The New iPhone And The Dawn Of Video Calls

The first attempts to market video phones are now 30 years or more old. They were run on residential landlines, weak sisters to the video conferencing just emerging at large companies. But, the consumer versions were too expensive. And they relied on the most unreliable thing which was that the person at the other end of the call had a video phone as well.

Apple (NASDAQ: AAPL) will launch a two-way video phone at its public conference next month, according to Bloomberg.

“With its size, market share, and influence, Apple could help move video calling to the mainstream,” Eric Kintz, a general manager at Logitech International SA, the computer peripheral maker, told the news service.

The trouble with a two-way video phone is probably the cellular service providers. AT&T has become notorious from dropped calls from the 3G iPhones that it markets. The amount of data that the handset can send and receive simply puts too much load on the infrastructure. But, that will likely change with the advent of 4G.  Sprint (NYSE: S) has already rolled the service out in a number of cities with the aid of technology provider Clearwire (NASDAQ: CLWR). AT&T (NYSE: T) and Verizon Wireless will probably offer their own super-fast wireless service with the LTE standard. No matter what the platform, cellular services are expected to be upgraded in two years.

The barrier to adoption of a two-way video phone is likely to be price. The earlier version of the iPhone cost nearly $600. The question is whether cellular providers will underwrite the cost of the handsets for their customers. If the phones are unusually expensive, that could damage their margins, already under pressure as a part of price wars among the largest firms in the industry.

And, consumers have become used to packages that give them unlimited service for below $100 a month. A two-way video based service will likely come at a large premium for monthly service. Some tech buffs and teenagers with wealthy parents will buy an Apple iPhone with the new service. But, it will have trouble getting beyond that.

Douglas A. McIntyre

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