iPhone Set To Roil Telecom Industry

The Alliance Looks at Apple's Latest Telecom Brainchild

We’ve all heard the old adage, “It’s not what you say, but how you say it.”

Well, a new ChangeWave survey shows there’s a whole bunch of people who want to say it using Apple’s latest telecommunications brainchild.

Our January 2007 consumer survey shows the huge potential impact of the soon-to-be-released Apple iPhone – one that could change the playing field for cell phone service providers and manufacturers alike. A total of 1,938 members of the ChangeWave Alliance participated in the survey.

Here are the highlights:

How likely is it that you will buy an Apple iPhone for yourself when it becomes available?

Nearly one-in-ten respondents (9%) say they are likely to buy the new multi-function iPhone – a combination cell phone, iPod and Internet browser – when the product becomes available (3% Very Likely; 6% Somewhat Likely). Another 7% say they are likely to buy it for someone else.

For those who are likely to buy an iPhone, would the device likely replace your existing cell phone, or would it be in addition to your current cell phone?

Four-in-five planning to buy the iPhone say it will likely replace their existing cell phone.

What is the most important reason given by likely buyers for switching to the Apple iPhone? By a wide margin, the most exciting selling point for them is the iPhone’s overall integration of iPod, phone, camera and email/Internet capability (34%).

As one respondent puts it, “It’s an all in one device with a big screen and fairly small size, and Apple normally does a great job with new innovative products.” Another adds, “I already use an iPod and I’d like to be able to carry one device to browse the internet, as well as use the phone and hear music.”

A Matter Of Cost

The survey also asked respondents who aren’t considering buying the iPhone why they weren’t interested.

For those not considering buying an Apple iPhone for yourself or someone else, what's the most important reason why not?

More than half (55%) said they have no need, but the key finding is that 28% cited the issue of price. A follow-up question revealed that if and when the cost of the iPhone were to come down from its proposed $500-$600 range to the $200-$300 range, there would be a double-digit surge in demand for the product.

For those not considering buying an Apple iPhone, at what price point would you consider buying an iPhone?

To put these findings in context, in Apple’s latest earnings conference call, CFO Tim Cook said, “The worldwide market for total cell phones is somewhere around 1 billion and our objective of getting 1% of it would yield 10 million units across the calendar year.”

The current findings provide strong evidence that 10 million units is very attainable for Apple in 2008 – if the iPhone performs to consumer expectations.

“The issue for Apple won’t be in meeting its iPhone sales goals. The survey shows that this will be relatively easy,” says ChangeWave Advisor Tobin Smith. “The real issue will be whether Apple can keep up with consumer demand – including making sure there are enough parts available to fulfill all of its iPhone orders – while maintaining product integrity.”

Impact On Cellular Service Providers

The impact on cellular service providers going forward could also be great. A total of 15% of respondents say they’re likely to switch service providers in the next six months. When this group was asked who they plan to switch to, Cingular (T) – Apple’s exclusive service provider partner for the U.S. – surged 8-pts to its best visibility showing ever among planned switchers in a ChangeWave survey.

For those of you who are likely to change cellular service providers, which company are you most likely to switch to?

Verizon (VZ), however, dropped 3-pts to its lowest reading in 18 months. Other major providers experienced declines as well.

Impact On Cell Phone Manufacturers

A similar ripple effect is seen among cell phone manufacturers. The survey asked respondents who plan to buy a new cell phone in the next six months, which manufacturer they are likely to purchase it from..

For those of you who plan on purchasing/upgrading to a new cell phone, which company is the most likely manufacturer of the phone you'll eventually purchase?

While Apple was cited by 6% of respondents, Motorola’s (MOT) share of planned buyers fell a whopping 9-pts.

Bottom Line

While it’s too early to project how much of Motorola’s decline in planned purchases is directly attributable to the upcoming debut of the iPhone, it is clear from these results that the iPhone is a potential monster that Motorola and the rest of the cellular manufacturers are now going to have to reckon with.

We will continue tracking the iPhone phenomenon in future surveys, and update you on these and other transformations within the cellular service provider and manufacturer markets.