Swooping

Dear Dan Lyons,

[ This letter is a response to this Newsweek article. ]

Ok, you’re frustrated. We get that. I feel like you didn’t bring your journalist A-game to this subject (a little of Google I/O conference reality distortion maybe?).

Three obvious examples:

- Android outselling iPhone. Given that Verizon has more customers than anyone, and that there are several variants of Android phones, and some of them are offered for $.01, how surprising is it that a hot phone offered essentially free sells well? To report this as “Customers Choose Android Over iPhone” is exactly what the marketing people at Verizon and Google wanted you to say when they decided to offer their phones for free.

“If we did not act, we faced a draconian future where one man, one company, one carrier would be our future.”

- A Google exec promoting his company as a defender of the common man against the evils of a competitor with an eye toward monopoly is these days more ridiculous than hearing those words from someone at Microsoft.

- [Android OS] “blowing past Apple in terms of the technology it’s delivering.” Google has ANNOUNCED a bunch of very cool stuff, but NONE of it is in a phone you can buy today. And the implication you make is that Apple is resting on its laurels, which you of course know is not true (are you going to be at WWDC again next month?)

However, to your rage about ATT and iPhones dropping calls: Amen. My email signature says “Sent from my iPhone, because who knows WHAT would happen if I tried to use it as a phone…”

That said, you’re making way too much out of the woes you list. You’re an uber-geek. Every regular person I know with an iPhone thinks it’s no less than great. Yes there are issues here and there, but really: what product do you own that doesn’t occasionally disappoint?

Your reporting here is misleading and sensationalist. You touch on some big issues (monopoly, innovation-stifling, bad corporate behavior), but instead of unpacking these rationally in a way that might elevate the conversation, you delivered a Fox News-worthy rant.

Your Fake Steve work was once supreme. Thank you for that, but time to move on. Retire FSJ, excise his zealotry from your psyche, and get back to good reporting.

Namaste. I wait for the time when your insightful thoughts and my enquiring mind again become one.

It’s October 2008. I’m in an AT&T store shopping for an iPhone. At the register, I agreed to oblige myself to AT&T for two years in return for their “generous subsidy” on my phone which, they tell me, would otherwise cost me $699.

Holy cats! They’re subsidizing me $500! Thanks, AT&T! What a pal.

I also got my wife a new phone that came for free with our new Family Plan. It’s a very capable Nokia, which – the sales guy tells me – actually has better voice quality than the iPhone, can take pictures, can send MMS … oh, but not to the iPhone … but to other free Nokia phones and a bunch of Sony phones and Blackberries etc. Anyway, it can also play music too, even can sort of surf the Web. But I digress. The main point: free just for signing up. I mean, yes it’s subsidized, but I could have gotten the same very capable Nokia phone free without the two year contract.

So then I left the AT&T store, new iPhone in my pocket, new Nokia in the bag.

On our way over to the Apple Store, I started thinking back to Steve Jobs’ keynote at Macworld Expo 2007, where he introduced the iPhone as “a widescreen iPod with touch controls, a revolutionary mobile phone, and a breakthrough Internet communications device.”

We head to the Apple Store, where we’re looking at the iPod Touch. In Steve’s terms, the iPod Touch is two of these: iPod + Internet communicator. The only thing separating it from it’s cousin is the phone part.

The 16GB iPod Touch cost $299.

That Nokia in my bag was free. Gosh, if Apple could just somehow figure out how to get the free phone part of my Nokia into that $299 iPod Touch, AT&T wouldn’t have to “subsidize” me $500.

Hmmmm…

A few things to point out, then some jackassery:

1. Apple sells iPod Touch to me at a profit
2. Nokia sells that phone to AT&T at a profit
3. There is no way that the circuitry that defines the difference between iPod and iPhone costs Apple or AT&T anything resembling the difference between $299 and $699.

Now, the jackassery:

The fact is that the $199/$299 price tag for the iPhone is the result of AT&T’s—or any other carrier, since the situation is the same all around the world—subsidy. Without subsidy—and tying you to a new two year contract—the iPhone is not different from something like the Nokia N97, which is $700 unlocked. Or the contract-free, unsubsidized iPhone 3G itself: The iPhone 3G costs $770 and $877 unlocked for the 8 and 16GB versions.”

Just because “the situation is the same all around the world” does not mean we should just shrug our shoulders and accept it.

I think a lot of the grumbling we’re hearing (and if we own 3G iPhones, doing) is not because we don’t feel like we should pay SOMEthing for this new bit of Apple magic, but it’s because our gut tells us that we’re being scammed by AT&T due to the rules that the wireless industry has managed to sucker us into accepting as standard procedure.

The question I have is this:

Where would Apple have to price the iPhone 3G S to get it the same profit margin that they get when they sell an iPod Touch?

Is it $299? Probably not.

Is it $699? No way.

Steed is writing now. Please stay tuned.