How Apple changed the mobile industry

When Apple secretly shopped around the iPhone to mobile carriers in late 2006, who could anticipate what a disruptive change this was going to bring to the industry? (Perhaps only Steve Jobs.) Up to that point, cell phones were just for phone calls! Even the Blackberry could only handle rudimentary email and had almost no impact on mobile internet.

Back then, the phone companies made their money on minutes. I remember going over my tiny allotment of minutes dozens of times from my first cell phone in 1995 to well into the iPhone age. I used to pay $250 a month for phone calls back in the 90s! So AT&T agreed to give the data away to iPhone customers. What the hell? There was no app store the first year and how much data could iPhone owners use to display web pages on that tiny 3.5” screen?

By 2010, the world had changed. Not just because of iPhone users but everything that came after it (Android). People loved their smartphones and wanted to do everything on them, including shooting hi-res videos and posting them online from the scene. This is more than just fun and games…the world would know little about Ferguson, Baltimore, Tahrir Square or any other social phenomenon if it weren’t for smartphone cameras and Youtube. The iPhone is the reason all this happened, because if it weren’t for iPhone, there wouldn’t be Android either.

When the iPhone debuted, we didn’t expect much. People were happy with 2G EDGE and 0.1 megabit downloads on mobile devices. Today’s 4G LTE provides 15 megabit and beyond. That’s 150 times faster! And it costs billions in infrastructure upgrades to support the changes smartphones have brought about. (Rumor has it the iPhone 6s will handle speeds up to 300 Mbps on LTE, giving it a pipe 3000 times larger than the first iPhone.)

What will we do with all that internet capacity? Leave it to Apple to push the envelope. Apple changed the music industry in June with Apple Music. Now anyone with an iPhone or iPad (that’s over a hundred millions devices) can stream 35 million tracks from the iTunes Store on-demand for a low $9.99 a month. Right now, millions of people are getting their 3-month trial. Apple is adding Android support this fall. That’s a few hundred million more devices.

This is why Apple invested billions – not just buying Beats but building tremendous data centers to handle the traffic. Remember, the old model was purchase-download-play. Data only had to travel once, then it played from the customer’s device. But now, every song is streamed to each listener on-demand. Continuously. Forever.

Sure, Pandora and Spotify have been doing this for a while, but Apple is far bigger. On 1/12/15, Spotify reported 15 million paying customers, plus 60 million on their free (ad-sponsored) plan. In 2014, Pandora had 3.3 million paying customers. Apple? We don’t have current figures but as of 4/24/14 Apple reported 800 million active iTunes accounts with credit cards on-file. And with the loyal Apple customer base and free trial… just watch. If even 10% of Apple’s customers sign up for Apple Music, they will dwarf Spotify’s free subscriber base.

And this fall, Apple has their sights set on doing it all over again with television. It might be Apple TV set boxes at first, but surely this will come to mobile devices eventually.

What does this mean for mobile internet? Mobile carriers will be delivering a ton of data. And charging for it, so long as they can build their infrastructure fast enough. Don’t be surprised to find yourself using 10, 20, 50 GB per month. Eventually, prices will fall accordingly.

That’s why unless you’re on an old “unlimited” data plan, minutes are now free and it’s data you pay for. Phone calls are just a freebie thrown in with your data. This is also why it’s impossible for carriers to continue “unlimited” data plans. The few customers still on those old plans get their download speeds throttled, can't stream music, use the wi-fi hotspot function, and more. If data continued to be unlimited, carriers would quickly be out of business.

The coming data disruption could also shake out the lower-tier carriers. Sprint, Cricket and to some extent T-Mobile don’t have the funds to spend on infrastructure like AT&T and Verizon, so their only hope is hooking people who are at the bottom end of the market that don’t use much data. If they try to compete in the big leagues, they’ll go under fast. The stakes are just too high and only getting higher as we use tens of thousands of times more data than a few years ago.

This is why Apple Music is disruptive, even more than the original iTunes Store was back in 2003. But disruption is Apple’s game, and this is a good disruption. Apple changes the world again and again.

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