Why I'm Disappointed By The iPhone

I never bet against Steve Jobs. The man is a master but I am disappointed by the iPhone announcement for one reason. It is not OPEN. Ask yourself why there has been such a frenetic pace of innovation on the web and such a slow pace on the cell phone?

In my opinion, it comes down to one reason: the cell phone is a closed platform. The phones are locked, the carriers wall off the gardens and control the pipe, and innovators are, in most cases, forced to launch apps and services through carriers and their IT bureaucracies and share a huge amount of the revenues with the carriers.

On the other hand, the web is open. It is a paradise of innovation and you can talk directly to your users, get feedback and make your products better and more appealing.

One slightly orthogonal note: Apple's stock is flying. Don't bet against Jobs. But... the cellphone world is a cut-throat margin business where margins decline virtually overnight. The music player business is, ironically, more defensible. I wonder if Apple will succeed in maintaining margins as Motorola (see their recent announcement) and Nokia cut prices on all new phones. This is not a trivial shift even for the man who declared the end of the PC era.

Comments

[Frank Z]

I hate to break it to you, but it's not Apple's fault that cell phones aren't open. As far as margins... that has never been a problem as they charge a premium on everything they sell.

[Michael]

There are two elements to the closed architecture that I should have been more clear about. is the Iphone open to external software apps (that Apple certainly controls) and The closed nature of the cell phones and I wonder whether AAPL with all of their market leverage could have pushed Cingular on that. Opening either would have certainly been a revolution. As to the margins, you are correct but AAPl has typically been first or early in those markets that they have commanded premiums on or totally reworked the product. i am not convinced that is the case here.

[Dion Almaer]

I love "open". That being said, I have wanted this phone for the last few years.

It isn't perfect. I want all 3G's. We aren't sure about tech details (Java installed? ease of working with new apps?).

What I care about most is that it is a fantastic device that gives me what I want out of a next gen phone. I have disliked 'smart phones' forever, and this has the chance of being the first to make sense.

[JoshFerguson]

I think what you're saying here is that it's not open to other carriers. I think that's an issue for some reasons but I think It will be resolved by late 2008 early 2009. I don't know what deal they have with Cingular but I hope it goes away fast. The nice thing about it from a marketing perspective is the rapid exposure and national sales channels a partner like Cingular can provide.

As far as opened in other ways though I think that's wrong. I develop web applications and also Mac applications on OS X. I can tell you the developer community is buzzing about the fact that this runs OS X as a platform. That means all of the experience that will be available from developing on TIger (10.4) and the upcoming Leopard (10.5), which Jobs said the phone will be running, will already be available. The fact that I can start coding something once they release the developer kit using my previous knowledge, and build it for the iPhone when it's available is not just a plus, it's a deal maker. This will attract a huge number of developers who can whip up good applications in a matter of a month or two. I'd look for the number of apps for this to explode through the rest of this year.

As far as Symbian, MS's Mobile OS, and all of those other crippled useless platforms, they will begin to lose even more traction with the development community. The stagnation in the market that these companies have caused is something they will have to figure out how to deal with as they begin to build competing products to slow down Apple's growth in market share, which admittedly will initially be small and not much of a worry for them for the first few years.

[Michael]

Josh -
I agree with much of what you wrote. But yet another mobile platform to port to? BREW? umpteen flavors of Java Phones, Symbian and now OS X. It makes it very hard for app makers to make ubiquitous apps. That is, unless, AAPL takes 70% of the phone market as it did in music players. if they did that and became the windows of mobile so that you could write one mobile app and run it anywhere, then I would eat my hat and cheer them on.

[Tommo_UK]

The reason for sticking with one network - Cingular in the case of the US - is that they have invested in new infrastructure to support the iPhone, such as visual voicemail and other services. These are network-dependent services that would be unavailable to an unlocked phone running on a "normal" un-optimised networks.

This gives the network exclusivity, and an incentive to invest in the time, money, and equipment necessary to support the phone and offers an opportunity for Apple to offer services that no other phone provider or network will be in a position to for many years. I bet the exclusivity works both ways: Cingular gets to offer the iPhone, and Apple gets exclusive rights to the new services for the duration of that deal. Suddenly Apple and Cingular manage to make every other network and manufacturer look like they're stuck in the stone-age.

Expect the same out of Europe, and the rest of the world. The other manufacturers and networks will take years to agree terms, add functionality, and catch up with Apple. Again, this has not been widely recognised or discussed by analysts. The level of ignorance in the discussion of the iPhone's implications on the network/cell phone industries is remarkable. This is a game changer, as Apple said.

[JoshFerguson]

I hadn't thought of all of that but yes I think you're right. Exclusivity agreements do make a big difference. If anyone had the technical prowess, licensing, and developer power to come to market within the next 1-2 years they might just be left behind by these types of agreements. I think Apple has put itself into a good position to try and move into the 1% market share by the middle of 2008 like he wanted. It will be tough but we'll see if they can do it, I think they have a big hit on their hands but the technically best product doesn't always win out. I think Apple's marketing machine is pretty hot right now though, and I don't see them losing steam anytime soon.

[Stustanton]

Tommo- cell phones aren't locked any more in the USA. About 45 days ago the fair use rules were changed to allow the users to break the locks on their phones to access the capabilities of their phones, even if the supplier doesn't want you to do that. Under fair use, the facilities are now available to the owner, to use the way they want. So the hole in the dike might have happened and through it all sorts of uses might spill.

[Michael]

Tommo -
I agree it is a game changer but it is not good for the consumer or the rapid development of the mobile world broadly. Wide availability of next gen devices and applications drove ISPs to build out more bandwidth. Carrier and device maker lock-ins don;t give other carriers the same impetus. Competition drives markets and consumer choice. Exclusivity does not.