Will iPhone Mess Up Cell Phones Upgrade Cycle?

iphone.jpg

Olga Kharif at Business Week believes the Apple iPhone will disrupt the cellphone upgrade model.  That model says that users generally replace their phones every 18 months.  They do this for a number of reasons: Phone is broken or has battle scars, new features, new styling.  The biggest reason, of course, is that the industry enables it by giving free or cheap phones when you agree to a new contract.

In a recent article, Olga’s makes this argument:

“The new iPhone from Apple….brag[s] touch screens instead of buttons. That means that if cell phone makers or carriers decide to add new functionalities to these phone when they are already in use, they could, potentially, do that over the air. Want to enable consumers to shoot, edit and post videos to a mobile site in a new way? Just send them an application with virtual buttons that will appear on their touch screens and allow for this application’s use.

If consumers are able to get new applications this way, I think some of them will stick with their phones longer. After all, today’s phones all feature cameras and Web access. Unless handset makers come out with additional hardware making replacing handsets every 18 months a must, I don’t see why consumers will keep on changing their phones as often, especially since the phones’ prices seem to be on the rise. After all, with a simple software upgrade, users will be able to drastically change their phones’ looks and functionalities anyway. So, why splurge on a new phone?”

She goes on to ask her readers if they agree.  The article is short, but the list of comments is long and each side makes good points. 

Here’s my take.  The upgrade cycle today is controlled by the carriers.   Apple wants to change that.  The iPhone may be the hottest CE product of 2007 and millions of people will pay the premium to get it.  Once that happens, and assuming that the experience lives up to the Apple brand (and the hype), people will not be so eager to upgrade just because their contract is up.   Assuming that the 5 year exclusive deal with Cingular doesn’t change, they won’t really be able to switch anyway.  Being touchscreen based does not make the iPhone an infinitely extendable platform (sorry Olga).  There will be ongoing evolution of the technology, just as there has been a steady stream of product improvements to the iPod.  This is what will drive the upgrade cycle for iPhone users.  The cycle may remain at around 18 months, but it will be the product itself that shifts the control of the cycle to Apple.

What do you think????

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