Sunday, 16 December 2007

Response to Sim-lock backlash

I'd be interested to know how iPhone sales are doing in the UK. I live in London, and from my entirely unscientific anecdotal observations, I'm not sure it's been such as big hit. You just don't see many people using them. I was also surprised to be able to walk into the Regent Street Apple Store on launch night, walk up to the counter and buy an iPhone without having to wait in line. I shop at the Apple Store on Regent Street all the time and you always have to wait in line - but not on iPhone launch night, apparently. This didn't seem to bode well.

iPhone did suffer from mixed press coverage in the UK during its launch. The trouble was that the US launch got so much hyped coverage by the UK press in the Summer that by the time of the UK launch this autumn, journalists were looking for a different angle. And Apple's exclusive deal with O2 was the obvious theme to add some local colour.

As a consequence, consumer's awareness was not only raised to the fact that the iPhone's SIM was locked to O2, but they were given the impression that this was an unusual and unreasonable practice. In fact, this practice is not unusual in the UK at all. Most phones bought on a contract have a locked SIM card. Neither is it strange for the iPhone to be exclusive to one network - many phones are launched this way. Typically a handset manufacturer will offer exclusivity to a network in return for a guaranteed marketing spend to promote the product.

So, from the consumer's perspective, there's nothing strange about the Apple/O2 relationship in itself. What is strange is that consumers are being asked to pay full price for a phone that is locked, and in addition, they are being asked to pay a premium on their monthly O2 bills.

I suspect that this has proved to be a bigger obstacle to entering the UK market than Apple had originally anticipated, but given that they're tied into a contract with O2 now, their room for manoeuvre seems limited. Also, given the negative reaction from US consumers when Apple dropped the price of the iPhone by a third in the Autumn, they'll think twice about doing something similar in the UK.

So the conundrum is this - how can Apple sweeten the deal to UK consumers without alienating existing customers or renegotiating their contract with O2? I'm all out of predictions on this one, but I suspect that something is going to have to give.

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