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Apple And Orange Fallout Continues
French fans of the "marque de la pomme" are beginning to worry that the much-hyped Apple iPhone won't make it into the shops before Christmas.
Despite reports early last week that the rift between the US company and its French distribution partner Orange (France Telecom) had been healed, the weekend saw fresh conflict. Orange is still opposed to the massive cut of subscription fees Apple is demanding, while a French law could deter the iPhone's producer from releasing the handset in France at all.
Apple boss Steve Jobs was reportedly fuming when his France Telecom counterpart told reporters that Orange had clinched the deal to distribute the iPhone in September. Industry commentators and techie fans had expected a joint announcement, along the lines of the British O2 presentation, to be made at the Apple Expo at the end of September.
However, the French company and the iPhone were mysteriously absent from the Expo: It later emerged that Orange had booked a stand for the show, and cancelled.
French business papers then buzzed with the news that Orange was driving a hard bargain over the percentage Apple would take from monthly subscriptions. O2 is rumoured to be handing Apple 40 percent of its montly revenue from iPhone tarifs: Apple is reportedly looking for 30 percent from Orange.
And then there is the small matter of French law. In France, mobile phone operators must make handsets available for sale without subscriptions, so consumers can buy the phone and use it with SIM cards from another operator if they choose. Usually, phones are subsidised by the company - the more expensive and long the contract a user takes out, the cheaper the phone. Some phones are free with a contract.
Apple, however, is opposed to operators subsidising its iPhone. As the Californian company takes a cut of montly tarifs from iPhone users, it is also set against offering the iPhone for sale to users without subscriptions. If that was the case, anyone could buy an iPhone and add their SIM card, and Apple would get nothing. However, this might be the route Apple has to take if it wants to flog its phone to the French market (Belgium's phone laws are reportedly stricter still - perhaps a reader in Belgium could verify this?).
Indeed, if Apple and Orange were forced to sell the iPhone SIM-free, France could become the world's major supplier of iPhones, as buyers from around the world picked up their iPhones and inserted their own SIM cards while avoiding Apple's favoured distributors.
France is a big market for mobile phones, and a rich country: Some reports suggest that Apple hoped to sell 100,000 handsets within the first few months of the iPhone's release in the Hexagon. However, while there is probably room for agreement on Apple's share of revenue, it is unlikely that French law will budge to suit Apple's sensibilities and allow Orange to offer the handset subscription-only.
It might be that Orange sells the iPhone subscription-free but at a off-putting price: €1000 would see off all but the most dedicated fans: Apple's extra €600 profit would cover what it lost in revenue from subscriptions. Offering the iPhone only to those with proof of French residency status might work, though a) it could be against EU laws to ban sales of a product to other EU nationals and b) there's nothing to stop French citizens buying iPhones for visitors.
In the meantime, the technology is ageing. The iPhone could miss the big Christmas market in France, and there's a MacWorld show in the US in late January, when it is widely expected that Jobs will unveil a new model of the iPhone, with expanded memory and video facility. A faster 3G version will come in 2008 too. By then, the original model will be a year old and on sale for more than six months in the US - a long time for mobile phones, even those as advanced as the iPhone.
French users might choose to wait for v2.0, making the launch of the current iPhone model, if it ever happens, something of a damp squib.
Makes you wonder why Apple's lawyers didn't come across this problem when scouting for a partner in France in the first place. It wouldn't be the first time the Americans have run up against problems with French law. Last year, French MPs voted to force Apple to break the link between its hugely successful iTunes store and the iPod music player, allowing users buying their music from other online shops to use the iPod. The law is still in the process of being watered down, but Jobs reportedly fumed that he would pull iTunes out of France alltogether rather than abide by the original ruling.
Will the iPhone go the same way?
EDIT: Thanks to Mark for correcting our French. Doh!
