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Why the iPod touch 3G makes no sense


Amongst the frenzied speculation that tomorrow's media event will see new iPhones and the end of the iPods both Shuffle and Classic, there's also been some lower-key talk of a possible "iPod touch 3G", designed to sit halfway between the iPad 3G and the iPhone. I must confess, this makes very little sense to me. Here's why.

First problem: the hardware

Chris Rawson and I previously went back and forth on the differences between the iPod touch and the iPhone. It comes down to two things: the addition of the cellular technology stack in the iPhone (the baseband chip, antenna, and larger battery to power it) and the use of a few lower-cost components in the iPod (particularly the screen, chassis, camera, and RAM).

So if you graft the cell stack onto an iPod touch, what you actually end up with is physically indistinguishable from a low-end cut-price iPhone. Packing in that extra hardware dictates sacrificing the iPod's slim chassis and most of its price advantage. There's nothing left to distinguish it from the iPhone product range any more. This runs counter to Apple's normal strategy, which is to leave very clear gaps between product lines and avoid losing sales to analysis paralysis.

Now, perhaps I'm just being pedantic here. So what if the hardware is really just a diluted iPhone; what's in a name anyway? Surely the thing people are really getting excited about is the idea of a cheap data-only plan, just like the iPad has. Well, I'm not sure it's that easy, unfortunately.

Second problem: the carriers

The iPad has enjoyed enthusiastic support from the cellphone carriers despite Apple mandating its unusual and remarkably cheap data-only no-commitment plans. I claim that the iPod touch would have at best a lukewarm reception and more likely a downright hostile one.

I've spent a fair bit of time with cellular network industry insiders over the years and if you get talking to them a common view of the carriers' opinion of the future quickly emerges. The carriers are all deeply, deeply scared of what is usually referred to in telco slang as "carrier commoditization": the idea that the less attached the users are to a service the easier it is for them to move to competitors. This introduces severe downward pressure on prices -- great for users, not so great for the shareholders. GigaOM has a good essay that discusses carrier commoditization in detail.

What the carriers desperately want is to preserve the status quo. They want to offer dozens of overlapping plans with confusing naming schemes, thus ensuring as many users as possible are on the wrong plan for their needs. Either users don't have as many bundled discount minutes, messages and data as they use, and pay overage charges; or they select a bigger bundle than they need and overpay that way; or, when contract renewal time comes around, they stay with their current provider out of laziness or sheer confusion. The carriers want long contract terms to lock customers in and reduce churn. The carriers want to promote their own brands as much as possible, which is why so many non-Apple handsets have carrier-specific apps and carrier-specific logos all over them. The carriers want to own the user and anyone who stands between them and the end-user is to be feared and, if at all possible, avoided.

Data-only no-lock-in plans like those designed for the iPad threaten this business model. With fewer competing numbers to baffle consumers with, it becomes far easier to shop around between carriers and compare prices. Without artifacts like your phone number tied to the carrier, it becomes trivial to move between operators -- in the same way as a webmail email address makes it easy to change your home ISP without having to tell everyone that your email address no longer works.

The wide carrier support for the iPad can be explained because -- quite obviously -- no-one out there is ditching their normal phone contract in favor of an iPad (well, except perhaps for Dom Joly.)

Of course there are also Mifi-type mobile hotspots, and even the awkwardly weird ZTE Peel -- but these devices also can't be reasonably combined with an iPod touch to replace a phone, because they can't receive incoming calls when they're switched off (and they have awful battery life to boot). As such they are "secondary" devices that allow the carriers to extract a second modest monthly fee from a customer who's almost certainly already carrying a phone with a premium contract attached. That's fine, but the second these cheap data plans start taking a bite of the lucrative contract market will be when the carriers drop them like a hot potato. That's exactly what a data-only iPod touch 3G on an iPad-style data plan would be.

Apple managed an end-run around the carriers with the iPhone. It brings in high-value customers by the metric ton but those people aren't customers of the network -- a Verizon iPhone is the same as an AT&T iPhone, so the customer belongs to Apple, not the carrier. Have no doubt that this sort of thing induces deep conflicts in the carrier's management and sleepness nights for the senior staff. It's my belief that support for an iPod touch 3G would be a bridge too far for them.

But perhaps I'm wrong about this too, and maybe either one carrier (perhaps a hungry third-tier company like Sprint) will bite the bullet or maybe enterprising hackers will figure out a way to make iPad SIMs work in an iPod (expect Apple to make at least a token effort to prevent this, to placate the carriers). What next? Who's going to buy this?

Third problem: the users

Who needs just data on a mobile device, and doesn't care about voice or text messaging? I think there's less of a market for this mythical device than many people believe.

There are people who already have a phone, of course -- say, folk who are locked into a contract, or have a phone provided by work, but would really like to also have an Apple device with mobile data access. I can't deny those people must exist, but are there enough of them to justify a device mostly designed for them? It seems unlikely to me.

It's not hard to find tech bloggers who will tell you they "hardly use voice calls any more" -- I'm one of them, in fact. It's a rare month that I use more than 50 of the thousands of free minutes that come bundled with my unlimited data iPhone plan. So surely ditching the voice (and maybe even SMS) parts of our plans to save a few bucks makes perfect sense, right? We can always use Skype or Google Voice to make those few remaining calls.

I'm not so sure. It's true I rarely use voice but I still need it around for actual emergencies -- in case of car breakdowns, or accidents, or sudden illness, or an airline misplacing my baggage. These are exactly the times when I need the highest level of reliability from my voice service. However, at no point in my years of using it has Skype ever struck me as a service that has the highest level of reliability. As the Skype website itself notes, "No emergency calls with Skype. Skype is not a replacement for your telephone and can't be used for emergency calling."

I can't comment on Google Voice -- because it's only available to US citizens, which is a very good reason that you can't rely on that either. Even if you are willing to trust a VOIP service, it's still no use when you have only a borderline GPRS nine-point-eight-kbit data connection, or if you're traveling and don't care to pay your cell operator's horrifying data roaming fees.

The bottom line here is that I feel that even if (for some people) voice communication isn't frequently used any more, that doesn't mean it's not important -- any more than house insurance isn't important because your house hasn't caught fire recently.

Wrapping up

So, that's why I think an iPod touch 3G is highly unlikely, tomorrow or in the foreseeable future. Think I'm an idiot? Hit the comment form below and tell me so. And whether you agree or not, be sure to join us for our liveblog of the media event where we'll be covering the fun and frolics!

And now for the inevitable weaselly footnote where I cover myself in case it turns out Apple is smarter than me.

The thing I think we could see tomorrow that will scratch many people's itch for an iPod-with-data is a pay-as-you-go iPhone. In fact, here in Europe we've been able to get the last few iPhones on a no-contract basis (at a hefty upfront premium, of course) so this wouldn't be a radical shift in policy for Apple. We can also get tariffs with tiny numbers of voice minutes but generous data allowances, which is a basically a back door to the same end-point -- a no-contract iPhone that the user can move between cheap plans on different operators as easy as swapping a SIM card. But, please: no-one tell the carriers, or they'll catch on and stop offering these plans! In any event, this would be a significant change on the part of the US carriers, so we'll see if AT&T and Verizon can ante up and offer some appropriate plans -- and Apple can ship a "world phone" handset that works on all the US networks.

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