Apple Bails on iPhone Pricing

There are signs that Apple's long-held premium pricing approach may have gone over the top with the iPhone. The company is dropping a low-end model, cutting the price of the 8GB one by as $200 - and for those who bought early, missed the price break, and got angry with all the documented problems (non-replaceable batteries and others), there's a $100 store credit.

But you've got to wonder what's going on - at least, I do. Apple would never have cut the price if it thought it could continue to get the premium, particularly through the holiday buying. Particularly in high tech, you drop prices to clear out an old version and make way on store shelves for a new one, or because, somehow or other, you've really screwed up. I think it's clearly the latter, in this case. The move will tick off the early buyers - who might not mind if some significant period of time had passed and they had a chance to upgrade (and if a $100 Apple store credit could actually buy much of anything) - and it starts messing with Apple's positioning as worth the extra money.

This isn't going to batter Apple, but it does reveal that maybe someone took the old magic a step too far. Cool is fine, but you'd better also providing people with something of value. How do you think the sense of cool came about in the first place?

Counterfeiters Going One Better?

I've written a number of times in the past about product counterfeiting, and one of the big concerns is that the knock-offs can be dangerous, and have been proven so on occasions. But I've heard from experts who say that the products are getting better. Now we see an example where maybe the counterfeiters and knock-off experts are taking a few steps ahead of the original product. According to Popular Science, a Chinese company, Meizu, has effectively knocked off the iPhone, calling its product the miniOne.

A few days before Apple's launch, an online video surfaced depicting a sleek new product called the P168 [watch the video below]. The phone came in a black box, marked with both the iPhone and the Apple logos. The video showed the phone being unpacked and operated (the start-up screen also featured the Apple branding). There were features that the iPhone didn't have, such as the ability to operate on two different networks at once; six speakers; and, addressing a major prerelease complaint about the iPhone, a removable battery. I asked my translator if she could find one on the street. They weren't available in Beijing—yet—but a few weeks later, a friend discovered one in Guangzhou. The manufacturer of the P168 wouldn't comment for this story, but the hardware was real, and it worked.

Given the many public complaints about the iPhone, perhaps it's time for US companies to start copying the copiers.

AT&T Shows Sometimes Success is Failure

In reading the New York Times article on Apple's whopping 73 percent jump in profits (guess a lot of people are willing to pay big to be cool), I noticed some interesting numbers. The profit jump, exceeding analyst expectations, was boosted by selling 270,000 iPhones. But the company's stock had recently taken a 6 percent hit when AT&T told its investors on Tuesday that it had activated 146,000 iPhones in the day and a half between when the phone came out and when the quarter ended.

That means 124,000 people couldn't get service turned on. That's 46 percent - almost one out of two - being ticked off that they couldn't get phone service when they were told they'd be able to have it. Wow! What a massive pile-up and an abysmal failure. This would be like having the last Harry Potter book come out but with only 4 million copies available instead of the 8 million that sold. It's one of the worst examples I've seen of operations falling that far behind marketing.

BIG Problem with iPhone and Battery Replacement

According to an Associated Press story, a consumer advocacy group has just noticed some unpleasant fine print on doing an iPhone deal: you can't replace the iPhone battery yourself, as it's soldered into the unit! If you do need it replaced, it's $79 plus $6.95 for shipping and takes three business days. Oh, and while it's out at the shop, you can get a loaner - for another $29.

What in the name of all that is holy were these people thinking? Let's tally it: You pay either $500 or $600 for the phone, you have to get a $60 per month AT&T service plan, and now you've got to pay for someone else to replace the battery? And to bury that information so it took some careful deep reading by some technology bloggers and a consumer advocacy group to learn of the scheme is simply trying to distract people long enough so they can get stuck.

Now let's look at some of the other idiosyncracies of this battery replacement process that I didn't see in the AP story:

• The total of $85.95 is subject to local tax, which, I'm guessing, means that if there's an Apple office or store in your state, you're paying.


• "Service may not be available if your iPhone has been damaged due to accident or abuse." I wonder what "abuse" can mean? Oh, so sorry, but there's a scratch on your iPhone and we think you may have abused it (you bad, bad person), so we can't replace the battery. Have you considered buying a new one? Does this seem a bit too Machiavellian? Absolutely - but then, I never would have thought that a glorified cell phone would have a battery soldered into the case. Oh, and if Apple decides, according to its service policy, that iPhones "that have serial numbers altered, defaced or removed or that are damaged due to accident, abuse, neglect, misuse (including faulty installation, repair, or maintenance by anyone other than Apple or an Apple Authorized Service Provider), unauthorized modification, extreme environment (including extreme temperature or humidity), extreme physical or electrical stress or interference, fluctuation or surges of electrical power, lightning, static electricity, fire, acts of God or other external causes," it can send them back and charge a $100 "Diagnostic Fee."


• The replacement process is going to wipe all the data off your phone! So if the battery dies before you get a chance to back everything up, you're out of luck.

Apple has shown signs of incredible arrogance in dealing with other companies, the press, and even with its users over the years, demanding draconian conditions, generally keeping prices artificially high by not licensing hardware or software, and in some cases (like the iPhone) offering fewer features than competing products for more money because, I'll admit it, they're great at marketing. But this is ridiculous. I have a question for Steve Jobs: how long does this servicing really take, and how much profit will Apple make from it? Isn't locking people into more expensive hardware from your company enough? Oh, I think he already answered that.

iPhone Seeing Share of Problems

Most of what you'll see in the press about the iPhone seems to be raves. But to get a better rounded picture, it's informative to see what customers are saying in Apple's support forum. Some of the complaints:

• No support for AOL, Yahoo, and MSN instant messaging clients.


• No voice dialing support.


• One of the more "locked-down" phones you can find, which means that you're more than usually tied to the service provider - AT&T in this case.


• The headphone jack needs a special adaptor for most headphone sets.


• No support for custom ring tones.


• No to-do list in the calendar function.


• If you aren't careful with what features you leave on, a battery charge can last under half a day.


• Volume is less than on many phones and can require particular "technique" of use to hear.

There is even one person complaining on Slashdot that the phone won't work with the 64-bit version of either Vista or Windows XP and that a post on the Apple support forum about the issue was removed. (Apparently the incompatability is not listed on the iPhone specs, according to Engadget.) And reportedly AT&T insiders were saying to the blog Ethan Says/Homorific that the iPhone frequently drops calls. (Not something you want to support if you're trying to deal with customer perceptions that dropped calls are a carrier problem.) And this is just scratching the surface of the commentary you can find on the web.

Apple has had a good reputation in industrial design and engineering, but ultimately you need a product that works and doesn't just look good. The Apple die-hard group as a percentage is a tiny part of technology consumers and releasing something that starts making people angry is one of the best ways to damage a product line. Negative word of mouth travels faster and farther than positive.