Why The “iPhone Nano” Idea Really Sucks

By James Mowery

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For all the great things that Apple creates, there is always one or two stinking ideas that waft their way through the annals of corporate idea hell. The “iPhone Nano,” unfortunately, is one of them. And, while it isn’t confirmed, if the sources of the Wall Street Journal and Bloomberg are to be believed, Apple has been planning on creating a cheaper iPhone. I think it is crazy.

All this talk is about a new iPhone version (which has been called the “iPhone Nano”). This version, according to reports, would be significantly cheaper. But it comes at a cost. The new device is said to be smaller and cheaper than the iPhone 4. It has been said that the prototype had done away with the home button. The finished product could be scaled down in size and made with cheaper parts to keep costs down. Although another theory has been that Apple will use the iPhone 4’s parts as they will be cheaper by the time the iPhone 5 comes out, which also makes sense. And then there is the theory that no one knows what they are talking about (and I like that theory the most).

But if a scaled-down iPhone were to become a reality, I would expect that Apple would do away with the expensive Retina display and powerful resolution that the iPhone 4 has, and they would instead opt for something much smaller and cheaper to manufacture. It would keep costs down and give people an opportunity to purchase the device.

The whole idea is interesting and controversial, however, because AT&T and Verizon already heavily subsidize the iPhone when you sign up for a two-year contract. You can purchase an iPhone for under $200 on both carriers (with AT&T lately offering the iPhone 4 with even deeper subsidization).

That got me thinking: why would Apple even consider making an “iPhone Nano”?

Possible Reasons For An iPhone Nano

Could Apple be planning on cutting out the carriers? Would Apple be so bold to take the chance to cut the carriers out of the equation and sell a cheap iPhone to the public, thus giving them the choice of carriers on their own? This would cut out the need for iPhone users to sign up for a two-year contract. This would also make great business sense. Why? Because then Apple could sell existing customers a new iPhone every year instead of every two years.

One thing that could possibly support this is the fact that Apple has been rumored to be developing a “dual-mode” phone. The new “cheap” iPhone could supposedly support the two primary wireless standards — GSM (used by AT&T and primarily overseas) and CDMA (used by Verizon Wireless). Apple could then sell consumers a cheaper iPhone, pocket most of the sales, and, with that, could sell more iPhones on a yearly basis, because consumers might be inclined to upgrade their iPhone on a yearly basis instead of a bi-yearly basis.

Then again, imagine if this version of the iPhone supported most (if not all) of the radio (wireless) bands within the States — maybe there is an iPhone that could run on Sprint or T-Mobile! Of course, it might be possible, depending on how AT&T and Verizon handled their contracts with Apple.

In addition to that, however, Apple has been rumored to be working on a new piece of technology called a universal SIM. It would enable users to select a GSM network without having to switch on the SIM card. This, alone, would help reduce the costs of managing and distributing many SIM cards around the world, saving consumers and networks money. It also makes the lives of consumers much easier when traveling abroad.

Sounds great, doesn’t it? Well, hold on a minute.

Here Is Why This Makes No Sense At All

While, in theory, all of the aforementioned sounds great, the reasons against doing such a thing could be considered far more substantial.

One reason being that this new iPhone would compete directly the iPod Touch. Where would the iPod Touch fit in if Apple created an iPhone for $200? It wouldn’t fit in at all. It would only cost Apple more money because consumers would be less inclined to purchase an iPod Touch — think of all those people who purchase an iPod Touch now, and the think of those same people who purchase an iPhone later on when their current phone contracts expire.

Any given person could purchase iPod Touch — and, thus, could join the Apple ecosystem for relatively cheap (without paying thousands for a service contract for an iPhone — without even thinking about purchasing a phone. The iPod Touch, in a way, indirectly serves as a marketing tool for the iPhone and the Apple ecosystem. These consumers already become engrained into the Apple way.

But if Apple brings out this new “cheap” iPhone, it would make consumers confused. Which do they choose then? Do they choose a $200 iPod Touch or a $200 iPhone? What would be the differences? Would there be any reason at all to purchase the iPod Touch?

I’ve just tried thinking for the differences, and it already confuses me as a consumer. I would, obviously, choose the iPhone without service (if possible) and use it as like an iPod Touch if I didn’t want service. I would pass on the iPod Touch itself entirely.

But this move would also take away some of the magic of the iPhone. Apple’s flagship product is special because it is a single device that everyone gets to use, and there are no differences (beyond the amount of memory storage) between any one iPhone and another in a given year of production. So, when consumers purchase an iPhone, they know they get to enjoy the same experience as everyone else, and everyone gets to be happy.

However, if you introduce another iPhone device to the mix, you take away that feeling from those iPhone users. You make them question if they should get the feature-rich iPhone of now or opt with the cheaper iPhone instead. In essence, it adds complexity to the decision and, instead, creates indecision. Do that enough, and it might just dissuade consumers from purchasing an iPhone altogether. (Even though the possibility of that happening is slim, why even bother with taking that risk?)

It doesn’t make sense.

Maybe This Is Something Else?

Maybe this isn’t about the iPhone at all. Maybe Bloomberg and The Wall Street Journal got this one wrong, for all of the reasons I mentioned before. Maybe Apple isn’t creating a new iPhone device, but, instead, they are creating a cheaper version of an existing device — and that device could be the iPod Touch. Or, if not, they are simply reducing the price of older iPhones drastically. But, assuming that they are creating a new device… let’s assume it is a new iPod Touch.

It would make sense for Apple to want to get the iPod Touch into as many hands as possible, and if Apple were to produce a cheaper version of it, they would inevitably make more sales and give consumers a chance to spend more money on Apple’s thriving App Store and iTunes marketplace. This is especially important for people who have not already been introduced to the Apple brand.

Users get into the ecosystem for relatively cheap, users spend money, users enjoy it, and users become more obsessed with the company. Then those users spend more money on more of Apple’s products, thus becoming even more entrenched with the company to the point that it no longer makes sense to purchase a PC/desktop — those users purchase an iPad, iPhone, Apple TV, and more instead.

So, in the end, does is not — at least theoretically — make more sense for Apple to produce a $150 (or $100) iPod Touch instead of a $200 “iPhone Nano” (or whatever they will call it) that would render the iPod Touch virtually useless, confuse consumers about which iPhone they should purchase, and segment the iPhone user base even further (something that I believe would prove disastrous)?

Who’s with me?

About James Mowery
James Mowery is a passionate technology journalist, entrepreneur, and Apple enthusiast who has written for various top-tier publications like Mashable, Techi, and CMSWire. Follow him on Twitter: @JMowery.

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