Fred Wilson: The C In 5C Means Clueless Not Cheap

Fred Wilson, Apple, iPhone 5S, iPhone 5c

The godfather of New York venture capitalists Fred Wilson took to his blog Wednesdaywith his reactions to the New York City Mayoral race and, the all important news to the world, Apple’s release of two iPhones. ¬†When the story started crossing my alert box, I hadn’t had time to read the blog post and thought perhaps Wilson had gotten it wrong. I was thinking he didn’t see the need for the iPhone 5C.

Wilson took a look at what really happened on the stage at Apple’s headquarters in Cupertino, California on Tuesday morning. The first indicator that things were awry with this iPhone announcement is that they were holding the press event in the town hall room at Apple vs the Moscone or the Yerba Buena Center For The Arts. The significance in the venue is how many people it holds. Holding the event on campus meant a tighter, more curated press corps.

So what did happen on Tuesday?

Apple’s Phil Schiller, Jony Ive, and CEO Tim Cook announced not one but two new iPhone models. The iPhone 5s is the annual upgrade to the original iPhone (now in it’s 6th iteration). The iPhone 5c is supposed to be a cheaper version of the iPhone, designed to start competing with Android.

Most tech pundits have said time and time again over the last three days that one would be silly to “upgrade” your current iPhone to the iPhone 5c. The colors are cool but you can get a case for the new iPhone 5s in any color imaginable. Heck a 3d printer can print you one.

The 5C isn’t supposed to be an upgrade. It’s supposed to be an entry level iPhone, which is Wilson’s exact point over on his blog. When Apple held their press event, they showed the subsidized two year contract prices. The iPhone 5c would start at $99 while the 5s would start at $199. Yes you get a whole lot more for $100 dollars, but that’s not the point.

The point Wilson brings to our attention is that the iPhone 5C is supposed to be the low cost point of entry in the iPhone ecosystem. Abroad most wireless users buy a phone outright and just pay for SIM cards from the carrier they want. They own the phone and don’t have to get into a ridiculously long contract to obtain it. In the US those contracts are two years and in Canada they are three years.

So if you look at what’s really happening as Wilson reports: “the 5C is a big disappointment. It will sell for $100 less than the 5S in the unsubsized market, which means $549 for 16gb and $649 for 32gb. The C in 5C does not mean “cheap” as I had hoped. It means clueless, as in clueless about how the vast majority of new smartphone users are paying for their phones.”

So it looks like Wilson is right. The 5C may not be that entry point Apple’s been looking for to disrupt the low cost Android phones that are gobbling up market share.