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Continued ...

So with minimal opportunities for either branding or content revenues, what exactly are carriers getting from the iPhone? Other than voice and data traffic, not much. No doubt, the exclusivity which Apple seems happy to award its operator partners will generate a level of churn which will provide a short-term boost to revenues, but this could be cancelled out by the large handset subsidy which operators are footing. Furthermore, while Cingular will be able to lock the iPhone to its US network, in several European countries this behaviour is illegal, and in others, the operator is obliged to unlock their customer's handset if requested. Therefore, in Europe at least, there is a potential that the benefits of carrier exclusivity could be greatly diluted.

Voice is a commodity product, so the main benefit which an operator can achieve is a boost to the data traffic on their network as iPhone user get into the habit of consuming their iTunes content whilst on the move. Of course, the irony is that, with the first generation iPhone not supporting 3G, users are unlikely to make wide use of Cingular's EDGE network, which would make a movie download resemble molasses on prozac. Nonetheless, an HSDPA version is not far off, and at this stage iPhone users can really run wild: that is, once Apple has secured the rights for mobile distribution for its content (apparently, this hasn't been sorted out yet). On both sides of the Atlantic, many operators' unlimited 3G data plans are priced at around $40 a month, but this will be too expensive for most iPhone users and many would instead resort to syncing their handset through their PC or over Wi-Fi. The reality is that, if an operator wants their iPhone customers to make wide use of cellular data, they will have to price the service more attractively.

In two years time when exclusivity runs out, everything becomes fair game and iPhone user will be attracted to operators which can offer the cheapest data packages since there is unlikely be anything else the operator can offer which will improve or differentiate the iPhone experience. Operators will be judged on their ability to act as an effective bitpipe. Like a moth to a flame, operators face a similar fate if they're not careful with the iPhone's seduction.

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