The iPad, or how to unlock your Internet data from the mobile operator

If you were to design the best device possible to have the Internet in your hands, how would it look like? Now, we know how. Or at least, now we know how Apple has interpreted this challenge after more than a decade working on it. If you were to design the best business model to have the Internet in your hands, how would it look like? That’s probably a very tricky question, but may this be the real question that Apple answered during the event at the Yerba Buena Center in San Francisco two days ago?

During the past weeks, I have been following the hype about the launch of the iPad (now that we know how to call it!) with interest, and since now the dust is settling, it may be the right time for a bit of analysis and -why not?- speculation about the main areas of impact of this device.

Since its target is, in words of Steve Jobs, “to hold whole Internet in the palm of your hands” (see video for a demonstration of features), one must firstly reflect on what this means. Is is about, as Brad Stone points out in his NYT article, “blurring the line between devices“, or is it about really allowing us to get more Internet? What do I mean by this? Let me explain.

We all like that Internet allows us to get access to all kinds of content at a very low cost. For that, we have to incur into two different types of spendings: the cost of the connection to the internet (i.e. ADSL, or a 3G dataplan, etc), and the cost of content. Telecom operators so far are delighted that Apple helped them to finally mobilize the Internet, since they have seen how adoption rates of data plans have increased dramatically since the launch of the iPhone (of course, since adoption was basically inexistent before the iPhone!). The iPad promises even more “mobile Internet”, so at first sight, the iPad is good news.

Then, let’s have a look at the second part of the equation: content. Content creators  and distributors (of all formats -text, audio and video) have been suffering from the digital revolution. Most of them are still having problems to find adequate business models to be able to monetize content, especially on the distribution side. But we’ve seen that with a bit of creativity, bearing in mind the needs of the customers for simplicity and easiness, and tackling its need for “coolness” new viable business propositions have found their way. As my colleague Josep Valor was pointing out in his post last week, Apple succeeded in finding a way to find a profitable business proposition for a handset device in mobile telephony – while the main players are failing miserably. They had already done it before with music. Whose turn is now?

Some claim that the iPad aims at books, and hence will mainly hurt Amazon’s Kindle and other eReaders. Others claim it’s mainly about games. Or video. And the news industry hopes it’s about creating new ways of packaging news and information and therefore finally finding a viable business model. It may be about all of this. Apple has done its homework and presents a device that comes with an entire ecosystem of content, in which the iBooks store is a nice addition, but in which undoubtly the fact that it is compatible with most of the iPhone applications and the entire music is the main highlight. As developers are saying: this opens a new world of development opportunities.

But there may be more. Let’s go back to the access to content issue. How expensive is it today to access real multimedia content through a 3G network? Since multimedia implies huge data transfer, it currently requires a very expensive data plan. What will happen with the iPad? It has been much criticized that Apple seems to give a relatively low priority to  the need of including  3G. The first device that will come out to the market  -selling in the US at $499- will be WiFi only. One could argue that that’s because of the lack of time to find agreements with the operators, with the notorious exception of AT&T. But one may also think that Apple has learned its lessons from the launch of the iPhone.

Remember? It went out with a very similar proposition than the one that we’ve heard two days ago. Apple (not an operator) sells the device, the device is activated through iTunes. For the iPhone, Apple had added a revenue sharing proposition with the operator, and hence operator exclusivity was also part of the initial positioning. The first jailbreak (unlocking the iPhone) made this last part (with all its attached revenues!) fade away. What has Apple learned? That there’s no point in exclusivity deals any longer. So the new iPad will be unlocked. Yes, there is a deal with AT&T, but its just a deal about a new data plan, not an exclusivity deal. The user decides what operator gets access to its iPad. No contract, pre-paid data. The user is locked into the iPad, but unlocked from the operator. This equals to an invitation to real competition on price to the operators. The AT&T deals of $14.99 for 250MB of data is a price killer. $29.99 for unlimited data. This has set a new limit to the value of data transport. This is great for the users, but must be terrible for the operators.

It is also good news for the content distributors and owners, since with cheap(er) access to data, we will for sure consume more content! It will still imply that content distributors will have to find good ways to monetize content, but with this new proposition, Apple directly attacks the access hurdle. As they said on the iPad presentation event,  they have 75 million iPhone users. What they did not say is that they are all paying hefty data plans.  (all paying hefty data plans). How many users may they have  if the mobile Internet becomes cheap? 

So, while the discussions about the virtues or non-virtues of the device are nice, they may be missing the crucial point.