Mass Consumer Adoption of the iPhone Not a Certainty, IDC Survey Finds

FRAMINGHAM, MA – JUNE 19, 2007 – The price of the device itself and the cost of switching carriers may dampen the demand for Apple's iPhone, according to a survey conducted by IDC.

The survey of online mobile phone shoppers, conducted by IDC and Market Insight Corp., found that while a majority of the respondents – nearly 60% of a sample of 456 individuals – were interested in the iPhone, they were unlikely to buy one anytime soon owing to the cost of the device and the potential cost of switching carriers.

Apple is scheduled to launch the iPhone on June 29, 2007. The phone will be launched exclusively on AT&T's mobile network in the United States. The iPhone marks Apple's entry into the mobile phone market.

"While the allure of owning the next 'cool' device will undoubtedly have early adopters – and die-hard Apple fans – queuing up to get the iPhone regardless of the price, the associated costs of ownership will persuade many others into a 'wait and see' position," said Shiv K. Bakhshi, Ph.D., director of mobility research at IDC. "Despite all the hype, there is little clarity on Apple's (and AT&T's) service plans for the device. This lack of clarity could adversely impact consumers' purchase decisions."

The survey, designed to gauge consumer interest in the iPhone, found that only 10% of respondents were interested in paying full price and signing a two-year contract with AT&T, the only carrier currently slated to offer the device. AT&T has stated that it will not offer a subsidy for the iPhone, which will retail for $499 and $599, depending whether the subscriber wants 4GB or 8 GB of flash memory. Nearly 18% of the respondents indicated a willingness to buy the iPhone if it were priced under $299.

In addition to the cost of the device itself, the survey identified the cost of switching carriers as a deterrent to iPhone adoption. Given the widespread use of two-year carrier agreements with large penalties for early contract termination, consumers cannot easily change carriers whenever they want, wireless number portability notwithstanding. About 17% of the respondents indicated that they would buy an iPhone if it were offered by their current mobile carrier.

"Beyond these important adoption issues, a number of questions remain about how consumers expect to use the iPhone," said Chris Hazelton, senior analyst, Mobile Device Technology and Trends at IDC. "The capabilities of the device, and its supporting network, present the next set of potential barriers to widespread adoption. These issues may ultimately determine the success, or failure, of the iPhone."

The iPhone, at least in the version being launched, will come with (2.5G) EDGE connectivity. AT&T (formerly Cingular) is yet to have a system-wide 3G network in the United States, although its 3G HSDPA network is available in most metropolitan areas. EDGE is available system-wide.

"Apple loyalists alone can make the initial launch a 'success'. But beyond that, it will be interesting to see the extent to which the iPhone hype, and the curiosity it has generated, translates into actual purchasing intent," noted Bakhshi.

Survey results were based on a mini-poll designed by IDC and fielded by Market Insight Corporation on the consumer Web site, www.MyProductAdvisor.com . The poll was embedded in the mobile phone section of the site and voluntarily answered by 456 mobile phone shoppers using the Web site.

The IDC study, Survey of Mobile Phone Buyers: Who Wants the iPhone? (Doc #207225), details the results of a survey of U.S. mobile phone shoppers. The survey was used to determine consumer interest in the iPhone prior to its launch and to examine how the dynamics of the U.S. wireless market may affect the iPhone's success.

About IDC

IDC is the premier global provider of market intelligence, advisory services, and events for the information technology, telecommunications, and consumer technology markets. IDC helps IT professionals, business executives, and the investment community make fact-based decisions on technology purchases and business strategy. More than 900 IDC analysts provide global, regional, and local expertise on technology and industry opportunities and trends in over 90 countries worldwide. For more than 43 years, IDC has provided strategic insights to help our clients achieve their key business objectives. IDC is a subsidiary of IDG, the world's leading technology media, research, and events company. You can learn more about IDC by visiting www.idc.com/ .

About Market Insight Corporation

Market Insight Corporation is the leader in dynamic, "Always-On" Market Intelligence. The Company utilizes live, active, "24×7" shoppers to reveal consumer needs and preference trends. The tools created by Market Insight are used in Fortune 500 companies as a primary source and guide for matching product offerings to consumer demand. They can analyze product roadmaps, manage portfolios and optimize prices. The Company's "data collection" method is unique, and its engine for analyzing the data is patented. Market Insight is founded and managed by recognized industry executives; and is headquartered in Palo Alto, California, USA. www.marketinsightcorp.com/

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