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The new iPhone: Good or Evil?


Like many of you, I've been anxiously awaiting today's announcement on the new Apple iPhone 3GS.  (And to show what a geek I truly am, I don't even have the old version; I just love this stuff.)  First, I'd like to commend Apple for not naming it the iPhone 4G and causing all kinds of technology confusion.  Second, I'm very excited about one new feature in particular, namely video.

Ever since the iPhone first debuted, it has been in a love-hate relationship with Mobile operators: they love how the device has attracted new users and driven increased usage, but they worry about the flood of bandwidth-intensive applications and the resulting negative impacts on the user experience.  Now, with a higher resolution camera and advanced video capture, editing, and upload capabilities, how will this new iPhone impact carriers' networks?

According to Cisco's Visual Networking Index, the mobile space is more and more about data and video,in large part due to the popularity of the iPhone.  As my boss, Suraj Shetty, noted in a recent Network World article, these advanced devices and new applications will mean more and more mobile operators moving into the traditional cable video space, and vice versa.

So what do you think will happen?  Will video on the iPhone be a big deal or just another feature?  Will the new iPhone cause carriers to upgrade their networks?  How important is video via mobile to you?  For those using a device that currently has video capability, let us know how you use it and how you like it.  And when the new iPhone comes out on June 19, we'd love to hear from you early adopters.

8 Replies 8


I see that Cisco just released an updated VNI forecast that once again confirms the rapid growth of mobile data, and in fact highlights mobile video as the fastest growing segment among all categories measured.

I expect the new iPhone, and the proliferation of so-called "iPhone killers" will only increase this rate of growth.  Are Mobile operators ready?  What do they need to do to ensure customers receive the quality video experience they expect?


I wouldn't say operators have "loved the increased usage" as much as they have loved the new subscribers :-)

Actually, the iPhone generates a lot of data traffic, but this doesn't translate into margin improvements or increased revenue for the operator - in fact, it is the exact reverse.  The iPhone forces operators to upgrade their data networks pretty extensively to handle the increased data traffic, while netting them a flat-rate subscriber base that does not have access to operator-provided services.

The iPhone is the ultimate walled-garden application.

  Visual voicemail - provided via Apple

  Applications (extensibility) - provided via Apple

  Location-based services - provided via Apple (now with compass, GPS, etc)

In fact, I think the actual net effect of the iPhone for an operator is:

1) Decreased upsell of new services and applications

2) Decreased voice usage minutes (Although this isnt released anywhere, with all the other methods of communication, I would venture to bet there are less phone calls than other smartphones

3) Decreased lifetime value of a subscriber

Vote: Good for the industry as a whole.  Evil for the operators that deploy it.

I vote Good for users, good for industry AND good for operators that deploy it.

Why is it good for operators?

  • Shows commitment to meet pent up subscriber market demand
  • Forces multiple organizations within the operator to review sustainable business model sooner than later
  • Builds real life operational experience BEFORE the Mobile Internet revolution hits a majority, while Mobile Internet Devices are still a minority

The sooner operators begin operating networks that handle iPhone traffic, the sooner they begin building on an expertise (from good and bad experiences) that holds more promise to carry them forward as profitable experience providers.


In most industries, what is good for the consumer ultimately wins. No exception with the smartphone phenomenon.

With the iPhone as the impetus, I agree Robert that ease of use will be a top of mind issue for mobile operators and application developers. And to infrastructure vendors too that need to build intelligence in the network to minimize the respondent or end user burden and the OSS demands on the service provider.

On the user experience side, intelligent power management, connection management with auto-selection of the network based on preferences or policies, profile availability and enforcement, may be via the cloud, are all opportunities for the network. This synergy between user experience and network requirements is to be celebrated. Clearly, iPhone expedited the process.

In my book, all good. More good to come with no turning back!



So before we decide to too pessimistic from SP perspective on iPhones ("i.e. good for consumers, but bad for operators") lets take a closer look at what iPhone has really wrought for the carrier (understanding of course that many more devices like this one are on the way)....

Earlier this year AT&T shared that nearly 40% of iPhone users have a bill over $100 per month--while we know this revenue is driven by a much higher data throughput requirement (say at least 10X or more vs.a "feature phone" user), and that the revenue yield per KB for mobile web in particular must be going down (as flat access plans spread the same dollars over more KBs), we also know there is alot more going on here. 

iPhone users drive much higher rates of simple IM volume than do other device users (which is the carrier's most profitable data service--and is the single biggest effect of iPhones) and iPhone users must spend far more on incremental purchases (which are aggregated on the carrier bill and also have very high margin) to drive bill sizes that large (vs. the typical $60 per month user at AT&T with a voice plus simple access plan for 10 bucks).  AT&T has recently split off IM service plans from their broader data packages for this reason (i.e. better matching of revenue and costs).

Sure the iPhone user drives substantial additional costs back into the carrier network (much of which is difficult to assign only to the iPhone) but I have a hard time believing that the majority of iPhone users (despite driving lower % margins) have lower $$ contribution margins than general users at the end of the day.

I vote "good for consumers, good for carriers".....


iPhones, and other 3G smartphones, are the 1 big growth area for the wireless industry - so definitely a good thing for them.  Data ARPU is increasing significantly for the 3G operators, while voice ARPU is flat or declining. Don't forget the smartphone ecosystem, with app stores at the center.  Smartphone users buy apps and purchase more music & video content, as well as paying more per month for service with their data plans.

I forecast that the biggest impact is that increasing demand for smartphones and mobile data services will motivate operators to accelerate deployment of 4G networks based on WiMAX and LTE. So I am very interested to see Cisco's invlolvement with Clearwire on their WiMAX network.  I have recently published a report in which I investigated these topics - The Emerging 4G Wireless Landscape in the U.S.  A free excerpt is at



A recent post by Sam Churchill on dailywireless.orgtermed the iPhone phenomenon a "data tsunami", and cited independent telecom analyst Chetan Sharma's estimate that a typical iPhone user is responsible for four times the data usage of a typical smartphone user.

Further, Churchill cites the impending launch of numerous competitive mobile devices and uses Cisco's Visual Networking Index to forecast a thousand-fold increase in mobile data traffic by 2012.

All of this is to emphasize the urgent need for significant upgrades to the mobile network.  LTE is coming from Verizon, but not until next year and only in a few regions.  AT&T is upgrading its network but is being conservative in its migration due to expense and technical concerns.

Churchill mentions WiFi as a technology some operators are using to ease the network burden in the short-term, but long-term solutions are still difficult, expensive, or potentially offensive to those valued smartphone users.


Well, from AT&T's perspective, I guess it's all goodness.  AT&T just reported earnings that included the largest quarterly increase in postpaid 3G wireless subscribers in company history, including 3.2 million iPhone activations.

However, the chorus of complaints over iPhone service quality continues.  So I'm wondering how AT&T is doing it?  Is the iPhone really so great that people are willing to take a risk or put up with potential network issues?  Or is this simply a "squeaky wheel" situation, where the only people we hear from are the unhappy ones?

Bottom line: AT&T network issues -- fact or fiction?

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