Paul D. Kretkowski on September 19, 2007
So the newly-announced iPod Touch will have wifi capability. A Web browser. The ability to watch movies. An iPhone-like form factor. A touch screen. All almost exactly like the iPhone.
In fact, the only major item that keeps the iPod Touch from being an iPhone is a microphone. Add a mic to the iPod Touch and you don’t have a true mobile phone — but you gain a VoIP phone, just as the iPhone itself can be used as a VoIP phone.
There are several good reasons for Apple Inc. not to equip future iPod Touches with a microphone. First, a VoIP-capable iPod might cut into iPhone sales, which Steve Jobs brashly predicted would hit 10 million in a single calendar year. After all, the iPod Touch does almost all of what the iPhone does, and does it for $299 (8GB) or $399 (16GB), hundreds less than the iPhone’s $499 (4GB) or $599 (8GB).
Which partly explains why, when Steve Jobs announced the iPod Touch, he paired it with a steep drop in the 8GB iPhone’s price — from $599 to $399.
Jobs and Apple gave this move an optimistic gloss, expressing a desire to make the iPhone available to more people this holiday season. Given that there are still roughly 100 shopping days left before Christmas — and that it’s still summer — other reasons for the abrupt price cut are more likely.
Second, the iPhone and iPod are now similar enough functionally and internally that few people who own an iPhone will buy an iPod again, since the 8GB iPhone has essentially all the features and as much storage as the 8GB iPod Touch. Similarly, adding a microphone to the iPod would ensure that few people who already own a mobile phone would upgrade to an iPhone. Only those who needed calling service that was independent of wifi areas would find utility in a separate, more-expensive device like the iPhone.
Third, Apple would like to avoid angering its telecom partner, AT&T Inc. A VoIP-capable iPod might inspire users to start making most of their calls using VoIP over wifi rather than using an iPhone to do so. This would deny AT&T profitable “breakage,” a telecom-industry term for when consumers either use more than their maximum minutes (paying a premium for each extra minute) or don’t use all the minutes they’re entitled to.
However, there is a way that Apple could make everyone happy: converge the iPhone and the iPod Touch into a single iPhone device. Apple gets the efficiencies of producing a single device (hopefully with at least the 3GSM mobile standard) while Apple-happy consumers only have to buy one. In addition, AT&T gets to stop worrying about whether a voice-enabled iPod will degrade its sales of iPhone calling plans and minutes.
Apple will always have a market for simple, playback-only devices small enough for joggers to strap to their arms or unobtrusive enough for schoolkids to listen to in the back row; so the iPod Shuffle and even the iPod Nano are safe for the foreseeable future. But the need for separate iPhone and full-size iPod devices is quickly vanishing, if it hasn’t disappeared altogether.
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