Did Apple shaft Aussie telcos on the iPad?

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opinion I find it incredibly hard to believe that Australia’s mobile telcos would not be falling over themselves in naked lust to sell the Apple iPad when it launches in Australia on 28 May.

After all, the telcos have their previous experience with the iPhone over the past two years to inform their future decisions, and that experience has been extremely one-sided.

The iPhone sold like hotcakes in Australia from launch day, and has revolutionised the mobile phone market in only two short years. Optus capitalised on that opportunity with nicely targeted plans aimed specifically at the iPhone and took a large slice of the mobile market as a result — particularly in the early adopter segment.

Even Telstra, I thought, which can at times appear to be a slow, lumbering elephant, couldn’t possibly misunderstand the opportunity the second time around. Wouldn’t Telstra and VHA be coming out with all guns blazing, to ensure they won a slice of the big, fat, juicy iPad pie and make up for their relative loss on the iPhone front?

That’s why I was shocked by the revelation yesterday that neither Telstra or Optus would be directly selling the iPad from their retail stores (we don’t know about VHA yet).

As I wrote the news stories about the telcos, just one thought was crossing my mind: Are they completely insane? Don’t they want to make money? What the hell is going on here?

And then it hit me. It’s not that Telstra and Optus don’t want to sell the iPad. The problem must be that Apple has simply cut them out of the loop. If you look back on several revelations made by the telcos over the past few months, this theory starts to make a lot of sense.

Firstly there was the news broken in late April by MacTheMag that Apple was cutting tier two resellers in Australia — over the long weekend they received an email letting them know they were no longer permitted to sell Apple hardware. This, taken by itself, is not so much of a big deal — most of Apple’s major resellers in Australia were still on the books.

But there is also the noticeable reticence by Telstra, Optus and VHA over the past few months to say anything at all about the iPad apart from the fact that they would be selling dedicated iPad pricing. I and others had chalked up the telcos’ silence on the iPad as the normal effect of Apple’s reality distortion field.

The telcos, the thinking went, were so scared of Apple that they didn’t want to say anything and jinx their relationships with the iconic technology supplier. But what if the opposite was true? What if all along, all three telcos knew for a fact that they wouldn’t be selling the iPad in Australia and simply didn’t want to publicise this embarassing fact?

At this point, this theory seems more than likely.

The question is — why would Apple cut such a massive retail channel out of its Australian sales strategy? And yet again we have a recent news story to give us a hint into that answer.

Just last week iTnews revealed that Apple had obtained remarkable special treatment in a new court undertaking between the Australian Competition and Consumer Commission and VHA over the length of phone warranties. Mobile carriers, it turns out, will now have to offer 24-month warranties on handsets bundled with 24-month plans. I know, it sounds obvious, but Australia’s telecommunications industry is sometimes very far from being obvious in the way it does things.

But one hardware vendor was left out of the agreement — Apple. Why? Because Apple prohibits VHA from servicing iPhones at its service centres. Instead, VHA has an agreement with Apple whereby those customers with faulty iPhones out of warranty can buy a refurbished iPhone for $288, iTnews reported.

Reading between the lines here, it is relatively easy to see that Apple has a major problem with Australia’s mobile telcos. Not when it comes to selling iPhones through their retail outlets, but when it comes to servicing them. It is, quite simply, a pain in Apple’s ass for it to deal with the telcos constantly on repairing faulty iPhones — Apple would rather take care of all returns itself.

It strikes me as likely that Steve Jobs, in thinking about Apple’s long-term future, would prefer that telcos stick to doing what they do best — running their network — and get out of the business of selling handsets and other devices that access mobile broadband networks alongside telco services.

Starting with the iPad.

It’s been hard to know precisely how the iPad will be sold outside the US, as Apple has been quite miserly in terms of releasing information on that front. But examining the situation internationally, it appears as if other countries’ telcos are also being locked out of the Apple eco-system when it comes to the iPad.

There’s just one problem with this: the company’s apparent decision to lock telcos out of the iPad buying chain will cause annoyance with consumers.

There just aren’t that many Apple stores around the place, and creating a situation where telcos are not able to assist with servicing or selling Apple mobile gear such as iPads (and, eventually iPhones?) will gradually cause a significant amount of angst towards Apple as consumers won’t be able to easily get their equipment fixed.

There is also the cost factor. If you can’t buy an iPad from a mobile telco along with a two-year plan, you can’t have it subsidised and the cost amortised over several years of a contract. What this means is that customers will be paying the full up-front cost of iPads when they buy them.

Now I don’t want to give people the wrong idea. Sometimes Australia’s telcos are simply a pain to deal with and some people will love it if it truly is Apple cutting them out of the chain. Maybe there is also some value in the argument that the iPad is more like a laptop and should be sold by Apple itself.

But like so many of Apple’s control freak initiatives, many people will find themselves turned off by what appears to be yet another Steve Jobs idea that will give them less options than they’re used to.

It takes a special sort of company — unique, almost — to be able to have its cake and shoot itself in the foot at the same time.

Image credit: Yutaka Tsutano, Creative Commons

8 COMMENTS

  1. Vodafone have announced their intent to supply subsidised iPad deals in Germany, Italy, Spain and the UK already.

    I would be *really* surprised if Voda hasn’t done a deal with Apple to distribute the iPad in Australia.

    • Well I’ve been trying to ask them about that this morning David — but have gotten nowhere so far! They seem to be keeping very quiet about it …

  2. I must admit that my ‘fan boy’ hat has been in the bin for a while now, I like the technology, dislike Apples antics re: channel, locked down store, dictating to developers etc…

    • I’m pretty much the same David — I own a MacBook and wouldn’t mind owning a Mac Pro, but Apple’s strategy just doesn’t really cater well towards those who want complete control over their hardware. Is the next step to block out MacBooks from running certain applications?

      (obviously not, but I wouldn’t put it past Apple)

  3. There’s just one problem with this: the company’s apparent decision to lock telcos out of the iPad buying chain will cause annoyance with consumers.

    There just aren’t that many Apple stores around the place, and creating a situation where telcos are not able to assist with servicing or selling Apple mobile gear such as iPads (and, eventually iPhones?) will gradually cause a significant amount of angst towards Apple as consumers won’t be able to easily get their equipment fixed.

    I’m sitting here in front of an Imac with an Iphone and a Macbook on the desk next to it, connected to a wifi LAN run by Apple hardware. Not one of those things was purchased at an Apple Store, or in fact at a retail store of any sort. I know what I want, I click “Buy Now” when I want it, and a courier turns up an almost impossibly short time later. Honestly, I can hardly think of a less-appealing technology experience than having to go out among the unwashed masses and personally interact with some uninterested Gen Y store peon just to buy a piece of gear.

    There is also the cost factor. If you can’t buy an iPad from a mobile telco along with a two-year plan, you can’t have it subsidised and the cost amortised over several years of a contract. What this means is that customers will be paying the full up-front cost of iPads when they buy them.

    My ISP doesn’t offer Macbooks with a two-year ADSL plan either. And that’s exactly the relationship that Apple is defining for itself with the telcos. As far as Apple is concerned, the telcos have one function to perform and one only: moving ones and zeros to and from the device. Hardware sales? Repairs? Inserting themselves between the end user and Apple’s carefully-managed brand experience? No way.

    • Hmm yes I do see your point — however, I would argue the telco sector is a little different to this, because of the interaction between the devices and the network. In general, the quickest way to get something fixed with your mobile phone, which is much more of a commodity device than a MacBook or an iMac is, is to take it to your mobile provider’s store.

      I agree there are people (such as myself) who simply want to be able to buy the device upfront and unlocked so that they can use it however. But in general, most Australians are used to buying their handset subsidised from their telco, and I don’t necessarily see the iPad as being that different in this regard. Plus, why not simply have both options available? Why lock it down so much?

      “As far as Apple is concerned, the telcos have one function to perform and one only: moving ones and zeros to and from the device.”

      Precisely — Apple thinks it can ignore the whole telco eco-system, which every other handset vendor is participating in. Why should any one company be so arrogant?

  4. I think we will find that in time we will get iPad’s sold through telco channels.

    It appears that Apple likes to try things differently in Australia. The iphone is a great example where they are selling the phones outright without any links to a telco. I may be wrong, but this method is not used in any other Apple market.

    So, my prediction is that the iPad will eventually be available on a plan in the future, but Apple will let the market dictate when this occurs.

    They will let the initial rush for the product wane and then in an effort to open the product up to a new price sensitive audience, they will allow the telcos to sell the product.

    That said, I will probably be proven wrong.

    • Hmm I dunno Phil — I haven’t seen Apple really open anything up once it starts selling something or change its tactics — it tends to stay with them to the bitter end :) I anticipate that the iPad will do well — but not that well — and that Apple will simply let it sit there like the Apple TV has — underbought and not fully developed as a product.

      Even Steve Jobs has admitted he hadn’t quite seen the need for a product in this category yet. He changed his mind — but was he right the first time?

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