Jorge Serna

@jorge.serna

So in the end the LTE Apple Watch *IS* about calls

Apple has announced their Apple Watch Series 3 with a cellular option in which the showcased feature is voice calls

As hinted for some time, and revealed in some leaks, Apple has finally announced a new version of their Apple Watch with cellular support.

But contrary to some rumors (and some predictions, like mine), not only calling is part of the offering but it is the main use case they are highlighting. This was prominent both in the product presentation and in the marketing material in their updated website, which constantly displays the calling watch face.

This decision around calling, which has wider dependencies, will impact the market and the potential evolution of the Apple Watch ecosystem.

Cellular-enabled capabilities

Besides calling, not a lot of functions of the cellular capability were featured in Apple’s presentation:

  • Music. Users will be able to stream the full Apple Music library on their watch, as I predicted in a previous post. But while this use case was the focus of the video advertising presented at the end, it will not be ready for the device launch next week, so nothing else was displayed.

But in general the focus was that the phone-less usage would be casual. This is not here to replace your phone, but to allow you to leave it behind when “running a quick errand”, which is precisely the initial use cases that I expect can trigger a new ecosystem around this device.

Pricing and plans

The pricing for the cellular-enabled Apple Watch was exactly the one I predicted 1 month ago: $399

let’s assume the LTE Apple Watch will be priced at around $399/490€ (I’m using the reference price for the smallest iPhone SE, which offers a similar connectivity)

But Apple did not announce the specific cost for the cellular plans operators would offer, besides highlighting initial promotional prices. The initial information for US operators goes higher than my initial estimation of 3–4€ on top of an existing iPhone plan, as they are offering $10/month plans with a 3-month promotional period for free. But this get closer with the UK pricing of £5 a month.

More operators than expected

What really surprised me was the number of operators supported at launch. Unlike my prediction from early this week, in which I said the device would only support calls in the US, the device will be available initially in 7 more countries(!):

I definitely failed that prediction.

(I also incorrectly predicted that calls would only be available in AT&T as a nod to the original iPhone launch. But when Apple demoed the calling function they mentioned that they were using AT&T network for the call, so I will take half a point for that 😉)

My wrong prediction came from three expectations:

  • A more conservative approach by Apple. I thought that the product focus would be on data connectivity, so that calls would be a nice addition, but not a mandatory feature of the product. This has happened before for operator-based capabilities in iPhone, like Visual VoiceMail or Wi-Fi Calling, which are far from supported everywhere. But Apple has positioned calling as the main use case (for now), which has led them to make it mandatory for all operators supporting the cellular Watch.
  • More difficulties integrating the calling functionality. I believed that fewer operators would be ready by launch time to support this capability, since I considered that its implementation would be tied to the “Wi-Fi Calling on supported iCloud-connected devices”, and few do today besides the main 4 in the US. I still think this will be the case, but will have to wait for further analysis after the launch to validate that. A hint would be if these operators release also this functionality with the public launch of iOS 11.
  • The additional complexity of integrating with operators for the eSIM set-up (which Apple confirmed the device is using). This is probably the case, but Apple has been able to do it with 14 operators. And the process has clearly not been unique, as in some cases the pairing the iPhone line and the Apple Watch line requires that the users take additional steps, which is another hint of the complexity involved:

Still something that is relevant to highlight is that all the operators that launch the cellular Watch have VoLTE service support for iPhone (and most also Wi-Fi calling). This means that the slow roll-out of VoLTE will impact the wider availability of the cellular Watch, which reinforces my thesis that calling will not be able to reach a massive audience.

This is particularly important, because users cannot get a different service provider in their iPhone and in their Watch:

(also notice that no roaming will be supported for the Watch)

So people wanting to have the cellular Apple Watch will have to port their iPhone to a different provider if theirs doesn’t support it. And this can become an issue for some operators, as the price for the cellular Watch may drive demand as the “cheap option” to get the latest Apple gadget without having to spend $1000 on the iPhone X.

What could also happen is that Apple may change the spotlight in the future to something different from calls. If Apple starts to downplay calling and instead focuses on Music streaming, they could start to allow operators to launch the cellular Watch with a data-only service. And this could be the plan, given the main message of the video advertisement they showed at the end of the Apple Watch presentation:

So maybe they are not doing this yet because they don’t want to accelerate the availability of the Watch and keep the demand a bit contained.

During their presentation they insisted on the challenges they have faced to integrate all the new technology in the Series 3 without increasing the size of the device, and that probably comes at a cost. Given the problems that they have faced with producing the new AirPods, maybe the miniaturization of the device is impacting their ability to produce it at scale, and they want to limit its availability until they can get it right.

Impact in the ecosystem building

So, by making voice calling a mandatory feature for their Watch, they are also (maybe consciously) reducing their target market. And reducing their market, the attractiveness for developers will be reduced too.

But since they support the main US operators,

and these operators are providing initial promotional periods for their data tariffs, the friction for this market reduction can be reduced significantly. In the end many big application developers take a US-first approach, and it is in the US where the iPhone market is most relevant.

But besides availability in operators, other elements can affect also seriously the ability for the Apple Watch to create this new phone-less ecosystem. I will take a look of some of them (relationship with the Music service ecosystem, notifications behavior and battery life) in my next post in a couple of days.

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