Can iPhone's Carrier-Switching Magic Be Replicated?

The iPhone 3G has enough power to lure people over from other carriers. Nearly a third of iPhone users abandoned their mobile providers for AT&T in order to get their hands on the 3G, some new research shows. So can T-Mobile's upcoming G1 Android-based device come anywhere close to replicating that magic?

iPhone Inspiration

The numbers, released Monday by the NPD Group, indicate 30 percent of iPhone 3G owners made carrier switches in the first three months following the phone's launch. The vast majority -- 47 percent -- came from Verizon. Nearly a quarter jumped from T-Mobile, and 19 percent left Sprint behind. All together, the defections shot the iPhone into the top-selling smartphone spot, at 17 percent of the U.S. market. It's now the second-highest overall selling phone in America, trailing behind only the Motorola RAZR V3.

Understanding the Forces

To predict the G1's relative carrier-hopping success, one first has to understand the forces driving the iPhone's impressive record. The researchers break it down to two main factors: price and speed. Smartphones on the whole dropped in price 26 percent from summer 2007 to summer 2008, and the iPhone was no exception. But the 3G speed, combined with its already popular interface, may have been what pushed it over the edge.

"While the original iPhone also helped win customers for AT&T, the faster network speeds of the iPhone 3G has proven more appealing to customers that already had access to a 3G network," says Ross Rubin, director of industry analysis for the NPD Group.

G1 Predictions

There's no question upcoming competitors such as the G1 and Research in Motion's still-under-development BlackBerry Storm will take a bite out of Apple's pie, at least to some degree. But can Android's first offering even begin to recoup the hoards who left T-Mobile for the iPhone? Many industry analysts aren't holding their breath.

"It's not significantly better yet," says Derek Kerton, principal analyst with The Kerton Group. "It's a neat device and it's a good initial device from Android, but it is not significantly better, significantly more glamorous, so it doesn't draw people."

The G1 does offer a drop in price -- $179 with a two-year contract, compared to $199 for the 8GB iPhone (also with a two-year contract). The speed is there, too. So why don't things measure up? It's simple, Kerton says: The iPhone brought about a significant change from the previously available offerings, and -- perhaps most important -- it offered something you couldn't find anywhere else. That effect hadn't been seen before, and, Kerton proposes, may not be seen again.

"(The iPhone was) significantly better and permanently with only one carrier," he points out. "What's the point of switching carriers when you're in a contract ... for a slight improvement that's only six months different anyway?" he asks.

The G1, while generally competitive, doesn't up the ante substantially enough to balance out the hassle of changing carriers for most people, Kerton believes. Plus, other Android-based devices are under development -- so the "exclusive" factor just isn't there.

Signs of Success

Even if it doesn't inspire a massive carrier-switching movement, G1's early projections do look promising. T-Mobile announced Monday it had sold out of its pre-sale inventory, even after tripling the initial number of devices. (The company did not indicate, however, specifically what that number was.) Some early projections have put sales at 400,000 to 500,000 by the end of 2008, which would give the G1 around 4 percent of the overall U.S. smartphone market.

"Longer-term success will, of course, rest on Android vendor ability to create designs with wow factor and an intuitive user-interface," says Chris Ambrosio, executive director of Strategy Analytics.

(iPhone image (above) courtesy Shapeshift via Flickr)

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