Apple's (AAPL) iPhone and newer iPod Touch are competitors

by Brian White
When Apple, Inc. (NASDAQ: AAPL) engaged with telecom dinosaur AT&T, Inc. (NYSE: T) to partner with it in launching one of its most ambitious products ever -- the iPhone -- many saw it as a gambit to partner with the leading wireless operator instead of partnering with a more advanced and "hip" wireless carrier. Apple of course knew that to get the iPhone into as many hands as possible, it would have to go with the largest. There's probably other reasons as well. But the partnership between these two companies has been labeled as odd at best by many, including me.

Apple knows marketing, knows its customers and has the flash to sell gadgets and computers unlike any other company. AT&T is an aging brand trying to re-invent itself for the younger, everywhere-connected generation who won't even know what a landline telephone is in a decade. But with 60+ million wireless subscribers, no company could walk away from that statistic when launching one smash wireless handset. When Apple unveiled the iPod Touch a few weeks ago (which is basically an iPhone without the phone), AT&T execs must have cringed.
Although Mark Siegel, one of AT&T's most prominent spokespersons, said that the iPhone and iPod Touch don't really complete, he's covering completely. The two products will compete head to head soon, and many who have held out on the iPhone due to not wanting AT&T's cellular service or "forced" $60+ calling plans will flock to the Touch product. Since the iPhone uses an old wireless data technology anyway (EDGE), are intended customers really wanting to need that all-in-one device or do they want the iPhone sans the expensive calling plan, credit check and two-year contract?

Apple is even making its new iTunes WiFi music store available on the iPhone, which can let customers bypass AT&T's own (and highly substandard) online music store. All of this tells us about the power Apple has, even over partners that it needs to launch new products like the iPhone. Will iPhone purchases dip when the iPod Touch is released in the next few weeks? Probably not -- but we'll see competition between that and the iPhone, no matter how myopic AT&T will be.
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