iPhone 5c was never "as in cheap" - so what?

iPhone 5c lineup
iPhone 5c lineup (Image credit: Apple)

Going into yesterday's Apple event in Cupertino, many in the industry were expecting Apple to price the iPhone 5c considerably less than the $549 they've announced. We were wrong - all of us. That isn't Apple's fault - it's ours. Predictably, I've already seen a few opinion pieces saying that the iPhone 5c is too expensive. To which I ask, "So what?"

I should say at the outset that I'm among those who predicted a lower cost than $549. I fully expected the iPhone 5c would cost considerably less money. I've been reading a lot about Apple's challenges in China and the growing demand for smartphones worldwide, and a cheaper iPhone made sense to me.

iPhone 5s and 5c: A new approach

Typically when Apple releases a new iPhone they'll kick last year's model down to second place. Apple's doing something different this year by offering two new models instead of one.

The premiere spot is occupied by the iPhone 5s. Despite its similarity in case design to the iPhone 5 (iPhone 5s's fit in iPhone 5 cases, for example), it's entirely different under the hood - much faster, with better camera optics, Touch ID fingerprint scanner built in to the Home button and more.

In the past, we'd have expected the iPhone 5 to be knocked down a rung, available for purchase still for $99 on contract. But Apple shook it up this year by discontinuing the iPhone 5 all together, and replacing it on that second run with a less expensive iPhone 5c. The iPhone 4s, with its smaller screen and lack of LTE service, among other things, remains in the mix as Apple's zero-cost (on contract) phone.

The iPhone 5c is pretty much the same under the hood as the iPhone 5, and I'm assuming it costs less for Apple to make than the iPhone 5 - the aluminum unibody design is gone, replaced with a polycarbonate back shell and steel frame inside. That should help improve Apple's profit margin on the phone, so I'm a bit surprised that Wall Street investors haven't responded more positively to the announcement.

iPhone 5c: Doomed to fail?

If you think the iPhone 5c is going to fail straight out of the gate, think again. There are a lot of people who want to upgrade their older iPhone - plenty of iPhone 4 users are still out there, plenty of iPhone 3GS users too. And there are quite a few Android phone users who are fed up with their devices and want to give the iPhone a try instead.

To them, the iPhone 5c is a new phone. It comes in colors, and plenty of consumers love to have the option of different colors for their devices. It's simple customization and adds a personal touch.

The 800 pound gorilla

Apple is engaged in fierce competition in foreign markets, especially China, going toe to toe with Samsung and local smartphone manufacturers. The presumption that Apple was ready to roll out a cheaper phone was based at least partly on the belief that China Mobile - the biggest mobile phone company in China - has been negotiating with Apple over subsidization and other costs associated with the iPhone.

To date, Apple hasn't struck a deal with China Mobile. From that perspective, it made sense that Apple might be trying to craft something more palatable for China Mobile. It has more than 60 percent marketshare in a population of almost 1.2 billion mobile phone accounts. To put that in perspective, China Mobile's customer base alone is more than twice the size of the entire U.S. market.

There's been an interesting twist: Unwiredview.com reports that the iPhone 5s, specifically, has received approval from China's Ministry of Industry and Information Technology (MIIT) as a TD-LTE-capable device. TD-LTE is the high-speed mobile networking band that China Mobile uses (it's also used by Airtel in parts of India and Dialog in Sri Lanka).

What's holding up the show now, according to the Unwiredview report, is that China Mobile is waiting on a license from the MIIT to operate on the TD-LTE spectrum, which they should get in November.

That may provide some insight that the iPhone 5s, at the very least, is headed for China Mobile. But it says nothing about the iPhone 5c. It's possible that the iPhone 5c just hasn't made it through the MIIT's approval process yet.

The c doesn't stand for crap, either

Apple doesn't seem interested in competing with other phone manufacturers on price any more than they do in the computer market, where they've been criticized for years at having laptops and desktop machines that are way more expensive than the competition. That hasn't stopped the Macintosh from being amazingly successful. Even though there's been a recent dropoff in Mac sales, Apple continues to sell more Macs every quarter than they did in entire years just a few years ago.

For Apple, there's little sense in growing marketshare at the expense of profitability. That is, perversely, a message that's not well received by many Wall Street analysts, and they seem intent on punishing Apple for its hubris at wanting to, you know, actually make money.

But the rest of us should rest assured that Apple's not interested in cheating us by offering us crap. The iPhone 5c, by any measure, is going to be a great phone available at a modestly more affordable price than the top-of-the-line phone.

Ultimately, getting an iPhone needs to be a good deal both for you and for Apple. Apple's set the price of the 5c and it falls on us to decide if it's worth it. You may decide that the iPhone 5c isn't worth it, but by reading this article, you're part of a pretty select group of technical sophisticates that follows this stuff online. The vast majority of customers who Apple already caters to - and who Apple wants to cater to - isn't part of that group. They're "regular" people for whom a smartphone is a smartphone. And to them, the iPhone 5c is new. That's why I bet Apple will sell them by the boatload.

OK, I'm done pontificating about the iPhone 5c. What do you think? Is this the phone you want, you were you expecting something different? Is the $100 difference not a big enough factor to make you consider it compared to the 5s? Sound off in the comments!

Update: An earlier version of this editorial incorrectly stated that the iPhone 5c has more limited LTE compatibility compared to the 5s.

Peter Cohen