Rory Cellan-Jones

Networks and the iPhone

  • Rory Cellan-Jones
  • 17 Jul 09, 09:48 GMT

Will I test your patience if I try to answer a few questions about the future of Apple's iPhone in the UK?

Is O2 about to lose its exclusive contract for the phone? Is there any truth in the rumours that Orange or T-Mobile or Vodafone are testing the phone on their networks because they are about to get a deal from Apple? And finally does anybody care?

The answer to the first question is no - at least not until November when O2's exclusive deal with Apple runs out. The second question has been put to me by a number of people wondering whether their networks are about to get the iPhone.


My answer? Well at least one of those networks has told me the rumours are untrue, but it seems likely that Apple is testing the waters with companies other than O2 before making its mind up about whether it wants to renew that exclusive contract.

And as for the last question, the issue is obviously of limited concern if you're not a potential customer - but it appears to be causing a frenzy of excitement amongst the different networks jostling for a deal.

And I've just met a man who was interested, not so much in the iPhone or who will sell it in the UK, but in the whole question of how mobile operators are handling the huge amount of data that phones like this are sending across their networks, a subject we covered recently here.

Michael Schabel is director of research at Bell Labs, the birthplace of some of the more important inventions of the 20th Century, and now under the ownership of Alcatel Lucent.

He was in town to push a product his company sells to mobile networks to help them manage congestion, but when I met him over breakfast he was marvelling at the complete transformation of the mobile web over the last 18 months.

Two things have happened - first, networks started pushing mobile broadband, then Apple invented the mobile app. (Yes, I know there were apps before the app store, but it was the iPhone that made them insanely popular.)

Mr Schabel told me the average iPhone user has downloaded 27 applications - "that's probably more than they have on their PC".

And of course that's been followed by other manufacturers. Michael Schabel showed me the Pandora application on his Blackberry, allowing him to listen to the streaming music radio service on the road, and told me there was no reason why we shouldn't all be streaming music and video to our phones fairly easily quite soon.

But that all adds up, according to Mr Schabel, to a "tsunami of data" and a radical change in the mobile landscape, and the operators are finding it difficult to cope.

Handling the bits and bytes flying around from all of this new mobile activity involves different skills from dealing with voice calls or from those needed to control internet traffic across a fixed line network.

Users of mobile networks can suddenly find they just can't get online - or use a particular application and yet to the operator everything on the network looks fine.

That, according to a research paper from Alcatel Lucent, is because the type of traffic can vary radically from one 3G cell to another. In one area a cell can be choked by streaming media, while its neighbour will suddenly be occupied by peer-to-peer traffic, perhaps involving people using mobile dongles.

And while a fixed line broadband supplier might simply opt to throttle back streaming video across its network, that's not going to have the desired effect on a cellular network.

To mobile customers, of course, the technology and the challenges faced by the operators are of no interest. They are now getting used to checking the cricket score, updating their social network status or playing an online game via their mobile phones. And if they find they can't, they will get rather cross.

Which brings us back to where we started. I'm sure Apple will indeed be looking at doing deals with other operators besides O2 - but it will want to be sure their networks are ready to handle that growing flood of data from all those billions of apps.


  • Comment number 1.

    Where there's a will there's a way. Technology always catches up, especially in reguards to things there is a huge market for.

  • Comment number 2.

    I'd love to buy an iPhone. Trouble is, I can't get an O2 reception at my home, so it looks like I will never buy one.

    a) Orange (the only phone company that I can currently get a signal with) is allowed to sell iPhones; or
    b) O2 create an AFFORDABLE method to allow me to use a phone at home by tapping into my home broadband wireless network,

    it will just not be feasible for me to buy one. So, fingers crossed with this news!

  • Comment number 3.

    @geniusRich - buy one and unlock it, then just stick your current SIM in there.

  • Comment number 4.

    This is quite interesting as I was about tot make a blog post about the iPhone and its exclusive contract.

    I think that in signing the Palm Pre to O2 network it's quite sceptical about getting the iPhone back onto it's network - e.g. it's placing it's bets on the iPhone's biggest rival.

    I think that Vodafone would be a very feasible option considering the fact their network has the fastest speeds in the UK and a lot of business users (I know that the whole of HMRC use Vodafone as their network). Business users, let alone HMRC, would not go to Vodafone if their network could not cope with the traffic that is getting sent through it.

    Also, when I've tried mobile broadband on each network I have found that Vodafone is the best.

    Having said this though if they're looking for affordability then T-Mobile would be a good option because their contract prices are reasonable and have more units per £. (When I say unit I mean 1 minute of calling = 1 unit and 3 text messages = 1 unit).

    Be interesting. Either way I'll be getting one in November when my current contract expires, so if it does go to someone else - I'll be delighted.

  • Comment number 5.

    It should be interesting to see what competition would do to the price of iPhones.

    We look to be set for a world full of people so set on being different we will all be the same and have iPhones.

    I have to be honest, no matter how much I bash them, I would have to give serious consideration to the iPhone should it come to my network and offer the functionality I require at a reasonable price. I still can't justify paying through the nose for a mobile phone as I am so used to getting them for nothing on my contract.

  • Comment number 6.

    Hopefully Apple have seen the error of their ways, a short sighted exclusive deal may give them better margins, however prevents the mass market buying from the apps & Itunes store! Console developers (eg MS) were prepared to take a hit on their kit because they realise the money is in the content! Take a leaf out of their book! O2 need stop trying to become the SKY of the mobile world and start winning customers using good deals, not through a monopoly! A bit off subject here but is it just me or is apple basically admitting their 3GS is no better than the 3g to most ppl by restricting the 3G to 8gb? (worried that higher capacity versions will effect sales)

  • Comment number 7.

    If they offered a affordable sim free version they would simply sell a ton more. Not everyone wants to be on 02 which has quite simply has the worse data network in the UK.
    And Apple really needs to allow Multi Tasking like Symbian and Android.

  • Comment number 8.

    I was with O2 for several years before the iPhone came along, and didnt opt for the original iPhone due to the original cost. However i did opt for the 3G and my contract is due in december, which if according to the rumors is when the other networks will get it, now while i've never had any problems with O2 if the other networks opened up the market i could see the tariffs becoming a lot better across the board (500 texts while is enough for me, on most comparable tariffs you get unlimited texts + unlimited data) plus for me, the added bonus of orange wednesdays would be a deal breaker.

    My only concern is, if the rumors are true and in december Orange and Vodafone get the iPhone, i still wouldnt want to move for another 6 months because no doubt Apple are already working on a new iPhone for new summer. Plus at the moment i noticed with the N97 from Orange and Vodaphone 24 months was the default tariff option. which in my mind is just silly.

  • Comment number 9.

    Although I am guessing we'll never know, I would be very interested to see if O2 has made a return on their investment. I suspect probably not, or at the most a modest amount.
    If the +1 million customers stay with them for the long-term, then may it's a good deal. But I suspect it's far more likely the majority of this crowd will follow the iPhone around the networks.

  • Comment number 10.

    The concept of tying a phone to a manufacturer is an outdated one. Hasn't Big Business learned that when you try to restrict consumer choice artifically, that consumers will learn a way around it? Just looked at the explosion in P2P streaming of television programmes...

    It is ironic considering large companies constantly harp on about excessive regulation.

  • Comment number 11.

    Having thought about replacing my current old iPhone with the new 3GS I'm seriously considering buying one outright and then using it on a network with better data speeds/contention. I'd then get a phone and contract with whichever network that is, sell the phone for ~£200 and use the contract with the iPhone.

    Although I'm really not sure if there would be any limitations to the service I would receive, is anything locked down to work with only 02 on the iPhone?

  • Comment number 12.

    Why do people feel the need to always have the latest iPhone?

    I'm confused. When I got my first Motorola Colorado, mid 90s, I was well aware another model would come out almost immediately and make my model an older model. And now it's the same for iPhones, Nokia, Android and others.

    Why on earth are so many people annoyed that Apple are working on another iPhone when they have had their new one for just a month or so...? This is how the mobile world has always worked and it's the same with almost every other tech.

    So what if you skip a generation, give it a while and you will have the last laugh over the people who purchased the generation you missed out on due to your contract. Then they will have the high ground and then you then them then you then them... Simple.

  • Comment number 13.

    I wish companies would stop presuming that people will buy their product because of who they have signed with. I am sure that I am not alone in thinking that I don't care who provides my phone signal, just as long as I have one.

    A similar example would be with music: I don't buy ABC's album because it's on XYZ record label; I buy the album because I like their music. It's only XYZ that seem to think I buy the album because they signed them.

    Release the iPhone from O2, make available to all operators so we have a choice and drop the price. Mind you, that won't make me buy one so do what you like.

  • Comment number 14.

    Honestly? I don't think it matters. The iPhone will remain popular but it has peaked and, to be honest, outwith the US wasn't as popular as you would think (CPW show the 5800 as their best selling smartphone despite the fact that it's only one of three places you can get an iPhone and you can get the 5800 anywhere). Soon the hype will die and we'll move on to the next big thing as we did with the RAZR and the N97.

    Steve Jobs said the iPhone was five years ahead of its time. He was wrong: it was just over two. Time's up. Samsung and HTC's new Android offerings are going to impact the market in a very big way.

  • Comment number 15.

    @Mark_MWFC - I know from experience that there is nothing that beats the iPhone out yet. The HTC Hero just might and I think the Palm Pre will, but they still arn't out yet.

    I can certainly tell you that - as someone who has owned a iPhone 3G and Nokia 5800 - the 5800 is nothing but I dot on the iPhone's screen.

  • Comment number 16.

    Two points.
    1) O2s exclusivity. Apple are in the business of selling stuff. They care about turnover, which is usually linked to units shipped. O2 clearly "did a 3G" and waived a big number in front of Apple to get the exclusive rights to ship the iPhone. Apple said thank you very much, O2 got lumbered with an expensive deal, which pushes the iPhone price up having a limiting effect on units shipped.

    Now Apple will see that there's a bigger market for iPhones than is being exploited by O2 so they'll be happy to open the market up and see an increase in units shipped and thus bigger profits (which they are bound by law to maximise)

    2) Mobile data rates. Data deals really need looking at by the OfT. There's too much of this "unlimited" rubbish that is no where near unlimited as the mobile phone (and broadband) co's don't have anything like enough bandwidth. It's just been a race to the bottom. What we need is honest pricing. The best way to achieve that on mobile contracts is to differentiate burst and streaming data.

    If they offered deals with no or limited streaming data on the cheap (for web access and lightweight apps) , and more expensive deals with streaming data allowances for peeps wanting to stream film and music you'd see much better use of the current limited bandwidth. You'd also see the well managed mobile co's using the extra money they make to improve their data networks, which should see extra custom as people realise that company A has a great data network with fair pricing, whereas company B is stuck in 1998.

  • Comment number 17.


    "@Mark_MWFC - I know from experience that there is nothing that beats the iPhone out yet. The HTC Hero just might and I think the Palm Pre will, but they still arn't out yet."

    Which was my point. The advantage that Apple have had has lasted two years, not five.

    "I can certainly tell you that - as someone who has owned a iPhone 3G and Nokia 5800 - the 5800 is nothing but I dot on the iPhone's screen."

    YMMV. I tried both and settled on the 5800 because it suited my needs more. The 5800 outsells the iPhone in every market outwith the US though.

    The trouble with the hype around the iPhone - and before we go into this can I make it clear that it's a cracking phone and one of the strongest contenders for best smartphone out there - is that the US market is so awful it stands out like a sore thumb. However, in the more sophisticated markets in Europe and Asia, whilst it's a great device it's not really that far ahead of the pack and, given constraints of price and - to a degree - carrier lock in - hasn't attracted as many people.

    Mobile phone fashions change and what a lot of tech journals miss is the fact that peple buy phones because they're 'hot'. The RAZR was hot, the N97 was hot, the iPhone is currently hot but something new will come along and take its place as always happens.

  • Comment number 18.

    RJBrad makes some very good points - Apple is in the market to make money for shareholders and are very good at it (15 years ago was a very different story).

    As a tech company with some of the worlds most recognised brands, it controls very tightly the channels it supplies. Entering the mobile phone market the company knew this needed a different mindset so to protect it's other brands and reputation for quality. Hence selling iPhone exclusivity to a carrier within it's own territory. Doing so enabled Apple to still control avenues of the channel and essentially how the iPhone was marketed (and make revenue from each handset contract as well as the contract itself).

    That strategy has been very successful with the iPhone selling strongly and planting the iPhone brand squarely along side the Mac and iPod (I think even Apple could not have perceived how successful the App Store was going to be).

    The release of the 3G S saw a muted response and some backlash due to (certainly) 02's pricing and upgrade paths of which are 02's part of the deal, they paid A LOT of money for exclusivity and need to recoup it. Surly Apple realise that a fair proportion of their target market have an iPhone and are locked into a contract that only the senseless would buy themselves out of, and so, here is a new version of our very successful handset that our core market probably will not buy and will wait for the next revision. To a bean counter that's not good business at all.

    The iPhone is now a success and Apple will see massive growth in handset sales ONLY if they ditch the exclusive carrier deals. The devil is in the detail and they used 02, AT&T et al to get that detail out there but if 02 etc cannot get the data out there why be tied to just one?

  • Comment number 19.

    I won't bother buying one either way because I can't see whats so great about a phone who's latest feature (copy and paste) has been around on every other phone for the last 10+ years, so I will continue buying the competitors who have better cameras, expandable memory, free from itunes, etc...

  • Comment number 20.

    @ Mark_MWFC

    You say "the Phone is currently hot but something new will come along and take its place as always happens".

    Simply unknowable, or maybe just irrelevant to Apple's future business. The sheer growth Apple have seen - from zero to ten per cent of the smartphone market share in the 18 months to Q109 (Gartner) - is quite a foundation. iPhone is the current standard for mobile website development. Meanwhile iTunes and iPod retain their market leadership in music, video, and mobile apps. The iPhone draws immense strength from that.

    Yet despite not being especially 'hot', RIM is growing its share. And Nokia, though declining, still has the largest share by some margin. As you point out, Apple may have saturated their market on current pricing and network restrictions. But there are many options - already we see some differentiation in model features with the 3G/3GS. Whilst Steve Jobs may have overstated Apple's functional lead on rivals' phones, they look better placed than almost anyone else to grow their business.

  • Comment number 21.

    And just think, all these rival phones make heavy use of chips licenced by a single designer . . . . . .
    Football clubs go bust, football manufacturers do quite nicely.

  • Comment number 22.

    @NCbaslilisk #6 - You say the money is in the content - but that isn't how Apple see it. They see the content as the 'driver' that gets you to buy the hardware. The money being in the content only works when you have a piracy/free-content free platform (e.g. a games console). When you can download your music from anywhere else, it's in Apple's interest to make the money on the hardware and sell the music at the bare minimum (and even at a loss as they did originally). Apple may have distributed 1.5 billion apps, but that's estimated at under $100m income - peanuts for Apple - they couldn't use that to subsidise the cost of the hardware.

    The iPhone is not the same as a games console - a games console is a 'viewer' for games, an iPhone is perfectly good and useful without any further payments (to Apple).

  • Comment number 23.


    Sorry, don't agree. Unless Apple diversify the product it's will remain isolated within a particular niche with little growth potential. It's done well but the danger in putting all your eggs in one basket - as Apple are currently doing with the iPhone - is something better comes along and there's nowhere to go.

    History is littered with such examples including Apple's spectacular loss to Microsoft in the consumer and enterprise OS market. Hopefully they'll learn from their mistakes.

  • Comment number 24.

    I have the new iPhone 3G S. A friend of mine has a Nokia 5800. Both are on O2. The Nokia gets full 3G signal. In the same room, the iPhone gets 1 bar of 3G, but more often than not switches back to 2G.

    The iPhone doesn't have a very good 3G radio chip. Which is good for the operators because it means users use less bandwidth, and not bad for Apple since most people won't blame Apple, they'll blame their operator.

  • Comment number 25.

    as an iphone user that lives in portugal the contracts here are ridiculous compared to the UK, you get "unlimited data" i get 250meg and 300mins all for wait for it 45 euros per month so vodafone isnt all its cracked up to be, but on the plus side the 3g reception here is better than the UK

  • Comment number 26.

    Yippeee! Apple certainly did not choose the best network for customers. The facts speak for themselves. The O2 only just dodged an OFCOM censure for failing to meet their 3G network commitments. No, Apple's choice was almost certainly the carrier prepared to pay the highest premium.

    Looking forward to using an iPhone with a less incompetent carrier.

  • Comment number 27.

    Beware of folks who tell you to purchase an iPhone and crack it in order to use it with your current carriers SIM. Unless you are very sure of the data plan your carrier offers you could find your cracked iPhone is very costly to run. Also be aware that lots of the key features only work properly when on the Apple selected carriers network, and that each software upgrade may we require you to re-hack your phone with all the potential attendant problems around how you're phone is set up, the applications on it, and most importantly your data. G5airplane's glib recommendation is reckless.

  • Comment number 28.

    @27 - you don't know what you're talking about.

    If you unlock your phone it will work fine. There are a few bugs with WiFi at the moment because of 3.0 last I checked but they're probably fixed now with the new version of redsn0w, and if not they will be very soon.

    If you've hacked your phone, you won't exactly be rushing to update it until the new firmware is hackable anyway, it's common sense.

  • Comment number 29.

    @27 - also, it's very easy to get cheap unlimited data, even on pay as you go.

  • Comment number 30.

    The exclusivity deals around the world were necessary for Apple to have some weight to change how the networks operated. People forget what Apple achieved a few years ago when the landscape was quite different.

    The networks worked hard to develop their own music stores and wireless services like Vodafone Live! and T-Mobile's Web n Walk to avoid their services just becoming 'pipes'. Unlimited data contracts were extremely rare and expensive at the time the original iPhone was released and a phone's OS would frequently be 'branded' and tied into the network's internet services. Apple's iTunes store is a direct competitor to services like Orange MusicStore.

    Apple had to change all of this with the iPhone and they achieved it by doing what they're good at - creating a lot of hype. Then they got the networks to fight eachother to get exclusivity, with Apple imposing conditions like unlimited data, access to iTunes store, no branding in the OS, visual voicemail...

    Of course the exclusivity deals will end now the iPhone is a hit. It's obviously in Apple's best interests and in the best interests of their customers. But without the exclusivity deals, Apple would have had to make too many compromises and the iPhone would not be what it is today.

  • Comment number 31.

    When Apple annouced the new phone & O2 annouced it's new pricing structure I emailed the CEO of O2 with some information.

    Myself previously an employee of the company and iPhone customer and user with my business knowledge put forward the suggestion that this could happen and that really for O2 to defend its market share it needed to consider some changes.

    Not to my suprise, O2 dismissed my suggestion that such a thing would happen let alone that little old me would have such an insite. More to the point, O2 have positioned themselves with the new Palm Pre, reputed to be the first proper iPhone contender. Apple has a huge FAN base who are loyal to the brand because of its quality and service, O2 seem to have forgotten this and really have no one to blame but themselves.

    Bring on the other companies offering the iPhone, let the rest of the country finally see how good this phone is in the right hands and to O2 I say, serves you right! Business is business and if you behave like Julia Cessar, you will be treat like him!

  • Comment number 32.

    I am in the very unique position of owning an official non jail broken iPhone on T-Mobile here in the UK. I purchased it from the Hong Kong online Apple Store and have been using it with my business 3G Sim since I got my bag stolen, containing my Blackberry Pearl. At the time the Hong Kong Apple Store was one of the only places in the world where you could purchase the iPhone without a contract although you had to fork out about £400 for the pleasure of 16GB.
    Obviously a jail broken iPhone has its own advantages but I see being able to update the software for free (I used to have a iPod Touch and had to pay for the privilege) and not have to then crack it again to get all your custom apps back as an incomparable bonus. Ok, if I have any problem with it I have to wait until I got back over to HK to sort it out but Im over there quite a few times a year anyway so no skin off my nose.
    The T-Mobile 3G network is fairly quick but it does suffer as many black spots as Im sure O2 does. I admit its not all rosy I miss out on visual voicemail as at the moment its an O2 only feature at the moment because no other network provide has upgrade their voicemail system. On the other had webnwalk seems to give me the same internet access ability as an O2 iPhone and with the most recent software upgrade I can now tether the iPhone to my Mac Book Pro and surf the web in 17 3G luxury, as if I had a mobile broadband dongle.
    To finish, here is an interesting story to get peoples comments and opinions on. With normal unlocked mobile phones you get to the end of your contract and you have the option to move to any network provider. To capture customers like this almost all of the operators now offer a cheap SIM ONLY version of most of their contracts as they dont have to cover the outlay of the actual mobile phone. Out of curiosity I contacted O2 to see if I moved to them with my own iPhone, could I just buy one of their Simplicity contracts with a free Unlimited Web bolt on and get visual voicemail working. O2 replied saying that I could purchase the contract but they did not support imported iPhones (read in if our standard network crashes your iPhone bad luck) and as it wouldnt be an iPhone contract so it would not give me the visual voicemail feature. I therefore asked them what reduction in the iPhone contracts price (Simplicity contract = £20, cheapest iPhone contract = £30-£35) I would receive as I wouldnt need the actual iPhone theyre answer NONE.

  • Comment number 33.

    I bought a 2G 8gb iPhone hen they dropped the price to £160. Still have it unlocked on Vodafone with OS3 and it works a treat. I dont need GPs and although I have tried push, it eats battery life.

    Maybe if the iphone became available on Vodafone I might upgrade to a 3GS, but probably wait till the next 'big' hardware update from Apple.

    Some people are offering me good money for my 2G phone - as they like the 'metal' look. Same here, Apple should go aluminium unibody with the net iPhone.


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