A New and Improved iPhone

This BusinessWeek article claims that the CEO of AT&T mentioned at an event that AT&T will be releasing a new, faster iPhone. This is the number one complaint of iPhone users, and the demand has brought AT&T and Apple to the point of releasing a new 3G version, which will be supposedly much faster than the current iPhone.
It seems like on most iPods that the new release is close to double the size, so my question or thought is why is Apple only increasing the Internet speed from 2.5G to 3G? Wouldn't something like 5G really blow the new sales out of the water. I just think that the new speed won't be fast enough to produce the sales that AT&T and Apple are looking for.


Dominic said...

I have often wondered that same thing. After living in Japan I wondered why America doesn't just copy Japan's technology and use the same cell phone technology that they have. From my observations we seem to be anywhere from 1.5 to 3 years behind them when it comes to small electronics such as cell phones, cameras, and camcorders. I think that it is a marketing strategy to actually produce more sales by making small advances. Companies are constantly creating demand by continuously adding better features to their products and making sales every step of the way rather than one big leap associated with one big sale.

Dr. Tufte said...

I think this is one of those cases where you can't see how profitable the improvement will be until you put it out there, and see how inelastic demand is and how big the markups are.

Dominic: the main impediment in the U.S. is the FCC, and the influential companies that find it cheaper to influence the regulators than to innovate.

Trinity said...

This example of the Iphones reminds of the computer industry as well. Companies obviously could release a computer that would knock our socks off that wouldn't need to be replaced for 5 years but why do that? They can release a decent computer now for a lovely profit then expect consumers to buy one every 1 or 2 years as they become obsolete. It seems the same principle for the iphones. Apple probably could make one that's much better but why bother when so many people are already fighting for the newest and greatest?

Dr. Tufte said...

Trinity - you listen to too much talk radio!

Assertions like this have been floating around for decades, sometimes more than a century. The car that runs on water, and the pill that you can take instead of 3 squares a day still haven't been shown to exist.

William said...

Dr. Tufte,
You say that "This is one of the cases where you can't see how profitable the improvement will be until you put it out there." But, I would think with being such a profitable company they could make up models that would give them a close guesstimate of what the profits would be.

Isn't this kind of what we did in Quantitative Economics or in Decision Modeling? Of course you won't get the exact numbers, but I think you could at least come close to finding the marginal benefit of adding the higher speed.

Trinity said...

Dr. Tufte-
I don't listen to any talk radio at all. I'm quite certain companies could offer a better computer/phone than they are. It is possible that these items would be slightly more expensive and therefore sell the cheaper one due to demand of consumers.

Dr. Tufte said...

William - yes this is exactly what we did in that class. But, if you remember towards the end we started talking about simulating things that were volatile, and sometimes you get output that has so much range as to be close to useless. That might be the case with Apple and the iPhone.