Don't be dazzled by the iPhone, operators warned

A coveted gadget it may be for consumers, but Apple's iPhone might not make every mobile operator's dreams come true, according to one analyst group.

Strand Consult said a number of mobile operators ought to focus a "little less on the iPhone and a little more on their shareholders," because the device is not a mass-market product, but a niche one.

The analyst warned that if an operator moves a large part of their focus to a phone that is attractive to less than five per cent of the market, they could be forgetting the 95 per cent of their customers that are creating the cash flow "that is the foundation of an operator's profit for their shareholders," and added: "How many customers have been overlooked by operators focusing on the iPhone?"

The analyst also said iPhone customers tend to choose to view the full versions of webpages - rather than XHTML ones optimised for low bandwidth - which in practice means the operator may have to deliver 1MB rather than 100KB to serve an iPhone owner with a typical news website.

"It is significantly cheaper for an operator to produce 100KB data than it is to produce 1MB data and it is much more fun to deliver 100KB rather than 1MB when you are selling data at a flat rate," Strand noted.

"You could compare the operators' attitude towards the iPhone's data consumption with a restaurant owner that has an 'all you can eat for €10' buffet and that is proudest of the customers that eat the most! In this business the idea is to generate revenue for the shareholders, not to increase the production volume and costs, while at the same time minimising revenue."

The analyst also takes issue with Apple's way of doing business with operators, warning Cupertino is only driving them closer towards the "dumb bit pipe" nightmare they fear - as it takes the revenue generated by the App Store and iTunes.

However, other industry watchers have pointed out that the success of the iPhone so far is leading other mobile operators to change their handset strategy, and CIOs are increasingly interested in the device.

At the time of publication neither Apple, nor O2 UK, Apple's exclusive partner in the UK for the iPhone, had responded to a request for comment.