Segan: Steve Jobs Must Hate the Cell-Phone Industry

Steve Jobs seems to hate the cell-phone world. Not without reason, either; a lot of people do.

But I read a serious undercurrent of bare thinly veiled passive-aggressiveness in Wednesday's launch of the iPod Touch, stemming from the frustrations Apple has had with the ground-breaking iPhone.

All this culminates with the iPod touch — the i-minus-Phone, the iPhone that's truly for everyone.

Demonstrating the iPod touch, Steve played Beck's song "Cellphone's Dead" — really, Steve? — and pointed out that the iPod touch's Wi-Fi "is not only faster than 2.5G, but it's faster than any 3G network."

Then he rolled out a music store for the iPhone that doesn't seem to work on AT&T's EDGE network, only over Wi-Fi. Ouch!

[Editor's note: Unconfirmed rumors say the Wi-Fi iTunes feature will be ported to iPhones soon.]

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The iPhone is successful, but it's not nearly as successful as it could be. Otherwise, why would Apple feel like it had to cut the iPhone's price by $200 (or 33 percent)?

There's something dragging on iPhone sales, and in Cupertino, you bet they aren't pointing the finger at themselves.

Let's look at the evidence. Even the most positive iPhone reviews called out the phone service as a big minus for the device — whether it's AT&T's slow EDGE Internet service, AT&T's wobbly call quality in some areas, or the chaos that early adopters encountered trying to activate the phones.

I won't put all the onus on AT&T: the "phone" part of the iPhone is by far its weakest feature. Apple's a veteran PC and media player maker, but it's a newbie when it comes to radio-frequency-based voice devices.

AT&T spokesman Mark Siegel was quite cheerful about the price drop — as well he should be, because AT&T makes money off iPhone subscriptions, not off the devices themselves.

"We're very, very pleased with customer response to the iPhone so far, and we expect that this new pricing by Apple is going to make the phone even more popular," Siegel said. "We feel very positive about it."

Yet it was odd that Apple had no AT&T representative on stage when they announced a price cut for AT&T's flashiest product. It's almost as if Apple wanted to show AT&T who was really in control.

No Love Lost Here

It's not like AT&T's so in love with Apple, anyway. Apple is widely believed to have demanded an unprecedented cut of AT&T's monthly revenues in exchange for carrying the iPhone, and AT&T was obviously smarting; I still remember AT&T exec Glenn Lurie's insistence that the carrier "made Apple bend."

The iPod Touch will obviously cannibalize iPhone sales: now some people who would have switched to AT&T for the iPhone most certainly won't. Apple will sell these en masse; only AT&T will be missing the revenue gain.

Apple seems to be trying to find ways out of its "multi-year" exclusive contract with AT&T, too. The Apple-Starbucks alliance means that the iPod touch will work on T-Mobile's Wi-Fi network, not AT&T's cellular data network.

That's an interesting thumbing of the nose to both AT&T and T-Mobile (which didn't even get a name-check during the entire event, although T-Mobile operates Starbucks' hotspots.)

"Starbucks customers will enjoy the lightening-quick downloads of popular songs and featured play lists powered by our robust T-Mobile HotSpot network," said Joe Sims, vice president of new business at T-Mobile, in a statement. "This new service is a great way for T-Mobile's HotSpot network to help customers stay connected to the songs and content that matters most to them."

Meanwhile, Apple seems to be unable to close any deals with non-U.S. wireless carriers, though folks in dozens of countries are clamoring for iPhones.

The foreign carriers may be choking on Apple's revenue-sharing demands; it's less clear why Apple seems to be so cataclysmically afraid of releasing an unlocked iPhone.

The iPhone experience shows the counter-productive nature of the cell-phone-carrier mindset. Control, control, control, they say: they aren't willing to become "dumb pipes."

Remember the rumors that Verizon Wireless turned down the iPhone? Those Verizon customers will be buying iPod Touches now — and Verizon won't see a penny from it.

Now I just have to convince myself that I can afford one.