Daniel Eran Dilger
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The Street’s Flaccid Campaign Against the iPhone

The Street's Flaccid Campaign Against the iPhone
Daniel Eran Dilger
How does one out-do Steve Ballmer’s insistence that the iPhone is “the most expensive phone in the world,” a claim he televised knowing full well that his own Windows Mobile TyTN costs around $800? Well, if you’re the shameless Brett Arends of TheStreet.com, you publish a headline that claims the iPhone costs $17,670.

Why does The Street want you to think the iPhone is so expensive? Is it hidden costs, secret fees, or some sort of damages only suffered by iPhone users? No, it turns out Arends is just grasping for straws, but his motivation isn’t just reader titillation, despite the Digg links.

Brett Arends: Jackass Extraordinaire.
As a mutual funds columnist for The Street, Arends’ headline is more irresponsible than the usual flack’s panic mongering. The reason the iPhone costs so very much, he says, is partly because an employee in the 25% tax bracket would have to earn enough to first cover his income taxes.

Brett Arends: Jackass Extraordinaire

He then folds in two years of service and comes up with a $2720 bill. In Arends’ world, everything costs 25% more because of this bizarre accounting for income tax, but he only discloses this in regard to the iPhone. In other words, the burden of income tax inflates the “true cost” of the iPhone, but not any other purchase anyone ever makes.

He also fails to mention that any smartphone with service costs at least as much as the iPhone, if not more. Steve Ballmer’s “$99” Motorola Q, which really offers no competition for the iPhone in terms of features or usability, actually costs $100-200 more than the iPhone over a two-year period, depending on which plan Verizon Wireless is offering at the moment.

[Apple: iPhone Now Costs Less than Ballmer’s Lame Motorola Q]


Your Money or Your Life?
In order to launch his stutteringly stupid headline further into the heights of absurdity, Arends advises that a 30 year old user forgo a mobile phone and instead invest the money in a tax free 410(k) retirement plan, assuming that the user hasn’t already maxed out his allowed contributions.

Thirty-five years later, he should have $17,670. Of course, at that point he will be 65, and will have missed a lot of calls, perhaps several job interviews or calls from potential clients. That user also wouldn’t have been able to track stocks on the mobile he went without, but money isn’t everything he’d be missing: he also would not have enjoyed watching full length movies or listening to his music library back when his vision and hearing were in their prime.

Wealth isn’t about being buried with a fortune, Mr. Arends. It’s about enjoying your life while you have it. If you don’t know that, you’re not really qualified to be offering financial advice. The remaining question is, are you just trolling for attention, or are you a total fraud with a hidden agenda? I found the answer lying on The Street.

Just Riding the iPhone?
Why is it that that Arends is specifically badmouthing the iPhone in his specious financial advice? Finishing his article, it initially seems he was merely using the iPhone to build a provocative headline to rope in readers so that he can guide them toward “crazy” Jim Cramer’s financial services, which is apparently the entire reason for The Street to exist.

However, that doesn’t explain why he also wrote “Five Reasons Not to Buy an iPhone” last week, where he told readers, “beyond all the iHype and iMania, let’s get one thing clear. The iPhone isn’t the future. It isn’t a revolutionary mobile device ushering in a new era.”

Why does Arends find it so important to regularly warn readers to not consider the iPhone, using specious arguments that are really not unique to the iPhone? Why is he working so hard to impugn the iPhone specifically? The answers lie buried in his five reasons to not buy the iPhone:

1: The SIP Hits the Fan.
The first is that the iPhone does not currently support VoIP calls like Apple’s Jabber-based iChat on the Mac. However, very few mobile phones offer this, largely because the mobile networks that subsidize phones want them to use their own telephone networks–rather than WiFi and the open Internet–to place calls.

The only mobile provider that is actively working to deliver WiFi VoIP in the US is T-Mobile, and of course that’s because T-Mobile doesn’t have a competitive mobile phone network in place, as I noted earlier.

[Readers Write: iPhone Unlocking, T-Mobile, Europe and UMTS: T-Mobile’s T-roubles in the US]

Nokia and other phone makers want to push VoIP calls over regular WiFi networks, but the subsidy shell game run by mobile operators has put the networks in control of hardware and prevented competition. Apple’s iPhone removes that subsidy barrier, making it easy for Apple to later add integration with its own WiFi products and its own open VoIP server, Mac OS X’s iChat Server.

[The Road to VoIP: Phone Wars]
[The Road to VoIP: The Empire Strikes Out]
[The Road to VoIP: Paved with Bad Intentions]


It’s a bit ridiculous to think that Apple is against using WiFi and Jabber, considering that the company has pioneered the delivery of both into mainstream consumer products. Conspiracy theorists who think Apple is only interested in shoveling money at AT&T should consider that the iPhone’s interface promotes the use of free email, and actively discourages users from using pay-per-text SMS. It won’t even send photos over MMS, only email.

It’s also telling that Arends recommends Vonage and Skype, two battered companies trying to sell proprietary VoIP in an age where it’s obvious that the future lies with standards-based VoiP using Jabber’s XMPP and SIP, technologies Apple is actively promoting in iChat, making it compatible with Google Talk.

Arends apparently did a Google search that resulted in his final comment on VoIP: “The irony? The original ‘iPhone’ was a Cisco Systems phone for making VoIP calls.”

Thanks for the insight, Mr. Cavelurker! Did you miss the whole non-event/crisis about Cisco “owning” the name, and have you since failed to grasp that if VoIP were really here and being delivered by Cisco, the world would be associating the iPhone name with Cisco rather than Apple? Cisco never even bothered to use the term until it was already strongly associated with Apple, despite running a VoIP business for years.

Cisco has pushed VoIP over the last seven years, but using its own proprietary protocol tied to a Windows Server. After it bought up Linksys, Cisco inherited a more open Linux-based Asterisk system using open SIP, and is just now getting around to building interoperable VoIP products that aren’t Windows based.

That makes Arends’ first reason a small bit of ignorance wrapped up in false conclusions and tarred with an inability to grasp industry trends or identify market leaders. It only goes downhill from here.

[Apple’s Next Killer App]
[The Xserve mini]


2: OMG, the Price.
Arends’ next dire warning is that the iPhone requires a service contract, making it cost over $2000 over two years. Thanks for busting out that tired old yarn, as if every anti-Apple flack hadn’t already spun it threadbare.

This wasn’t provocative enough by itself, so he was forced to later float the idea a second time, embellished with the above “what if” scenario where the cost of a mobile plan is invested over the users’ lifetime instead of used to pay for mobile service.

Again, the problem here is that–even with shell game subsidy pricing–there really are no significantly cheaper smartphones on the market, because the real expense isn’t the phone itself but the service it requires.

I’ve already done the math for Balmer’s Motorola Q, which is a couple hundred more than the iPhone; all smartphones require a $2000 investment. Even if a user gets an unlocked phone and uses it with pay per month service, the total is still going to be paid. The only difference will be the extra fees paid for not taking advantage of the lower rates provided under a contract.

And of course, it’s also possible to buy an iPhone and pay extra to avoid signing a long term contract; one only needs to fail the credit check. The only way to not pay $1000 a year for a smartphone is to not use one, which of course is Arends’ brilliant $17,000 postulation.

How about telling us how much we’ll save by not driving a vehicle or not living indoors, too? I bet we’d be able to leave lots of money to our grandkids if we just worked hard and lived under a bridge for forty years with a maxed out 401(k). I bet Arends would be happy to sell us information on how to do it.

3: AT&T and International Roaming.
Arends then recommends against the iPhone because its linked to AT&T, explaining that roaming internationally is expensive, and the iPhone doesn’t allow users to plug in a generic pre-paid GSM SIM card to use it overseas.

International roaming can be expensive, from $1 – 5 per minute depending on the country. However, if you travel overseas frequently, you can sign up for a $4 – 6 monthly plan that deeply discounts international call charges, making calls closer to 50 cents per minute in Europe, similar to domestic roaming fees.

[International wireless services – AT&T]

Also, if you’re going to be traveling in Europe for an extended period of time, you can get a cheap GSM phone and use it to place longer calls if that makes sense. What doesn’t make sense is warning American users about being “locked” to AT&T, because it’s the only large US provider of standard GSM phones that work in Europe.

Bringing a Verizon Wireless or Sprint phone to Europe won’t allow you to pop in a SIM card as he seems to suggest, because those networks’ phones are CDMA2000 and can’t use either the European GSM networks or its SIM cards at all. T-Mobile offers spotty GSM service in the US, so if you have a quad-band phone, you’re likely going to be roaming on AT&T’s network a lot in the US anyway.

Arends’ advice is to buy an unlocked European phone and forgo the carrier subsidy, a $200 loss. But applying his own logic, that money could be invested over a lifetime, making Arends’ advice a $1700 mistake! By simply ignoring him, one could buy an iPhone and use it for a year with the virtual savings earned.

He also throws in complaints about the iPhone not supporting 3G networks, but even the unlocked phone he brags about using himself, the Nokia E61, does not support American 3G service!

It’s inevitable for flacks to throw out 3G as a buzzword, but here it only makes it clear that Arends is grossly disingenuous.

[Nokia E61 Technical specifications – Nokia]
[How AT&T Picked Up the iPhone: A Brief History of Mobiles]
[Unlocking the iPhone: The GSM SIM and Activation]


4: Third Party Software Panic.
Arends is incensed that Steve Jobs prevented third party apps from running on the iPhone apart from those that run in Safari, purportedly because a flood of native shareware apps would have been better.

The apps that already run in the iPhone’s Safari include Reddit; every newspaper I’ve visited so far; all the banks I use, including Wells Fargo, Citibank, and Scottrade; Yahoo Movies, Google Analytics (apart from some graphs generated by Flash), and lots of other stuff.

What are the third party applications that run on Windows Mobile, Palm OS, Symbian, or Linux? There are some apps that my clients have reported wanting to see, among them the doctor’s friend, Epocrates, which is widely used to call up medication facts like an engineer’s calculator. This type of information could readily be ported to a web application maintained within a clinic and delivered using the WiFi network that’s likely already in place.

Porting such an application to the iPhone’s native OS X platform would take longer and be more complex to deploy and update that using the web as a platform. There are many other similar examples. Certainly there are other native apps I’d like to see on the iPhone–more on that later.

However, the vast majority of existing, custom mobile software is absolute garbage, and is grossly overpriced. I calculated over $450 of Windows Mobile software that is either included or redundant on the iPhone. Add that to the $200 premium of the Motorola Q, and you’ve saved enough to buy an 8 GB iPhone as a gift for someone else!

[More Absurd iPhone Myths: Third Party Software Panic]

And pray tell, Arends, what third-party Linux software is anyone running on their mobile phones, the GIMP? The only Linux phones being sold in any quantity are being sold in China by Motorola, and are not open in any useful context. It’s quite obvious the only love Arrends has for Linux is in using it as a buzzword.

[Mac OS X vs Linux: Third Party Software and Security]
[Mac OS X vs Linux on the iPhone and Mobile Devices]


5: Over the Air Music Downloads.
The final reason Arends recommends against considering the iPhone is that it can’t download and purchase songs while walking down the street. He’s already half wrong in saying that however.

Actually, the iPhone can download MP3, WAV, AIFF, or AAC songs from a website and play them in place, just as it can play H.264 videos directly from the web. What it can’t do is download songs into its library, paid or not. The only way to put music into the iPhone’s song libarary is to sync it with iTunes.

Arends says he listens to NPR podcasts over WiFi from his phone. “That’s mobile. And it’s the future.”

He didn’t try doing that from the iPhone, or he wouldn’t have made the false claim that it can’t do the same. The iPhone not only has a nice RSS parser, but it can also play both audio and video podcasts directly from a feed over the web. It’s a great secret, but the iPhone actually works very well as an RSS reader for both articles and for podcasts, no local syncing required.

I have been making some changes to my website to make it more compatible with the iPhone, but I didn’t have to do anything to make my RSS feed and Podcast just work.

If you’re reading with an iPhone, follow my RSS link to quickly browse recent articles without navigating through the front page. Follow my Podcast RSS URL to listen to episodes.

[Article RSS Feed – RoughlyDrafted Magazine]
[RoughlyDrafted OUTLOUD]


Remember the Missing Memory.
What Arends’ phone can’t do is sync an actual movie and present it in a watchable manner, or play music from iTunes. Most of the highest-end smartphones only have 64 MB of RAM or less, most of which is already used up by the phone’s operating system. Arends’ phone only has that much, and according to Nokia can only expand by another 64 MB using a miniSD card.

Not only does the iPhone have more internal RAM, but it also has another 4098 or 8192 MB of Flash storage available for movies and lots of songs.

The anti-iPhone crowd keeps forgetting that rather huge difference: the iPhone has far more storage capacity than any other phone on the market, by a huge margin: commonly 128 times as much.

Few mobile phones can even add more than 1 – 2 GB, and most feeble mobile OSs could not really do anything with more RAM anyway. Figure in the cost of adding just a quarter of the iPhone’s Flash RAM to any other phone, and you’ll need to add another $100 to the competing phone’s price tag.

That also means that the SD expansion slot some people think is “missing” on the iPhone is really unnecessary. It’s like complaining that your PlayStation doesn’t have a cartridge slot for games like your Atari 2600 did.

When you have enough storage to carry around your own library, you don’t have to rely upon a web service like Verizon’s V Cast to sell you individual songs for a couple bucks a piece. That’s part of why I earlier argued against the practicality of OWA downloads and subscription media rentals for a wireless iPod.

[10 iPod vs. Zune Myths]
[The Online Music and Movie Rental Myth]


DRM Complications for OTA Music Downloads.
The other complicating factor in OTA downloads is DRM. You can’t buy much commercial music online without some sort of DRM system, and keeping track of that inside a mobile device, not to mention trying to offer a usable store, is a lot of complication with little upside.

Microsoft’s disastrous PlaysForSure offers an example of why mobile devices bound by an internal DRM system do not work well, and why it’s best to deal with that on the desktop instead, as iTunes does.

The iPhone actually offers the suggestion that it might be expanded to allow impulse OTA buys, but right now, it really makes little sense. It might in other markets, particularly Japan, where lots of young people don’t have a computer and use their mobile phone as a substitute.

Unless Apple can convince the Japanese market to buy a Mac Book along with the iPhone, there might be some culture shock. Not so in the US, where everyone knows how to use an iPod already.

[Readers Write: the iPhone in Japan, Australia, and Universal 3G]
[Hacking iPod Games: How Apple’s DRM Works]
[Inside the iPhone: FairPlay DRM and the iTunes Store]
[Steve Jobs and the iTunes DRM Threat to Microsoft]
[How FairPlay Works: Apple’s iTunes DRM Dilemma]


A Trail of Red Herrings.
In any event, OWA music downloads tend to be a red herring dropped by Verizon Wireless Enthusiasts who are desperate to identify something that the iPhone lacks. Verizon loves its V Cast mini bits of video and audio clips and rented games, all of which are sold at grossly inflated prices to consumers, who are often then blocked from putting their own music on their own phone.

V Cast is implemented in Qualcomm’s BREW and uses Microsoft’s Windows Media 9 DRM, making it near the top of any list of technological evils. The service typically costs $15 per month, with premium videos costing $3 – 4 extra each. Songs are $2, and games cost $4 – 5 per month, with many eating up minutes during gameplay.

The clowns crying about the “$2000 iPhone” and its inability to play V Cast garbage know full well that Verizon’s phones cost the same $2000, and V Cast adds another $360. If you actually use it, the fees balloon quickly. The iPhone syncs the music you already own, your own desktop photos and home movies, and iTunes is free.

If the “freedom” to pay extra for Verizon’s junkware sounds a lot like Microsoft’s PlaysForSure “choice,” it is. Both business models hope to limit customer options to the point where consumers can only access content that is centrally charged and typically billed monthly. Who could support such a consumer rip-off with a straight face? Who is the Paul Thurrott of the mobile world?

Recall how a previous article on iPhone panic, thrown in The Street by Arends’ partner Scott Moritz, claimed that the iPhone’s launch was widely “disappointing” and that Sprint, Verizon, and T-Mobile were rejoicing at Apple’s supposed misfortune?

That story was fed to Moritz by Roger Entner of IAG Research.

[Unraveling Anti-Apple Panic: the iPhone Launch Success]


IAG Research: an Anti-Apple Think Tank.
It was already pointed out in “Unraveling Anti-Apple Panic: the iPhone Launch Success” that Entner was acting out the role of a Rob Enderle, by falsely representing himself as an independent researcher while actually being a paid-to-say flack.

However, reader Craig Ferry forwarded a link to IAG’s website that helps clarify that and demonstrates why Entner has professional reasons to spread iPhone misinformation to his pet FUD regurgitators at The Street.

Listed among IAG’s clients is Microsoft and the wireless providers, but no Apple. Apparently Sprint, Verizon, and T-Mobile are the current clients that Entner has to blow out FUD to support, as its client list doesn’t name AT&T, only the former Cingular.

Listed among IAG's clients is Microsoft

Entner has lots to say about how great Verizon is, and what a problem the iPhone will be for users. The Street loves to repeat his ideas, regardless of how vacuous and specious they may be, but its writers never disclose that conflict of interest, in the same way that lazy journalists who cite Enderle never say he’s a Microsoft flack.

Ironically, The Street’s articles on the iPhone really have little to do with the iPhone itself, but are all hot air designed to lift the failing business plans of mobile providers blindsided by Apple’s new phone. The Street’s lamentations over the iPhone are as ineffectual and laughable as the shoe-banging of hardline Communists after the Iron Curtain fell. What is it about the 90s that you miss so much?

Waah, I Am Persecuted By Religious Nuts!
The Street baits readers into writing in to tell it just how off the mark it is, so that its credibility-impaired writers can laugh at the complaints of “religious fans” as they continue to ignore their own misstatements of fact, irresponsible reporting, and bad financial advice.

Just two years ago, Arends complained when Mac users laughed at his advice for Apple to “snap up” the remains of Palm, as if anyone else might be interested in the company. In response, he called his readers “Apple Zealots” in a headline published by MacNewsWorld, a favorite haunt of fellow troll Enderle.

I recommend simply ignoring Arends’ mad raving in The Street and its gushing attempts to sensationalize headlines, which all seem to center around Jim Cramer and his misinformation business.

However, if you haven’t heard Cramer himself explain how he and other hedge fund managers have presented false information about Apple and other companies for their own short-term profit, it’s an eye opener on why the news being delivered so frequently gets the details wrong.

It’s not incompetence, it’s purposeful fraud.

[More on Scott Moritz and the Jim Cramer Street Misinformation Engine]

Clipid=1373 10329438&Channel=Cramer+On+Demand&Puc=Yahoo&Bt=Ns&Bp=Win&Bst=Ff&Biec=False&Format=Flash&Bitrate=300
Thanks to Mike Jackson for the story link.

What do you think? I really like to hear from readers. Comment in the Forum or email me with your ideas.

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2 manicmouse86 { 09.19.08 at 11:34 am }

Well, if you’d actually bothered to read the second page of the article before prattling on for god knows how long, you would have seen him referring to all shopping and not just the iPhone. The iPhone was used as an example as it is a hugely popular product. And apart from everything else, he is completely correct in everything he says, consumers are too willing to spend all their money these days, when they should be preparing for their future, Id much rather have the $17k come retirement than an iPhone now. (But rather than being sensible I bought one anyway)

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4 Jon Stewart exposes Apple stock manipulation | FW { 03.13.09 at 11:32 pm }

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