Balsillie breaks down the Apple/AT&T relationship

26 Comments

RIM CEO Jim BalsillieIn a recent feature by the Toronto Star, RIM’s Co-CEO Jim Balsillie offered commentary on Apple’s relationship with AT&T regarding the iPhone. His comments have sparked some debate across the Internets, most notably on the Boy Genius Report, where several staff members (including the BG himself, of course) have taken different stances on what Jim Dog’s words mean.

The quote in question refers to the surprising (to some) amount of control Apple featured over the iPhone’s launch: for example, a lack of AT&T branding on the device, and activation via iTunes rather than through AT&T. Here’s what Balsillie had to say:

“It’s a dangerous strategy,” says Balsillie. “It’s a tremendous amount of control. And the more control of the platform that goes out of the carrier, the more they shift into a commodity pipe.”

Our good friend the Boy Genius argues that Balsillie’s comments come from jealousy over the fact that Apple has the power to command such control while RIM can’t — hence, the reason why there are no Wi-Fi BlackBerrys in North America (yet). One of his fellow writers wonders why RIM wouldn’t welcome this shift in power from the carrier to the manufacturer, especially considering how poorly AT&T handled their BlackBerry Pearl launch. However, I think this extends beyond simple jealousy, and reflects the divergent philosophies of RIM and Apple.

It is important to note that Balsillie never stated that the relationship between Apple and AT&T was
bad, merely that AT&T’s concession to relinquish control in order to be the sole supplier of the iPhone was a dangerous one for the company. I’m sure Balsillie would love more control in his negotiations with carriers, but the issue here isn’t about control, it’s about how RIM and Apple both deliver their products.

Jim Balsillie personally told me that RIM serves three masters: the carrier, the end user and the CIO. They are, in effect, the three different customers that RIM has to sell a device on in order to be successful. Why do carriers rate as highly as the end users in RIM’s mind? Because carriers such as AT&T provide them with great help to get devices out the door. While RIM may go end-to-end when it comes to the back-end technology required for the BlackBerry network, they are very much hands off when it comes to the promotion and sale of their devices (although this is slowly starting to change): it is the carriers who offer promotional deals and subsidize device cost (it is worth noting that the lack of AT&T branding upon the iPhone is likely due to the fact that they don’t subsidize the device). The reason for this is that RIM isn’t primarily a hardware manufacturer — they’re a service provider (BES/email) that uses BlackBerry devices as the medium for their service. That’s why top RIM brass refers to BlackBerrys as a platform, not a product.

The iPhone, of course, is a product. Not only that, it’s a product that Apple — as with all other products they offer, be they hardware or software — wants to control from conception to completion. Apple also does not consider carriers to be their customers; their customers are the evangelistic, tech-loving nerds that embrace the Apple iZeitgeist of design. I’m sure Apple considers their relationship with AT&T to be similar to the one they share with Wal-Mart in selling their iPods.

This is the danger that Balsillie is identifying: AT&T is jeopardizing becoming the Wal-Mart of telecommunications (i.e. a simple product vendor) in order to cash-in on iPhone sales. RIM might not want AT&T or other carriers to lose that control, because it would force them to play a greater role in BlackBerry product launches and marketing (diverting their attention from design and iteration), and because RIM doesn’t want to get into a straight product war with Apple (which they would lose). Regardless of what you think of Jim Dog’s motives, I believe his analysis is correct, although it may take some time before other hardware manufacturers demand the control that Apple does, simply because their products are not ready to stand on their own. Whether or not AT&T has opened Pandora’s box remains to be seen, but post a comment and let us know what you think the future holds.

  • http://beyondthebleedingedge.blogspot.com Andrew

    to be blunt – tough shit Jim. RIM (successfully) has catered to the Telco powers that be for years, locking out features and been happy selling handsets, they played it safe and it has worked well. The end user is not on RIM’s radar, or all BB’s sold would have unlimited data. A new player comes along and literally turns over the ‘Apple’ cart – the boys at Cupertino basically kicked in the door and said

    “Hmm AT&T you want to partner with us eh?? ok great, well can you have this new voice mail infrastructure built out in 18 months? – we are going to need you to offer a new data plan as our phone uses data, so change that – and while your at it, we have unfettered access to wifi, so in the future we are going to add a SIP client and steal minutes from you. Kapeesh? Great, sign here – press hard, there are 3 copies…”

    So Kudo’s to Apple for humbling wireless carriers, for their next trick hopefully they can come up to Canada and kick the powers that be @ Rogers squarely in the ‘nads’ – we have the most expensive mobile data in the world by a factor of 1000x, so Apple will succeed in 1 month in doing what RIM has had the opportunity to do for CDN’s wireless users for years, and that is force data rates to acceptable international prices. So who cares about the end user more? Apple or RIM?

    Where do I buy my I love Steve Jobs T-shirt?

  • http://beyondthebleedingedge.blogspot.com/ Andrew

    to be blunt – tough shit Jim. RIM (successfully) has catered to the Telco powers that be for years, locking out features and been happy selling handsets, they played it safe and it has worked well. The end user is not on RIM’s radar, or all BB’s sold would have unlimited data. A new player comes along and literally turns over the ‘Apple’ cart – the boys at Cupertino basically kicked in the door and said

    “Hmm AT&T you want to partner with us eh?? ok great, well can you have this new voice mail infrastructure built out in 18 months? – we are going to need you to offer a new data plan as our phone uses data, so change that – and while your at it, we have unfettered access to wifi, so in the future we are going to add a SIP client and steal minutes from you. Kapeesh? Great, sign here – press hard, there are 3 copies…”

    So Kudo’s to Apple for humbling wireless carriers, for their next trick hopefully they can come up to Canada and kick the powers that be @ Rogers squarely in the ‘nads’ – we have the most expensive mobile data in the world by a factor of 1000x, so Apple will succeed in 1 month in doing what RIM has had the opportunity to do for CDN’s wireless users for years, and that is force data rates to acceptable international prices. So who cares about the end user more? Apple or RIM?

    Where do I buy my I love Steve Jobs T-shirt?

  • Ominx

    I agree with Balsillie. I don’t get why people can’t see beyond the present. If the future of the mobile industry follows Apple’s lead, we will all end up with LESS of a choice. Not more. Don’t be so shortsighted people. If manufacturers demand the same treatment as Apple, we will only have the choice of the heavy-weights.

    So what is so great about what Apple has “achieved”? Taking the service provider out of the game will only get you, as Jim said, “a commodity pipe” where the telcos fight for the “next big thing” leaving all other competition to the dogs. And that is a BAD thing for consumers.

  • Ominx

    I agree with Balsillie. I don’t get why people can’t see beyond the present. If the future of the mobile industry follows Apple’s lead, we will all end up with LESS of a choice. Not more. Don’t be so shortsighted people. If manufacturers demand the same treatment as Apple, we will only have the choice of the heavy-weights.

    So what is so great about what Apple has “achieved”? Taking the service provider out of the game will only get you, as Jim said, “a commodity pipe” where the telcos fight for the “next big thing” leaving all other competition to the dogs. And that is a BAD thing for consumers.

  • Matt

    Wait, what’s wrong with being the Wal-Mart of the wireless industry. While yes, it’s arguable that Wal-Mart is a horrible entity, they are also an unstoppable juggernaut or retail. That’s not a bad place to be either. AT&T is just out there to make loads of $, and that happens to be something Wal-Mart is quite adept at.

  • Matt

    Wait, what’s wrong with being the Wal-Mart of the wireless industry. While yes, it’s arguable that Wal-Mart is a horrible entity, they are also an unstoppable juggernaut or retail. That’s not a bad place to be either. AT&T is just out there to make loads of $, and that happens to be something Wal-Mart is quite adept at.

  • Cocolicius

    More of RIM not wanting to get into a product war with Apple rather than RIM not wanting more control of how it sells its own products. The US cell phone market is a bit skeewampus when you compare it to the UK. In Britain, a 2-yr contract is unheard of and just about any phone can be had on a pre-paid plan if you don’t mind it locked down to a single carrier and shell out for half the price of the device. Also, unlocked phones are much more common to buy (though you’re paying full price). Then the carriers DO become commodities in which case choosing a carrier (ATT vs TMobile vs Verizon, etc) with this system in the States would be based on quality of service, pricing, customer support, etc. The very things I’m looking for!!

  • Cocolicius

    More of RIM not wanting to get into a product war with Apple rather than RIM not wanting more control of how it sells its own products. The US cell phone market is a bit skeewampus when you compare it to the UK. In Britain, a 2-yr contract is unheard of and just about any phone can be had on a pre-paid plan if you don’t mind it locked down to a single carrier and shell out for half the price of the device. Also, unlocked phones are much more common to buy (though you’re paying full price). Then the carriers DO become commodities in which case choosing a carrier (ATT vs TMobile vs Verizon, etc) with this system in the States would be based on quality of service, pricing, customer support, etc. The very things I’m looking for!!

  • Berry

    ATT is a very controlling carrier and they might have stepped back for versoin 1.0 of the iPhone but if anything thinks they are going to be hands off for the remainder is just fooling themselves. What remains to be seen is how much will they try to control or will Apple just “walk-away” from the carrier if ATT tries to control. I think the coments have stirred the pot for sure…

  • Berry

    ATT is a very controlling carrier and they might have stepped back for versoin 1.0 of the iPhone but if anything thinks they are going to be hands off for the remainder is just fooling themselves. What remains to be seen is how much will they try to control or will Apple just “walk-away” from the carrier if ATT tries to control. I think the coments have stirred the pot for sure…

  • http://www.dragonhunting.com/ James

    Oh and one more thing, look at what Ominx said. If Jobs and Co. win on this one, it’s gonna be a fun time for all of us consumers. Want that new 9900? Sorry, only on Sprint. For 3 YEARS. The 9100 Pearl 3.0? Yeah that ones only T-Mo…another 3 year exclusive. Oh and they’re hardlocked and there’s no way to change carriers.

  • http://www.dragonhunting.com James

    Oh and one more thing, look at what Ominx said. If Jobs and Co. win on this one, it’s gonna be a fun time for all of us consumers. Want that new 9900? Sorry, only on Sprint. For 3 YEARS. The 9100 Pearl 3.0? Yeah that ones only T-Mo…another 3 year exclusive. Oh and they’re hardlocked and there’s no way to change carriers.

  • B Wilson

    Don’t worry Jim, I still have a Curve for my business line , but my personal line is iPhone BABY!!!

  • B Wilson

    Don’t worry Jim, I still have a Curve for my business line , but my personal line is iPhone BABY!!!

  • Ominx

    @James:

    Exactly. Thanks for seeing that. If Apple really wanted to achieve something and change the business model for the benefit of the consumer, they would have released the iPhone unlocked without contract that could be used on any GSM provider. Now that would benefit customers.

    But Apple did nothing other than show competing phone manufacturers that they can demand special treatment and sell their devices un-subsidized at full retail under exclusivity WITH a required 2 yr. agreement.

    Doesn’t anyone else see the problem with this. We’re moving backwards.

  • Ominx

    @James:

    Exactly. Thanks for seeing that. If Apple really wanted to achieve something and change the business model for the benefit of the consumer, they would have released the iPhone unlocked without contract that could be used on any GSM provider. Now that would benefit customers.

    But Apple did nothing other than show competing phone manufacturers that they can demand special treatment and sell their devices un-subsidized at full retail under exclusivity WITH a required 2 yr. agreement.

    Doesn’t anyone else see the problem with this. We’re moving backwards.

  • http://www.blackberrycool.com/ BlackBerry Cool Douglas

    I think we can all agree on two things:

    1. Canadian data rates are WAY too high.

    2. None of us want to see devices with long exclusivity deals with carriers.

    With that being said, Matt, the reason why AT&T doesn’t want to be Wal-Mart is that they’re already more powerful than Wal-Mart. If they become simply a big store for products, then their livelyhood is dependant upon having the best products rather than consumer perception of their full-spectrum service.

    I’m not saying this is a bad thing for us — I think carriers are modern day train barons and need to be shaken up. I’m just saying (and so is Jim) that AT&T is walking a fine line right now.

  • http://www.blackberrycool.com BlackBerry Cool Douglas

    I think we can all agree on two things:

    1. Canadian data rates are WAY too high.

    2. None of us want to see devices with long exclusivity deals with carriers.

    With that being said, Matt, the reason why AT&T doesn’t want to be Wal-Mart is that they’re already more powerful than Wal-Mart. If they become simply a big store for products, then their livelyhood is dependant upon having the best products rather than consumer perception of their full-spectrum service.

    I’m not saying this is a bad thing for us — I think carriers are modern day train barons and need to be shaken up. I’m just saying (and so is Jim) that AT&T is walking a fine line right now.

  • http://beyondthebleedingedge.blogspot.com/ Andrew

    The issue here is product. Apple made a great product, RIM makes a great product. Apple had the fortitude to stand up and say I am not playing a ‘me too’ game, RIM has never done that and they easily could.

    If RIM went to Rogers and said, ‘we aren’t selling BB’s to you anymore until you provide unlimited data’ do you think Rogers would walk from BB? Not a chance, because if Rogers didn’t do it Bell or Telus would. It is all about the Benjamin’s – Apple had nothing to lose and everything to gain, so user experience was priority 1.

    @ James and Omnitrix – good points but, but Apple again had nothing to lose. They got a great deal with AT&T, you can’t buy that kind of distribution unless you play the game a bit (go exclusive etc.), now they have an wifi capable handheld device in 750K users hands.. if you think they aren’t thinking VoIP bypass of AT&T you are nuts.. the iPhone won’t be sold locked in Europe, no one would buy it, the market isn’t ‘groomed’ like it is in NA.

  • http://beyondthebleedingedge.blogspot.com Andrew

    The issue here is product. Apple made a great product, RIM makes a great product. Apple had the fortitude to stand up and say I am not playing a ‘me too’ game, RIM has never done that and they easily could.

    If RIM went to Rogers and said, ‘we aren’t selling BB’s to you anymore until you provide unlimited data’ do you think Rogers would walk from BB? Not a chance, because if Rogers didn’t do it Bell or Telus would. It is all about the Benjamin’s – Apple had nothing to lose and everything to gain, so user experience was priority 1.

    @ James and Omnitrix – good points but, but Apple again had nothing to lose. They got a great deal with AT&T, you can’t buy that kind of distribution unless you play the game a bit (go exclusive etc.), now they have an wifi capable handheld device in 750K users hands.. if you think they aren’t thinking VoIP bypass of AT&T you are nuts.. the iPhone won’t be sold locked in Europe, no one would buy it, the market isn’t ‘groomed’ like it is in NA.

  • ryan

    I agree with the comment about that RIM basically doesn’t have the balls to stand up to Rogers(Canada’s largest BB carrier). I pay out of my ass for my data plan and the service is sub-par. The least they could do is offer unlimited data plans. I hope Apple comes to Canada soon hopefully they will spark a change. And shame on RIM(great device but obvisously they don’t believe in their product like the end-user does)get some balls and stand up to Rogers. Good job Apple.

  • ryan

    I agree with the comment about that RIM basically doesn’t have the balls to stand up to Rogers(Canada’s largest BB carrier). I pay out of my ass for my data plan and the service is sub-par. The least they could do is offer unlimited data plans. I hope Apple comes to Canada soon hopefully they will spark a change. And shame on RIM(great device but obvisously they don’t believe in their product like the end-user does)get some balls and stand up to Rogers. Good job Apple.

  • Nakim

    Rumor has it that verizon saw this coming and was the reason they backed out of the deal. At first I thought of this as being a “dummy” move for it would cause mass histeria and people dropping their “carrier” and flock to the handheld holly grail. The more I thought about it and read on I saw that verizon saw the shift in power because that was one of their complaints…..no carrier branding and for apple to have the power to sale iPhone out of Wal Mart, Target or the back of someone’s trunk at the mall. Proving to be a smarter move.
    This reminds me of PS3 launch. Everyone wanted one, paid up to $15,000 on eBay for one only to get it home and find out it was just a video game system. iPhone’s are great but have they actually reinvented the wheel on this one? That is the real question at hand. “In the land of the blind….the one eye’d giant toting an apple is king”.
    Have wondered why Apple’s symbol has one bite taken out of it until I remembered what happened in the Garden of Eden. Do the math

  • Nakim

    Rumor has it that verizon saw this coming and was the reason they backed out of the deal. At first I thought of this as being a “dummy” move for it would cause mass histeria and people dropping their “carrier” and flock to the handheld holly grail. The more I thought about it and read on I saw that verizon saw the shift in power because that was one of their complaints…..no carrier branding and for apple to have the power to sale iPhone out of Wal Mart, Target or the back of someone’s trunk at the mall. Proving to be a smarter move.
    This reminds me of PS3 launch. Everyone wanted one, paid up to $15,000 on eBay for one only to get it home and find out it was just a video game system. iPhone’s are great but have they actually reinvented the wheel on this one? That is the real question at hand. “In the land of the blind….the one eye’d giant toting an apple is king”.
    Have wondered why Apple’s symbol has one bite taken out of it until I remembered what happened in the Garden of Eden. Do the math

  • Nakim

    Rumor has it that verizon saw this coming and was the reason they backed out of the deal. At first I thought of this as being a “dummy” move for it would cause mass histeria and people dropping their “carrier” and flock to the handheld holly grail. The more I thought about it and read on I saw that verizon saw the shift in power because that was one of their complaints…..no carrier branding and for apple to have the power to sale iPhone out of Wal Mart, Target or the back of someone’s trunk at the mall. Proving to be a smarter move.
    This reminds me of PS3 launch. Everyone wanted one, paid up to $15,000 on eBay for one only to get it home and find out it was just a video game system. iPhone’s are great but have they actually reinvented the wheel on this one? That is the real question at hand. “In the land of the blind….the one eye’d giant toting an apple is king”.
    Have wondered why Apple’s symbol has one bite taken out of it until I remembered what happened in the Garden of Eden. Do the math

  • Nakim

    Rumor has it that verizon saw this coming and was the reason they backed out of the deal. At first I thought of this as being a “dummy” move for it would cause mass histeria and people dropping their “carrier” and flock to the handheld holly grail. The more I thought about it and read on I saw that verizon saw the shift in power because that was one of their complaints…..no carrier branding and for apple to have the power to sale iPhone out of Wal Mart, Target or the back of someone’s trunk at the mall. Proving to be a smarter move.
    This reminds me of PS3 launch. Everyone wanted one, paid up to $15,000 on eBay for one only to get it home and find out it was just a video game system. iPhone’s are great but have they actually reinvented the wheel on this one? That is the real question at hand. “In the land of the blind….the one eye’d giant toting an apple is king”.
    Have wondered why Apple’s symbol has one bite taken out of it until I remembered what happened in the Garden of Eden. Do the math