Apple announced its first non-U.S. partner for the iPhone on 18-Sep-07, unveiling a relationship with UK cell carrier O2. O2 will start selling the iPhone for £269 ($542) including VAT (value added tax) on 09-Nov-07. That compares to $399 or roughly £200 for the same model in the United States. Service at 7,500 Wi-Fi hotspots is included in the monthly service plan; while AT&T resells access to over 8,000 Wi-Fi hotspots – mostly McDonald’s – they offer no inclusive rate for iPhone or other cell users.
Monthly service rates for the iPhone from O2 cost £35 ($70), £45 ($90), and £55 ($110) per month with an 18-month commitment required. What’s included is somewhat different than the plans offered by AT&T, although all three plans include “unlimited” – with an asterisk I’ll define below – data service over EDGE, as in America, and “unlimited” Wi-Fi access. Wi-Fi service is provided via The Cloud, a hotspot builder in the UK that is currently building out city centers. They operate service in the famous “Square Mile” financial center of the City of London. The Cloud is part of many worldwide aggregated hotspot networks.
The £35 plan offers 200 minutes and 200 SMS messages; £45 buys you 600 minutes and 500 SMS messages; and £55 gets you 1,200 minutes and 500 SMS messages. The higher phone cost comes from VAT, Steve Jobs said at the press event. However, the UK VAT is just £35 (17.5 percent). U.S. sales taxes run no higher than about 9 percent. That doesn’t explain the other cost variances. VAT ostensibly reflects taxes that aren’t gathered at each stage of manufacture, whereas in the United States, some taxes are paid as products move from raw materials into finished goods, so the final price with VAT shouldn’t so drastically outstrip the U.S. price with average sales tax.
Germany, France Are Also on Board — Later in the week, Apple added T-Mobile in Germany to its European partner list; the carrier is a division of Deutsche Telekom, which also owns T-Mobile USA. T-Mobile will include 8,600 German Wi-Fi hotspots operated by the company as part of its data plan, along with full nationwide EDGE coverage due to be in place by the end of 2007. The phone will premiere on 09-Nov-07 as well, and cost €399 ($562) including VAT. Monthly pricing plans haven’t yet been announced. The company brags in their press release about having a worldwide network of 20,000 Wi-Fi hotspots, but fails to note that there is no included cross-border roaming in any of their typical service plans in the United States or Europe.
The head of France Telecom said this week as well that its Orange cell division would carry the iPhone, but Apple hasn’t yet confirmed that detail or provided pricing.
Asterisk Marks the Hidden Facts on Unlimited — Now about that data-plan asterisk in O2’s terms: It refers to O2’s “fair usage policy,” which the firm’s head defined at the press event as the equivalent of 1,400 Web page views per day. I love the Orwellian doublespeak of “unlimited fair use.” That’s simply “limited use,” and shouldn’t be weasel-worded away.
Even more rich, I can find no formal definition of their policy on the O2 Web site. A Blackberry “fair usage” plan is just 75 MB per month. A special “1024” data plan includes 1 GB of data transfer a month. So not only is O2 using marketing-speak, but they aren’t exposing enough information for consumers to make an informed choice. UK and European regulators tend to be more heavy handed on issues like this than in the United States, and the UK has a self-regulating Advertising Standards Authority that isn’t afraid to smack down member claims that are misleading.
It’s common among European carriers to impose data limits that are far below their U.S. counterparts. Verizon Wireless tends to treat 5 GB per month as “unlimited”; I usually call this service unmetered but limited, meaning that it’s not charged a per-byte rate, but it’s capped at the top. T-Mobile USA appears to offer a truly unlimited EDGE plan; I’ve never heard of anyone having their service canceled for overuse of EDGE.
This haziness around the monthly usage mars the launch for me. Apple used to be one of the better firms when disclosing limitations of their products and services, or explaining how the rest of the industry required the limits they imposed. You could then be free to choose or reject their offerings or explanations. In this case, Apple has bought into the usual practice of telecom firms in obfuscating a number that’s a bright line within the carrier – they know when to cut you off – but appears like a gray blur from the outside.