The iPhone: 5 Years

Posted by Sam Churchill on

Five years ago today, the original iPhone went on sale in the United States on June 29, 2007.

The original iPhone had a 3.5-inch display with 160-pixels per inch, a 2-megapixel camera and was running a mobile operating system that would later be come to be known as iOS. Apple filed over 200 patents related the first iPhone.

“Today Apple is going to reinvent the phone,” said Steve Jobs, the late co-founder of Apple, when he unveiled the first iPhone at the Macworld Conference in San Francisco on January 9, 2007. It used AT&T’s 2.5G EDGE network and was unable to connect using their 3G services.

The iPhone’s killer feature tuned out to be the tightly controlled App Store, released a year later, on July 10, 2008, that made the iPhone a hit.

The App Store created a new economy and business model. Apple has paid more than $5 billion to developers, after taking a 30% cut off all app sales for itself. Today, there are more than 650,000 mobile apps available in the App Store, ranging from free to $1,000.

Apple has sold 250 million iPhone units to date, generating $150 billion in revenue for the company. The hotly anticipated iPhone 5, this September, is expected to be a “world phone”, working on China and India’s mobile networks and adding LTE.

It almost didn’t happen.

In 2007, developers had to pay carriers big bucks for entree into their exclusive “walled garden”. Text messaging was their cash cow.

Carriers had a closed shop.

AT&T and Verizon were the dominant participants in the 2007, 700 MHz auction for LTE spectrum. Google got a provision through the FCC that required carriers using the “C” block to provide “open access” to competing software and hardware on their network, if they paid a minimum of $4.7 billion for the “C” block.

Google’s press release stated:

“Google earlier this year helped ensure that regardless of which bidders win a key portion of the spectrum up for auction (the so-called “C Block”), they will be required to allow their users to download any software application they want on their mobile device, and to use any mobile devices they would like on that wireless network. The winner must ensure these rights for consumers if the reserve price of $4.6 billion for the C Block is met at auction. The winner must ensure these rights for consumers if the reserve price of $4.6 billion for the C Block is met at auction.”

AT&T and Verizon vehemently insisted that “open access” would ruin their business. AT&T paid through the nose to avoid “open access” provisions, paying way more for their B & C blocks then Verizon paid for their “C” Block in the upper 700 MHz band.

AT&T paid $6.6 billion to acquire 227 B Block licenses (12 MHz) during the FCC’s 700 MHz auction in 2008. Later, AT&T acquired Hiwire’s C block spectrum in a $2.5 billion deal and Qualcomm’s unpaired MediaFLO licences for $1.93 billion for 12MHz of the lower 700MHz D and E block.

Verizon paid nearly $10 Billion for blanket, nationwide coverage using 22 MHz of “C block” spectrum, which committed them to “open access”. Both carriers anticipated a “walled garden” of software services. To their credit, AT&T allowed Apple’s App Store to develop and grow.

App stores, run by Apple, Google, Amazon and others, turned out to be the Golden Goose, both for the carriers and for the United States economy and prestige.

The carriers didn’t have a clue.

Apple’s hardware and software vision – combined with Google’s “open access” philosophy – created an unstoppable force that has transformed the world.

Posted by Sam Churchill on Friday, June 29th, 2012 at 9:01 am .

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