Archive for the ‘Apple’ Category

Why I Don’t Have a Palm Pre Yet

Tuesday, June 16th, 2009

June 6th was the launch date for the Palm Pre, the heavily hyped new smartphone from Palm and Sprint.  What I really want in a phone is something that matches the elegance and simplicity of the user interface on Apple’s iPhone, but still includes a physical keyboard and multitasking capabilities.  The Pre appears to be a very close fit, almost certainly much better than the Windows-mobile based HTC Touch Pro that I bought last year.

I definitely tend to be an early-adopter on new gadgets, so it certainly wouldn’t have been surprising if I had run out to buy a Pre last weekend.  In fact, I would have very much liked to have made that purchase.  Unfortunately, I’m already a Sprint customer and, as I mentioned earlier, I purchased a new phone last year.  Because of this, I am not currently eligible for upgrade pricing, which means that any phone purchased now would cost me considerably higher than the new or upgrade eligible customer pricing, which, of course, is the pricing that Sprint and Palm are advertising publicly.

I am, of course, under a 2-year contract with Sprint that was a necessary condition for the purchase of my last phone.  I completely recognize the validity and legality of that contract and that it is the underlying reason why I am not eligible for upgrading without a price penalty.  My purpose in this post is not to argue that my situation is somehow unfair or that I am being denied an entitlement.  I never had any expectation of being able to upgrade early and I don’t believe that there is anything unethical, much less illegal, about the system.

What I do question pretty strongly is whether or not the current business model used by the cell phone industry is a correct one in today’s marketplace.  Particularly since Apple has turned the smartphone into a much more mainstream product with the iPhone, the industry has entered a phase of extremely rapid growth and enhanced competition with frequent introduction of new models with desirable new features.  I strongly question whether customers are going to continue to be willing to accept a system that requires a 2 year wait between upgrades.

I had initially started thinking about this as subject for a blog post after getting into a Twitter discussion of it during the day of the Pre launch.  I got busy with other things and didn’t find time to start working on it until later.  In the meantime, this became a very hot subject generating a lot of coverage both in blogs and the mainstream press after Apple announced the third-generation version of the iPhone and AT&T revealed that the lower pricing would not be available to current iPhone owners that are still under contract.  This is a change from the approach taken with the last version of the iPhone, which was offered at the new-customer price to owners of the previous version, regardless of contract status.

The central idea behind current business model used by the cell phone industry is that the carriers subsidize a portion of the purchase price for the phone in exchange for the customer committing to a service contract, generally for 2 years.  If the customer chooses to switch carriers before the contract is up, he/she is obligated to pay a fairly substantial fee to buy out the contract.  Most carriers offer the customer the option of a smaller discount on an a new phone half way through the contract.  After the contract expires, the customer is generally eligible to again get the same subsidy offered to a new subscriber.

The contract system eliminates a lot of the need for carriers to expend much effort in customer retention, outside of the discounted phones offered at the end of the contract.  This likely saves the companies a lot of money, but is also almost certainly the biggest contributor to the industry’s reputation for poor customer service.  I have found that no matter which of the big cell phone carriers is mentioned, it doesn’t take long for someone to start telling stories about their horrible experiences.

It is in the best interest of the cellular carriers for most phones to have non-subsidized prices that are prohibitively high for most people since, otherwise, it is a safe bet that most people would forgo the contract.  This would make it much easier for customers to switch carriers at will and, thus, would greatly increase the cost and effort that the companies would have to expend towards retention.  I have little doubt that this would dramatically improve the quality of the customer experience, but it might or might not have a negative impact on profitability.

The big question is whether or not the non-subsidized prices really reflect the true cost of a cell phone or if they are kept artificially inflated by the cell phone manufacturers as a result of the subsidy-based sales model.  I admit that I have no direct knowledge, but my educated speculation is that the subsidized prices are probably more realistic.  The non-subsidized prices for phones (especially smartphones) simply seem way out of proportion with the pricing for other portable electronics.  In most cases, those prices are pretty close to what you would pay for a full-featured laptop computer and considerably higher than netbooks, stand-alone PDAs, or portable media players, any of which would seem more comparable technology.

The most obvious direct comparison would really be between the iPhone and the iPod Touch, which is basically an iPhone without the cellular radio or camera.  The pricing information for the 16GB version of the new iPhone 3GS has indicated that it costs $199 fully-subsidized (the price widely advertised), $399 for customers 1-year into their 2-year contract, or $599 un-subsidized.  The suggested retail price of the 16GB iPod Touch is $299 and it can be found in the $260-$275 range if you shop around.  I can certainly see where the added features of the iPhone would justify a higher price, but does it really make sense that they would double it?

In all fairness, my instinct looking at those numbers is that the $399 price offered after 1-year is probably the most realistic one.  While I suspect the price on the iPod Touch is also a bit inflated (it doesn’t really have direct competitors), it really does look like the $199 price probably brings in a pretty thin profit margin, if there is any at all.  The same is probably true with the similarly priced Palm Pre, although it does also have somewhat lighter specs, including only 8GB of memory. Even if the subsidies do push the prices down below the actual cost of the phone, I can still see justification for why the carriers might want to subsidize even for existing customers still under contract in order to prolong their contract and help to ensure loyalty.

I think that they might want to look to the satellite TV business as a possible example.  I’ve been a DirecTV customer for a number of years and they also use a system of contracts and subsidized equipment.  The big difference from the cellular business, though, is that DirecTV lets current customers upgrade their equipment (such as going to a DVR or hi-definition) at the fully subsidized price no matter how far they are into a contract.  The one catch is that doing so will reset their contractual start date to the date of the upgrade.  This helps to accommodate any need that the customer might have to move up to something better or different, while also pushing further back the date at which he/she might be able to switch to a competitor.

I do imagine that the cellular industry would probably prefer to stick with the current fairly customer-unfriendly system for as long as possible, but I do seem some recent signs that they may very well be changing their approach.  The recent publicity over AT&T’s prices for iPhone upgrades hasn’t been very good for them, even if they are pretty clearly within their rights.  A fan base as loyal as the more vocal iPhone owners, particularly when they are so willing to spend more money to make sure they have the latest and greatest, really does need to be cultivated and protected.  Policies that seem to directly target those loyal customers may not be in the company’s best interest, even if they appear to be the most financially prudent on the surface.

Another interesting development is Sprint’s recent introduction of the Sprint Premier loyalty program.  Customers that have achieved high longevity (10 years or more) or have one of the higher-end service plans (priced over $69.99/month, a fairly common price point for a smartphone with both a voice and data plan) are automatically enrolled in that program.  While the program offers a number of smaller benefits, the big one is that those customers are eligible for the fully-subsidized upgrade price at the end of the first year of a 2-year contract.  While Sprint’s recent issues with customer retention probably made this more necessary for them, it still is a pretty clear acknowledgement that higher-end customers are increasingly unwilling to wait 2 years between upgrades.

Never heard of Slate Tablet PCs?

Thursday, October 2nd, 2008

I came across an odd post by Jason D. O’Grady entitled Would you buy an all-screen notebook computer? on the in the "Apple Core" blog at ZDNet.  This really short post centered on the proposed concept for the second-generation OLPC, which is expected to have a lower screen that can be used as a virtual keyboard (with haptic feedback) instead of a physical keyboard.  O’Grady then went on to provide a poll asking if readers would be willing to buy an all-screen notebook.

The strange thing about this post was that there was absolutely no mention of slate Tablet PCs and UMPCs.  O’Grady was instead treating the idea of an all-screen notebook as if it were a completely original and radical idea as opposed to simply a new example of something that has existed for several years.  The poll question only had "yes" or "no" options and didn’t even have the obvious "I already have one" as a choice.

This was posted on an Apple-centered blog, which is almost certainly the key explanation for this.  Slate notebooks to date have mainly been Windows-based (although there are a few Linux models out there too) and Apple focused bloggers have a definite tendency to pretend that the Windows world essentially doesn’t exist, particularly when it comes to innovative features that haven’t shown up in Apple products.  I’m even a tad surprised that the OLPC caught this author’s attention considering that it isn’t an Apple product.

The no-keypad design of the iPhone and iPod Touch has also generated a fair amount of posts and articles from Apple bloggers and journalists that seem to suggest that the concept was completely new or that only cite the Apple Newton as a precedent.  Of course, there have been numerous slate PDAs and phones in the Palm OS and Windows Mobile world for years, but I guess they don’t really count since they aren’t Apple products.

I really don’t have anything against Apple (I actually recently got my wife a MacBook), but the extremely myopic viewpoint of some Apple enthusiasts has always been an irritation to me.

My Inventory of Computer Equipment

Tuesday, August 26th, 2008

I figure this is a good time to give an inventory of my home computer equipment.  I’m only listing personal stuff here, not my work computers.  I’m also only listing the items that are in active use currently.  We have quite a bit of older equipment in closets or on shelves around here as well.

1. Home-built Desktop PC: I haven’t purchased a desktop computer for over 10-years.  Instead, I build my own system from individual parts, occasionally upgrading when the pricing and my needs dictate.  My current system has an Intel 2.13GHz Core 2 Duo processor, 3GB of memory, 1.5TB of hard disk space (spread across 4 drives), NVIDIA GeForce 8600 GTS video card, and a Creative SoundBlaster X-Fi sound card.  The OS is Windows Vista Ultimate 64-Bit.

2. Vye S37: This is my every-day laptop.  It is a mini-tablet UMPC with a 7-inch touch-screen, a nearly full-sized keyboard, 250GB hard drive, and 2GB of RAM.  It is running Windows Vista Ultimate 32-bit.  I’ve written several previous articles about this device on the previous version of this blog.

3. Apple MacBook: This is primarily my wife’s laptop computer, although I do use it occasionally as well.  This is the newest computer in our collection, having just purchased it a few weeks ago after the power supply died on her old HP laptop.  I’ve never been a big fan of the Mac OS, but we felt that it might fit my wife’s needs much better than Windows.  So far, she has been very happy with it.

4. HP EX470 MediaSmart Home Server: This unit is our primary backup and centralized file storage device.  We also use it as a media server.  This system runs Microsoft’s Windows Home Server OS and I have upgraded it from its stock configuration of 500GB hard disk space and 256MB of RAM to 2.25TB of hard disk storage and 2GB of RAM.

5. Palm Treo 700P (Sprint): My current cell-phone/PDA is the latest in a series of Palm OS devices that I have owned.  I am nearing the end of my current contract with Sprint and will be eligible for the best upgrade rates on a new phone starting September 1.  I’m starting to evaluate options for new phones (a topic for another article) and probably am ready to finally move away from the Palm OS.

6. Sony Playstation 3: Although I do use the PS3 for some game playing, it was actually purchased primarily because it is generally the best currently available choice for a Blu-Ray video player.  The PS3 is located in the upstairs bedroom and is also used to stream music up there from the home server.

7. HP OfficeJet 7410: This is an "all-in-one" color ink-jet printer that also works as a scanner, copier, and fax machine.  A big motivator for purchasing this particular printer was that it has built-in wi-fi networking.  That let us put the printer up in the bedroom (out of easy reach of our preschooler) and still send print jobs to it from the desktop computer downstairs as well as from any of the laptops.  While it is now a somewhat older, discontinued model, it still works pretty well for us.

8. D-Link DIR-655: This router is the centralized networking device for our home network.  It is a fairly new wireless router that includes draft 802.11n high-speed networking.  The desktop PC and home server are both directly connected to the router, while the laptops, PS3, printer, and our DirecTV HD-DVR are all set up to connect to it wirelessly.  The router is connected to a DSL modem with service from DSL Extreme with 6000/768Kbps download/upload speeds.

Macintosh Clone Maker Counter-Sues Apple

Tuesday, August 26th, 2008

A few months ago, a small company called Psystar introduced a fairly generic Intel-based PC which they were offering pre-installed with Apple’s Mac OS X.  Apple’s official End-User License Agreement (EULA) for the Mac OS indicates that it is not permitted to run it on hardware that isn’t made by Apple.  From the start, it appeared to me that this company probably existed largely to provoke a lawsuit.  Not surprisingly, Apple did file suit against them claiming copyright violations and the news came out today that Psystar is counter-suing with a claim of anti-trust violations.

In a cnet.com article reporting the counter-suit, Psystar outlined their case as follows:

Psystar argues that its OpenComputer product is shipped with a fully licensed, unmodified copy of Mac OS X, and that the company has simply "leveraged open source-licensed code including Apple’s OS" to enable a PC to run the Mac operating system.

I’m pretty unsure of how strong Psystar’s position really is, but I think this could be a fascinating and fairly ground-breaking test case, assuming that Psystar has the financial backing to go the distance on this case.  This could end up having a substantial impact on the strength of EULAs and the degree to which they can restrict how a customer uses a piece of software after purchase. 

Although they appear to be citing a number of different issues in their defense/counter-claim, the two main items that Psystar’s case appears to hinge on are the fact that Apple sells boxed-copies of OS X in stores separate from the hardware and whether or not the EULA’s restrictions that the software only be installed on Apple hardware are really legitimate.  

While I’m uncertain of what the legal finding will be, my own view is that Psystar’s argument represents the way that the situation should work.  Basically, if a customer goes into a store and purchases a piece of software, I believe that he/she should be free to install and use it as the purchaser sees fit.

That isn’t to say that I don’t think Apple should be required to make it readily available or easy for customers to run the software on non-Apple hardware.  I’m perfectly fine with them putting technological barriers in place that are designed to prevent unintended use.  I just don’t think that there should be any legal restrictions that will prevent the legal purchaser of the product from bypassing those restrictions, assuming he/she can find a way to do so.  Along the same lines, I also don’t think there should be any legal restrictions against someone publishing, or even selling, that solution or offering to perform that service for the customer.

My view is that this is how it should work in a free-market system.  I essentially see this as a matter that is between Apple and their customers and I believe that the legal system should essentially stay out of their way.

Thoughts on the MacBook Air

Thursday, January 24th, 2008

I’m going to take a short break from my ongoing reports on my new Vye S37 to write a bit about the mobile computing device that is getting the most attention right now.  I’m referring to Apple’s MacBook Air ultra-portable, which was announced with quite a bit of fanfare during Steve Jobs’ annual keynote speech at the MacWorld Expo.

I’m certainly not a big Apple fan and the MacBook Air definitely wouldn’t fit my own personal needs (its footprint is way too big, for one thing), but I do think it looks like a reasonably decent device that should be a good fit for some users.  It has received a fair amount of criticism from some quarters, but I think most of its shortcomings are just examples of the types of compromise that has to take place when portability is a primary focus for the device.  Every such design has to require a fair amount of give and take.  Some potential customers will not be able to get by with the compromises that Apple chose to make, but those same concerns will be less important to others.

The key issue with the MacBook Air is really one that is inherent to Apple’s computers in general: the Mac OS remains a closed platform inextricably tied to a single manufacturer’s hardware.  Competition is one of the main things that makes the compromises on mobile PCs tolerable.   As noted in my recent post outlining the factors that led to my decision to purchase my Vye S37, there were all kinds of factors that led to my rejection of other decent systems in favor of the one that most closely matched what I wanted.  This was made possible by my preference for using an OS that woks on hardware from a wide variety of companies.

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