Blog Post

iPod touch Is Close, But Still No Contract-Free iPhone

Stay on Top of Enterprise Technology Trends

Get updates impacting your industry from our GigaOm Research Community
Join the Community!

If you don’t count the ol’ iPod Classic, Apple (s aapl) completely revamped the iPod line yesterday at its annual music event. The Shuffle saw the return of buttons. The Nano is now a miniature multi-touch marvel that can apparently double as a fancy watch in a pinch. Then there’s the iPod touch, which is now the most popular iPod model of all, thanks to support for apps and web browsing. On the surface, it looks like the new touch is everything one would want in a contract-free iPhone 4 without cellular voice support. I would say that it’s close, but not quite.

I will give Apple credit, as it found a way to cram more iPhone 4 features into the new touch, even as it kept price points the same. The new touch enjoys the 960 x 640 “retina display,” an Apple A4 chip and two cameras, both of which support Apple’s FaceTime video calling feature. That said, however, there are still three missing features that make the new touch close to, but not on par with, a contract-free iPhone 4.

Location, location, location! There’s still no GPS chip in the iPod touch. Instead, the device will use available Wi-Fi networks to triangulate a location, just as it does on the iPad Wi-Fi model I own. That method actually works reasonably well, but of course, requires the touch to be connected to a hotspot. So much for check-ins on Foursquare or finding local points-of-interest if there’s no Wi-Fi to be found.

Just give me data. Unlike the iPad, Apple chose not to offer a 3G radio option in the touch, likely to keep the device thin. To be as mobile as the iPhone, features such a radio and a microSIM slot would have been a nice offer. Data plans could have been month-to-month for those that want them, although an option like this would surely boost the price of the device; it’s a $130 option in the iPad, for example. The touch has always been limited to Wi-Fi, so this is nothing new, but again, it’s a key difference between the touch and the iPhone.

2003 called and wants its camera back. Yes, the new touch has a front-facing VGA camera and a sensor on the back too. That rear camera even shoots high-definition, 720p video, just like the iPhone, but don’t even think to compare the rear shooter to that of the 5 megapixel camera on the iPhone 4. Stills from the iPod touch are a lowly 960 x 720, which works out to just under 0.7 megapixels. A solid shot like the one to the right taken by my son with his iPhone 4 isn’t happening on the new touch. Pics will look fine from the touch for posting on social networking sites and such, but blowing them up is going to be a painful experience, as details will lose definition faster than you can say “one more thing.”

I raised these kinds of points prior to Apple’s new product announcement, saying that the touch will never have all of the same features as an iPhone because the phone bits allow Apple to enjoy a $600 average selling price per handset. The phone costs less than half that to manufacture and consumers in the U.S. pay $199 or $299 for the device. Apple receives a carrier subsidy to make up the difference between the ASP and the price a customer pays.  What incentive then, does Apple have to make an iPod touch equal to an iPhone — minus cellular voice, that is — when it will earn less profit per device? As long as we’re on a subsidy model for handsets, Apple has no incentive to do so.

Having said that, the new iPod touch is close enough to an iPhone 4 for me personally, and probably many others who already have a smartphone. I’ve pre-ordered a 32 GB model that I’ll carry with my Google Android (s goog) phone. My phone has a 5 megapixel camera for better stills and I’ll use the free Wi-Fi hotspot feature to get my iPod touch online during my travels. Looks like Apple is making money from me, even though it still doesn’t offer a contract-free iPhone 4 in the touch!

Related GigaOM Pro Content:

10 Mobile Predictions for 2010

60 Responses to “iPod touch Is Close, But Still No Contract-Free iPhone”

  1. all i know is that, the moment an iPod goes 3G and charges a low monthly rate, like the iPad. Im DITCHING this iPhone in a HEARTBEAT!! I love my iphone, BUT i love everything about it MINUS the actual phone function. I dont know that that would ever happen, but i feel like itd be a bad move for Apple, cause i think a lot of people would be with me and ditch the $100 a month constantly dropping calls phone, and have all the fun functionality in a ipod.

  2. I currently use a Boost Mobile Blackberry Curve for my smartphone, pocket camera, and GPS unit, and a 64GB iPod Touch for everything else. I’m perfectly happy carrying just these two devices. I just love the fact that the Blackberry plan is only $60 a month for unlimited voice, text, data, and GPS. As I usually have access to wi-fi, I prefer to use the Touch with Safari for web surfing. I hardly ever carry a laptop or netbook anymore. I will definitely get the new Touch, mainly for the new display.

  3. The iPod Touch, especially if the 2G and 3G ones are priced lower now, are a slightly better music/game player supplement for Android users. Especially useful now that Android has that handy mobile wifi.

    Use the Android for your own heavy lifting and let the kids play online with the iTouch at places that don’t have wifi, like younger brother’s soccer game.

  4. I will probably buy an iPod Touch when they come out later this week. Here’s why:

    1) I spend most of my time in WiFi environments, so getting mail, Skype, social networks is feasible without a phone data plan. I like that idea a lot.
    2) I’m happy with my old Verizon phone, I don’t need a new phone.
    3) I would never, ever, want to get on the AT&T network. If the iPhone is ever available on Verizon, I will look at the phone thing again. IMHO, Apple’s biggest iPhone mistake was the deal with AT&T. When I need a new phone, the Droid is definitely on my list.
    4) I have an older iPod that I would like to upgrade (bigger screen)
    5) The camera is not great quality, but let’s be realistic. If taking images is what you want, no phone camera is going to match a real camera with optical focus, different lenses, and all the other bells and whistles. Nobody buys a phone or iPod primarily for photography. It’s good enough for YouTube, and that’s sufficient for most users.

  5. It would be interesting to know the real reason behind the lack of the camera.

    So close to a purchase yet so far.

    I just don’t get the 0.7 mp camera. Worse than my ultra-cheap cellphone I carry around.

    Do they really view thin as more important than a decent camera? Is that expensive to make the Touch thicker and include the iPhone camera? Is purposely holding it back to upsell on the Touch or because they no competition in the Touch space or don’t want to upset Canon and other camera companies and find themselves competitors in the Touch space?

    • I was disappointed to and I’m not really a picture person.
      The .7mp camera is in fact great for facebook and other social sites where you just upload a pic of you outdoors or what ever with your friends. If you want a camera where you can blow up the pictures and hang them… well to bad :(

      Just buy a decent camera and keep it in your car for pictures that you want to get printed out and hang

      With that in mind, I convinced myself the new iTouch is actually an amazing product

  6. Before, the thought of an iPod touch as a modern PDA was absurd. But now…I’m tempted, with the combination of this hardware revision and an iOS that’s even less gimped than before. (Still needs jailbreaking to get around the walled garden, however.)

    No GPS: I have a Bluetooth GPS receiver already. Any way to just use that? (It’ll probably require jailbreaking, though.)

    3G data: Don’t need it. Besides, if you want that, you might as well spring for the iPhone 4.

    Camera: The resolution is lousy, but it does fit the screen resolution perfectly. Besides, it’s a pocket device camera. If I want image quality, I’ll break out the old Canon AE-1 Program and keep using that ’til I can’t get 135 film rolls any more.

    What I have to know now is how well the iOS version of Pocket Informant compares to its Windows Mobile incarnation. My use case for the iPod touch 4G almost entirely hinges on that. I know it does Web browsing well, vlc4iphone can sort out the limited multimedia format support, and there may even be some sort of Graffiti-esque input panel available after jailbreaking, but the stock PIM is just abysmal at best.

  7. Sorry but Apple should concentrate more on fixing its broken products then to introduce new ones. Hey, you can’t blame them for trying to cover up a solution for the iPhone

    Plus has anyone heard about why Apple would not allow its products to be tested by O2? It was a simple questionnaire that they had to fill out. You can check it out here:

  8. “and I’ll use the free Wi-Fi hotspot feature to get my iPod touch online during my travels.” But why do you actually need to do this? Why not just go online direct on your Android phone?

  9. Add VoicePlex’s Traveler(TM) VoIP calling service and the iTouch will be a first rate phone over WiFi. Great call quality and low cost calling. A nice option for some. It works for the iPad in speakerphone mode, but accepts the iPhone headset. I’m sure the new iTouch works the same. :)

    Remember, if you use a 2nd gen iTouch you need an iPhone headset, since there is no microphone. Of course it works on the iPhone.

  10. It’s worth noting that the lack of data plan can be remedied by paying $150 for a Virgin Mobile MiFi (about the same as the difference in price between iPad WiFi and iPad 3G) and then $40/mo for a prepaid, contract-free pay-as-you-go wireless plan. And unlike AT&T’s iPad plans, Virgin’s is unlimited bandwidth, and can be used by as many wi-fi capable devices as you have on you, up to five at a time.

  11. Just want to say thanks to Kevin and the many well-informed commenters to his article. I ordered the 32 GB Touch because it sounded like it might be (or become) many things. Most post-announcement stories on it focus exclusively on the low res backside camera. I wanted to hear more about everything else that has become possible using this device, and voila, after a little more searching, this seems to be the definitive discussion so far. Thanks again all.

  12. Kevin,

    Good points as always but I need to weigh in.

    First off with the poor coverage we see in the USA on AT&T with the iPhone, the iPod touch now with a camera opens up lots of possibilities. You point out about carrying less devices, well now you can drop the camera, and upload to various sites more easily, as so many apps (Shozu, PixelPipe, etc.) make that far simpler. Pictures and video upload faster over Wi-Fi so add in a $7.95 a month Boingo account (yeah, yeah, they’re my client) but that’s unlimited and faster so for the heavy using shutterbug who wants to send photos off or upload to social networking sites, it’s a blessing.

    With calling, my client Truphone on the iPod is a proven winner with others saying that in print. Now with the new built in mic and speaker, there’s no need for a headset. You can also us the iPod as a PBX extension with CounterPath’s Bria (yes another client) using SIP over WiFi.

    Next is the ability to use something like a ClearWire ClearSpot or a Sprint Overdrive. If like JK or yourself, you’re in a CLEAR market, you have no limit on uploads and downloads, plus the speeds are often better than DSL, so there’s a use case for no need for a mobile phone if you spend all your time in the CLEAR zone.

    Then there’s the Sprint Peel that was talked about a few months back. If that gets 4G it is another reason for the iPod.

    So net net, for those who can get away from Circuit switched cellular calling, or who really talk little, the iPod over a 3G data card or WiFi there’s only benefits and no downside.

    • Well said Andy, because there are many add-on services / options that make the iPod touch a compelling voice and/or data device. I still have my Verizon MiFi or can use the Wi-Fi hotspot feature on my Nexus One to get most of what I need out of the new iPod, so I’m covered. Thanks for sharing more potential services for others!

  13. Hamranhansenhansen

    It’s not really true that you can’t get a contract-free iPhone. That is actually how the majority of iPhones are sold. Your perspective is colored by the sad fact that the United States has a total of one (1) open standard network. If you only have one open standard network, you lose many of the advantages of an open standard network, like moving a contract-free device between 2 competing carriers. So there is just no demand for a contract-free iPhone here. But an almost total lack of infrastructure is one of the advantages of living in the US, because once you make your first billion, you won’t have to pay any taxes. Then you can hire a peasant to carry your 4 phones and hand you whichever one is working wherever you happen to be. And another peasant to drive in front of you and test each bridge before you go over it.

    Yeah, the iPod touch camera is a video camera, not a still camera. But the other features you want can be had with an accessory. There are iPod touch cases with 3G in some countries now, but I don’t think they are available in the US yet. The thin profile of this new iPod touch makes these kinds of cases even more practical, though. It makes sense for Sprint to do them for both iPod touch and iPad Wi-Fi.

    There was a rumor Apple was considering doing an iPod touch 3G, like a mini-iPad. Probably the fact that no network has yet allowed FaceTime over 3G was a downer for them, since FaceTime is a major feature of this update. I think it is more likely next September if there is a Verizon iPhone in January as rumored and if networks are supporting FaceTime.

    Ultimately, though, what is needed is open standard carrier competition. Then some upstart carrier would offer iPhone users a $30/month data-only plan with FaceTime and there’d be no need to pay for voice minutes or a text plan.

    • You caught me with my U.S.-centric approach here. ;) Indeed, we don’t have multiple GSM providers, so there isn’t a ton of benefit for SIM swapping. It can be done, obviously, but you give up 3G data here. And neither Apple nor AT&T sell the iPhone 4 without a contract anyway.

      As I said in an earlier comment, I anticipate change when we finally move voice to data networks and just pay for tiers of data usage.

    • I’m not sure what benefit a contract-free iPhone even is in the USA. My sister-in-law offered to pass down one of her family’s older iPhones to me, but when I contacted AT&T about the possibility of putting it on a plan, they informed me that I would have to have a contract even though I wasn’t buying a phone through them. Which would have meant that I couldn’t get the soul-selling subsidy on an iPhone 4 if I bought one later that year.

  14. Thanks for a great review and one that expresses my sentiments precisely.

    The lack of GPS is particularly frustrating. Three years ago, mobile devices needed a cellular connection to get the maps and data to make use of a GPS location. Now that’s built into most apps, so there’s no reason not to add GPS to the touch and turn it into a nifty navigation device. Google and Microsoft are going to doing precisely that.

    And yes, what was Apple thinking when it added a camera that’s the equivalent of a $9.95 keychain camera? Do they really think we don’t understand pixels? Do they think we are that obsessed with thin?

    To Apple’s credit, they did include a Retina display and the more powerful A4 chip without raising the price. But they negated that good deed with the lousy camera and no GPS. I’ll be sticking with my 2g iPod touch and perhaps upgrading to a second-hand iPhone with those missing features when T-Mobile joins the iPhone club. An iPhone 3GS and a T-Mobile prepay plan would fit my needs perfectly.

    • It’s worth noting that people made the same sorts of complaints about the video-only camera in the iPod Nano in 2009 (which, to note, had only half the resolution of the one in the new iPod Touch). Back then, Apple explained that there simply wasn’t enough space in the tiny Nano to stick in a full-sized CCD of the sort the iPhone had. Perhaps the iPod Touch had a similar limitation. After all, they made it smaller than ever, and I’m not sure how the innards of the Touch differ from those of the iPhone.

      It’s also worth noting that even if the still frame aspect of the camera is lousy, it shoots considerably higher resolution (high definition!) full motion video than my 5 megapixel Kodak camera does—not to mention higher resolution than a whole generation of shoulder-mounted camcorders.

  15. Great article Kevin.
    I like all the comments about using the touch rather than the iphone, in all the various combinations. People figuring out ways to stay connected, save money, and have cool gadgets.
    I’m interested in a better phone, but not willing to pay the monthly costs. So, I have a SE Walkman phone, and only do voice on it (I load music onto the memory card, and listen to that sometimes), and I have a Dell Axim x51v which I use like many use the apps on their iphones.
    Its not exactly the same, but it works for me.
    And, my old AT&T [blue] monthly bill is VERY low.

  16. Kevin, one point to clarify about Wi-Fi triangulation: it actually does not require being connected to a hotspot. Rather it recognizes hotspots by their broadcast SSID (if they’re in a database of known hotspot locations, such as Skyhook in the case of the iPod touch). Wi-Fi on the touch needs to be on, but it does not need to be connected to a hotspot.

      • Apparently the iPod Touch takes a snapshot of the wifi mac addresses in range at any given time when a location is called, and downloads the location when it links up to wifi. For instance, when I wrote tweets in Tweetie on my iPod Touch while riding the bus, even though I didn’t have signal, I noticed when I sent them later that they were correctly geolocated to the time at which I had actually written them.

  17. William R. Cousert

    “2003 called and wants its camera back.”

    The camera I had in 2003 was better than that. MUCH better.

    It was a $100 Vivitar camera that did 3.0 megapixels. The picture quality was great.

  18. Le Corsaire

    Gosh, such a long article to state the obvious. I was thinking was this guy serious when I got to point 2. Want 3G data/gps but without a contract? Is Apple stupid or is it a charity, or is it you? Write sth. just a little bit deeper next time, pleeeeeeez.

    • I’m all for feedback on better writing, so what would you have added or removed from the article? And based on the emails I get on a regular basis, I’m not sure the points made here are obvious to all — especially since Apple didn’t make mention of the low res, rear camera. Having said that though, I’m all ears. Thx!

  19. I’ll be replacing my 1st gen iphone (which has been relegated to home VOIP) with this new ipod. If you have a remotely accessible NAS unit, I’m not sure it makes sense to get the model with the most storage. So, you are comparing a $600 phone to a $230 ipod. Does that make sense?

  20. I think this is a fascinating development. If you run a Virgin mobile no-contract mifi card with unlimited data for $40/month, and grab a skype or Google voice number, now you could receive wifi calls on the iPod touch and you effectively have a WI-FI VOIP iPhone with no ATT, no antenna issues, a sweeter form factor and the ability to use the mifi to power your laptop/netbook/wifi iPad as well.

    • I have a prepaid cell phone for “emergency” use; but my main set-up is a retired iPhone (I was tired of paying $115 per month to AT&T) with a Clear iSpot. I use Skype and TextFree to replace the AT&T service.

      $30 for Pre-Paid
      $25 for Clear iSpot WiMax
      $10 for Skype (phone #, VM)
      $0 for TextFree
      Total $65, which is a lot less than the $115 I was paying AT&T.

      The devices live in my briefcase and in the office, I have WiFi. I bought a Bluetooth for Skype on my office computer.

      So, I save about $50 a month, don’t use AT&T and I am a walking WiFi HotSpot. Over the course of 2 years (typical contract) I save over a thousand dollars with virtually no downside.

      My dream device is an iPhone with 3G/4G for $30 per month. Then I could ditch the pre-paid (although I’d probably keep it) and the iSpot device (but keep the service).

  21. “So much for check-ins on Foursquare or finding local points-of-interest if there’s no Wi-Fi to be found.”

    Without wi-fi, how would just GPS allow you to check into Foursquare? Don’t you need wifi for that?

    • I was wondering this myself. No wifi/data means you wouldn’t be able to push/pull that information anyway, regardless of whether your phone was able to tell where it was in the world or not.

  22. for me there is a different thing that is huge. i believe there are many who could live with a wifi only VOIP phone and would like the iPod touch to be that for them. but it is not always convenient to use a bluetooth device or headphones. to really attract these users it should be possible when using a VOIP app to hold the iPod touch up to your ear in exactly the way you would hold an iphone during conversation. this means it should have speaker and mic in the same locations as an iphone.

    • Great question. In order to cover the mobile space effectively for work, it would be ideal to have devices for all of the platforms. Of course, that can get expensive, especially if some (iPhone is a perfect example) require a contract. I whittled down from 3 contracts to 1 at the beginning of this year but have no iOS handheld as a result. So the the new touch will solve that problem and not add a new contract.

    • It’s the monthly charges, my friend. Most iPhone users I know pay upwards of $100 per month at least. I have a little Virgin cell phone which I use for emergencies that I pay $80 PER YEAR. Committing to an iPhone is like committing to a mini car payment. It’s a major turnoff. Still . . . a lot of the features not related to voice calls seem quite cool. Plus it is an iPod without WiFi. So call me one of the people interested in the “B-version”.

    • stcknmdlwthu

      Isn’t that a little like saying ” Why do all those people eat at Micky D’s when that great French place is across the street?” Not everybody is invited to the table David.

    • For me, the ‘target’ is that I have no interest in the iPhone itself. I am a happy Android phone user, but what I *do* want is the iPod, Apps, and Video integration that I get on my Touch. I love my iPad as the replacement for a carry-around netbook, but it is too big for some things. The Touch has a wonderful ‘in-between’ slot.

    • Games and music. That’s the target, and they have the mobile markets for both all sewn up. Pictures are fine, but that’s really the province of the phone market, so that’s why you don’t see a 5mp on here.

      • I recently switched from a Verizon Blackberry to an iPhone 4 and the service has been great so far; (I’m in the Minneapolis/St. Paul area). I’m sure the coverage is worse in some areas, but I’m going on my 4th week now, and haven’t had a single dropped call.

    • John Bowers

      I’m a grad student and I carry around a dumb phone and a 1st gen iPod Touch. I looked at Android phones but all of them require an added $25 per month data plan. Because of the ubiquity of free wi-fi (especially in a college town) and the $300 per year in savings by not owning a data plan, it makes sense to have the iPod touch rather than an iPhone.

    • Hamranhansenhansen

      There are many use cases:

      * Something like 50% of iPod touch users are kids. Some of them are really little kids. They don’t quite have a business case for $80/month smartphone plan.

      * More Verizon users have a dumb phone plus iPod touch than have Verizon smartphones.

      * If you just want a full-featured music player, the fact that when you’re in Wi-Fi (say at work or school) it can play Pandora or other streaming music or download new music or podcasts from iTunes is a pretty significant feature.

      * It’s by far the cheapest mobile app platform, and is often purchased just to run one app all or most of the time. For example, there are text-to-speech apps for people who can’t speak. The cost of the iPod touch plus the app is much, much less than a dedicated device. Or an iPod touch plus FourTrack is cheaper than a portable multitrack recorder and has a better interface.

      * Portable gaming system.

      • Synthmeister

        Exactly. The iPod touch is the gateway drug to the iOS universe for those who can’t/won’t use AT&T and can’t/won’t pay ridiculous data fees.

        The iPod touch has zero competition, yet it accounts for around 30 to 40 million iOS users.

        I’m thinking of buying a VirginMiFi hotspot with unlimited data which would still cost less than any smartphone plan. Now just add an iPod touch with VOIP/Facetime.

  23. In the UK we can buy Iphones and then choose either a contract or pay as you go deal. So it is not really Apples technology here that is at fault it is the politics in the US where you are tied to one carrier. Shame really…