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Saturday, August 02, 2008, 07:00 am PT (10:00 am ET)

Telecoms fight for the right to party with iPhone 3G


L'Eggo my Eggo

Orange, owned by France Télécom, signed exclusive rights to sell the iPhone in France last fall. It has since muscled into other markets including Switzerland, where it now sells the iPhone 3G in competition with Swisscom, which was originally assumed to be region's exclusive iPhone provider. Apple has partnered with more than one mobile provider to sell the iPhone 3G in a number of new markets, including Australia, Austria, Czech Republic, Egypt, India, Italy, Poland, Portugal, Slovakia, and ten markets in South and Central America, according to a list maintained by iLounge.

Orange is now rumored to be trying to fight its way into the UK market to compete against O2, hoping that it can break its rival's exclusive lock on that market by the end of 2009. For its part, O2 staged a promotional discount on the original iPhone prior to the launch of the iPhone 3G, a trick it has since credited with being able to grab over 137,000 subscribers from rival providers, according to a report by Jonny Evans in Macworld UK.

Until it can force its way into the UK market to sell the iPhone 3G, Orange has begun including a free iPod touch in its contracts for the phones it already sells in the UK through Carphone Warehouse. That deal is also being pushed by rival mobile providers in other markets; in Switzerland, Sunrise similarly bundles a free iPod touch with some of its phone contracts in a bid to compete against the two official vendors of the iPhone 3G.

Apple's partnerships mean automatic sales

All of this is great news for Apple. A decade ago, the company struggled to sell its technology in partner's retail stores such as Sears, BestBuy, and smaller independent computer stores. The problem was that those retailers could make more money selling cheaper and higher profit PCs; they actively funneled interested Mac buyers toward their own store branded computers running Microsoft Windows.

Apple is now selling its computers itself through its own retail stores, using sophisticated marketing to inform users of the differences between its products and commodity PCs. With the iPhone, that sale is even easier, since mobile providers are happily motivated by higher profits to push the iPhone 3G themselves. Additionally, with rivals of Apple's official iPhone partners marketing the iPod touch, Apple is selling its WiFi mobile platform from every outlet, broadening the value of the iPhone itself as that software platform establishes itself.

In many ways, Apple is creating a broad, automated sales channel similar to that created by Microsoft in the 90s, where PC hardware makers effectively sold Windows on the company's behalf to enable them to rival Apple's Macintosh. This time around, it isn't hardware makers selling Microsoft's software, but rather mobile service companies selling Apple's hardware and software.

That's terrible news for struggling handset makers such as Motorola and Sony Ericsson, and a direct challenge to most profitable markets of the high volume handset leaders including Nokia, Samsung, and LG, which haven't been able to tap the heady interest in iPhone despite a series of flaccid attempts to steal the thunder of their new American rival with iPhone-lookalike products. All Apple has to do is maintain its lead in software, a task that will become increasingly easier as it builds a worldwide ecosystem around the iPhone.

Later this month on August 22, Apple will expand its iPhone 3G launch to 20 additional countries, and 30 more countries are planned to be added by the end of the year.