Skip to main content

Five Reasons Not to Buy an iPhone

Apple's new device is nifty, but it's hardly revolutionary.

There is much to admire about the new iPhone. The hardware looks beautiful and the product is apparently smooth and easy to use. It's a terrific achievement for Steve Jobs and the Apple (AAPL) - Get Apple Inc. Report team. So give them their moment in the sun.

But 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.

At its heart, this fancy-looking new product is very old fashioned. The reason: It tries to keep Apple and


(T) - Get AT&T Inc. Report

in control instead of you.


1. You need to pay AT&T to make phone calls.

The first thing that stands out about this supposedly "revolutionary" communication device is that it is missing the one revolutionary piece of technology that is turning telecommunications upside down.

Walter Mossberg at

The Wall Street Journal

and David Pogue at

The New York Times

both harped on about the fact that the iPhone can't use modern "3G" data networks, but they missed an even bigger omission.

'VoIP,' or Voice over Internet Protocol.

For the uninitiated, this is the technology that allows you to make free, or nearly free, phone calls over any Internet connection. No, this isn't just geek stuff. Skype and

Scroll to Continue

TheStreet Recommends


(VG) - Get Vonage Holdings Corp. Report

are two widely used VoIP services, and there are now many more. The technology is growing rapidly. Free and open Wi-Fi networks are springing up like weeds in every city.

Sources close to Apple confirmed to me that the iPhone lacks VoIP technology. It cannot use Wi-Fi networks to make cheap calls over the Internet

(Stop the Presses: Steve Jobs has just revealed in a

Wall Street Journal

interview that he excluded VoIP from the iPhone because he didn't consider it a "breakthrough" technology. He has added, though, that a third party developer may produce a VoIP program for the iPhone in due course, to run through the browser.")

That's great news for AT&T, of course. It's bad news for consumers.



(NOK) - Get Nokia Corporation Sponsored American Depositary Shares Report

e61 smartphone -- which I bought online from Europe -- can use VoIP. Net result? I just slashed my cell-phone bills by $80 a month. That's nearly $1,000 a year. And I expect to cut a lot more. I am already shifting the bulk of my phone calls to VoIP and I mainly use the cellular network for backup.

True, I am not always near a Wi-Fi network -- but it's remarkable how often I am. Boston, where I live, is rolling out citywide Wi-Fi over the next 18 months.

The irony? The original "iPhone" was a

Cisco Systems

(CSCO) - Get Cisco Systems Inc. Report

phone for making VoIP calls.

2. It will cost you more than $2,000 over the next two years.

Yes, you read that right. Ignore the reports that an iPhone will "only" cost you $499 or $599. That's just what you pay to start. To use your new phone, you will then have to sign up for a two-year voice and data plan with AT&T. Minimum charge: $59.99 a month, or $1,440 for the life of the contract. Add that to the initial cost and you're looking at $2,000 or more.

How, in an age of freedom, can people agree to be locked into a contract for two years simply for the privilege of buying a phone? The kicker: Your iPhone will be obsolete long before your contract expires because it doesn't even run on the modern "3G" data connections. The first iPhones only run on AT&T's slower, 2004-era EDGE network.

3. You can't choose networks.

Henry Ford once said customers could have their Model T in "any color so long as it's black." That worked for a while. Then people got bored and switched to

General Motors

(GM) - Get General Motors Company Report


Today, Steve Jobs tells customers they can use their iPhone on any network ... so long as it's AT&T.

The iPhone is electronically "locked" so you can't use it on any other cellular system, like T-Mobile. That means you aren't free to shop around for the best deal. It also means you will pay a fortune if you try to take it overseas. You will be stuck using AT&T's overseas partners and paying their international "roaming" charges. The last time I did that it cost me hundreds of dollars in a few days.

Now I have an "unlocked" smartphone (from Europe). When I go abroad I just buy a pay-as-you-go SIM card from a local network. It costs me pennies on the dollar. A growing number of Americans are rebelling against network control and buying their own unlocked cell phones, many of them imported, over the Internet.

Steve Jobs could have struck a blow for freedom by launching his iPhones unlocked, so his customers could take them to whatever network they wanted.

4. Where's my third-party software?

Apple will only allow third-party applications that run through the iPhone's Safari browser. That's going to mean limited selection and limited functionality. This is a far cry from the freedom and innovation of true open-platform development. How does Steve Jobs know what programs I want? Or you want? He doesn't.

If you use a mobile device that runs Linux,





(MSFT) - Get Microsoft Corporation Report

Windows Mobile or Symbian, you can choose from hundreds, even thousands, of independent programs. Hunting around for interesting new programs to buy is half the fun. That's how it should work.

5. You can only download media to your iPhone while plugged into a computer.

How mobile is that? You can't download songs or podcasts over the cellular network or Wi-Fi. Instead you'll need to go home, plug your iPhone into your computer, and then download the media through your iTunes account.

Ah, the open road!

With my smartphone I can download whatever music or podcasts I want, whenever and wherever I am. I can use the cellular network or Wi-Fi.

Net result: I have sat in a bar in Victoria Station, in London, waiting for a train, and downloaded NPR's On Point,


headlines and the latest Hardball podcast over a free Wi-Fi network.

That's mobile. And it's the future.

The last time I questioned Apple I was deluged with hate mail from iFanatics. They were full of iRe. This led me to describe Steve Jobs' company as "the world's only publicly traded religion." Doubtless I will get the same response again.

Apple's products stand out because they are well designed, well made and easy to use. I have a Mac at home. All credit to Steve Jobs. The iPhone will surely be no exception.

But it's tethered to an old-fashioned business model that is afraid of freedom. It seems a shame, especially for a company like Apple. This was Steve Jobs' chance to spark a real revolution in America's laggard mobile industry. He hasn't -- yet.

Apple did not respond to requests for a comment yesterday.

To see other stocks that might be affected by the Apple launch -- Marvell Technology (MRVL) - Get Marvell Technology Inc. Report, Broadcomundefined and Sony (SNE) - Get Sony Corp. Report -- please click here for a Stockpickr portfolio.

In keeping with TSC's editorial policy, Brett Arends doesn't own or short individual stocks. He also doesn't invest in hedge funds or other private investment partnerships. Arends takes a critical look inside mutual funds and the personal finance industry in a twice-weekly column that ranges from investment advice for the general reader to the industry's latest scoop. Prior to joining in 2006, he worked for more than two years at the Boston Herald, where he revived the paper's well-known 'On State Street' finance column and was part of a team that won two SABEW awards in 2005. He had previously written for the Daily Telegraph and Daily Mail newspapers in London, the magazine Private Eye, and for Global Agenda, the official magazine of the World Economic Summit in Davos, Switzerland. Arends has also written a book on sports 'futures' betting.