more exciting :)

TL;DR - the rumoured “cheap iPhone” will be an iPod Touch with 3G. Because of the reasons I explain above.

  1. Clunky name, I know.

  2. Or Apple could ‘open up’ the iMessage, FaceTime and VoiceTime services, to create a sort of standard that everyone can plug into. Also, people could always choose Facebook, Skype, etc. to communicate with friends instead. Whatever becomes the most popular service isn’t important. I just think it’ll be necessary for Apple to offer its own solution so the iPod Touch 3G seems more plausible as a "phone" at launch.