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iPhone juggernaut zeroes in on Japan, hits snag in China

Japan is the iPhone's next target, according to today's Wall Street Journal.

Apple is negotiating with at least one of Japan's top three cellular providers, notably its largest one, NTT DoCoMo Inc. The news is consistent with previous announcements from Apple that it plans to launch the iPhone in Asia in 2008.

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Many iPhone watchers in the United States were thrilled at this news. Since the major cellular networks in Japan use the faster 3G technology (as opposed to the 2.5G GSM technology in the current iPhone), the talks with the Japanese carriers has been taken as confirmation that Apple indeed plans to release a 3G version of the iPhone in 2008.

The Journal article points out that although Japan is an ideal market for the iPhone – its 100 million cell phone customers "are already used to shelling out hundreds of dollars for expensive phones with advanced features" – nowhere is the competition among handset makers more fierce. Given its track record so far, I think the iPhone will fare well in Japan.

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But before the iPhone can measure itself against the Japanese competition, Apple needs to make a deal with one of those cellular providers. As usual, the holdup is Apple's demand for a portion of the carrier's monthly revenues, which have been estimated at between 10 and 20 percent.

Two weeks ago, Apple's negotiations with two of China's popular carriers – China Mobile and China Unicom -- reportedly broke down over the revenue sharing issue. China Mobile has said it's still talking to Apple, but resistance to sharing revenue seems higher among the Chinese carriers than it has been in other nations.

Apple likely will succeed in Japan the way it has in other countries, by playing the cellular providers off each other. If the dominant DoCoMo doesn't bite, the No. 3 carrier, SoftBank Mobile Corp., probably will. Just as with AT&T in the U.S., SoftBank's rationale would be to pay Apple its iPhone membership dues as a strategy to gain market share.

However, as Apple continues to introduce the iPhone in more countries I wonder how often the tactic will prove ineffective, as appears to be the case in China.

A Reuters story from Nov. 14 quoted an anonymous Chinese telecom executive saying that their "business model does not entail sharing revenue with terminal producers – we don't share revenue. That's a Chinese rule."

Another problem with the iPhone in China that could crop up elsewhere is that the SIM cards in Chinese mobile phones are not "locked" as are those in Apple's product. The same anonymous executive said the iPhone's locked SIM cards might have compatibility issues with the Chinese cellular networks.

All of which only serves to strengthen my belief that Apple should be thinking about offering a universal, unlocked iPhone that would work on any network in any country.

A universal iPhone would cure the compatibility headaches that vary from nation to nation while saving the company the trouble and expense of battling those resourceful iPhone unlockers.

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Apple also would no longer require a partner carrier in each country in order to sell the iPhone (although I think it still would have a "preferred" carrier in most countries that could sell an iPhone with a contract at a lower price.)

The iPhone carries the promise of being at least as successful as anything Apple has ever done, including the mighty iPod. If only Apple would let the beast out of its cage ...


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