The New Arms Race
Earlier this month, Apple’s iPhone, one of the most anticipated launches in recent memory, turned a year old. Watching the lines form and the micro-economies that formed around early procurement, looked reminiscent of the euphoria surrounding the release of the first Star Wars prequel. Luckily for Steve Jobs, his technological marvel didn’t leave a horrid taste in customers’ mouths or have them one step away from riot in outrage, disgust, and disappointment. If you were one of the early purchasers, you didn’t think twice about spending $500 for a phone; those of us that didn’t looked at you twice while trying to grab it from your hands to see what it was like. Price, though, wasn’t the only deterrent. Apple signed an exclusive agreement with AT&T to market the phone, and those not already with AT&T were looking the cost of the phone, along with a hefty cancellation fee from their existing provider, or they were stuck paying two cell phone bills. The deal with AT&T struck a negative chord with many, especially because of limitations with the speed of their network, not to mention the phone’s absolute incompatibility with other networks, at least as intended by Apple and AT&T. Despite the phone’s exclusivity with AT&T, or perhaps because of it, a whole cottage industry sprung up to try and make the phone accessible,and analysts tracking the cell phone market estimated that one-third to one-half of the phones sold never made it onto AT&T’s network.
The biggest news with the iPhone recently came earlier this month with Apple addressing two of the major gripes about its phone – speed and price. The upcoming version of the iPhone runs on the newer 3G network versus the EDGE network, which translates into roughly two times faster browsing and other data related functions. While not a gripe for those located in the United States, those outside had limited access to the palm-sized super computer. The current phone has expanded into five countries, but the second one will go on sale in 22 countries on the July 11 launch date and reach 70 by years end. In the US, the new phone will be tougher to unlock or at least tougher to use without first activating. Currently, you can buy the phone from the AT&T or from Apple without activating them on a service plan. The secret to the new phone’s price drop, now $199 versus $399 for the 8GB model, comes straight out of AT&T’s pocket book, so activation will be essential for realizing the price.
Battle of the Fruit – Apple versus Blackberry
Perhaps the low-hanging fruit for the iPhone is the business market and competing head to head with long-time incumbent Research in Motion (RIM). It’s a huge market, and unlike the consumer market, the corporate market is generally price insensitive not to mention that they also add/replace phones quicker than the average consumer does. As a sign of RIM’s success, you will find hardly anyone in the corporate world who, if they don’t own a Blackberry, doesn’t know about it. When they first came out, unlike today, you couldn’t go into your local mobile provider’s store and purchase one. Their initial phones were clunky, large, and far from aesthetically pleasing. What they did do is work well with corporate systems and enhance productivity. With Apple and RIM, it’s really like watching yin battle yang. The iPhone has the style and continuing wow-factor that the Blackberry’s simply won’t have. The Blackberry may lose market share to Apple, but it’s like the Ford F series of phones. It is the workhorse that will always understand business needs and will make incredible strides in aesthetics but never have the same emotional connection with its users that Apple products do. Blackberries lack the elegance, and like Ford, they can improve over time, but they will have a hard time building that. Unfortunately, no matter how much corporate users may want the iPhone, it’s those who support the phone that will make the decision. One is a top down approach. The other a bottom-up. We’ll see who gets past the middle first. Where they overlap and where the future lies is in application development, turning the phone from phone to phenomenal.
Future Frenemies – Apple versus Google
Those of us so focused on Google the web company for use on the PC might find their entrance into the mobile space confusing. But, in 2005, Google was already familiar with the importance that phones will play in the future, outselling PC’s yearly more than three to one, not to mention being cheaper and increasingly more powerful. The US approach to wireless ensured that little innovation happened to date, but as reported in this great article by Wired Magazine, Andy Rubin, founder of Android, "had the solution: a free, open source mobile platform that any coder could write for and any handset maker could install." And Google liked his solution enough to buy it and make it the underpinning of their mobile strategy. Users of the iPhone and of the Blackberry will already have familiarity with mobile versions of Google’s products. Now, Google would go one step deeper and control the operating system. Unlike Apple though, they won’t be building the phones themselves. Instead, in a move that feels a lot like their Facebook sqaure off, they formed the Open Handset Alliance with the support of more than thirty other companies. As the Wired article says, "Google was never in the hardware business. There would be no gPhone — instead, there would be hundreds of gPhones." If we think the applications that Google has now are neat, and many already make the phones that run them that much better, just imagine a phone with Android Scan which allows users to take snapshots of bar codes and pulls up reviews and price comparisons from across the Web. And that is just the beginning. Google is "trying to make programming for a cell phone analogous to programming for a PC or the Web," but with a cooler palette with which to play.
The Disgruntled – Apple versus Other Handset Makers
With the launch of its new version July 11, Apple’s iPhone makes other phones look overpriced. Already, other manufacturers are coming out with touchscreen phones, but as Avi Greengart, research director for mobile devices at Current Analysis, "deliberately inviting direct comparisons to the iPhone is stupid," and companies interested in competing with Apple should focus on areas that the iPhone does not. "The iPhone is not rugged, it has mediocre imaging capabilities, it lacks a physical keyboard, and it is available at just a single carrier." It’s no wonder many have decided to side with Google.
While the launch of the upcoming 3G version of the iPhone is newsworthy in and of itself, the reason we write about it is its broader impact, the changing shape of the web as we know it. What’s at stake now isn’t just the mobile phone market, but the future of connectivity, of media consumption, and as a result advertising. Phones are the way people connect with each other and increasingly for everything else. The iPhone proved that web browsing on a phone could work, and it proved to Google that mobile browsing wouldn’t spell the end to their mega-lottery parade. And that means that whether Android based phones take off or not, Google still wins with the iPhone’s ascension. As for Microsoft, instead of trying to buy Yahoo, maybe they should have been trying to make a deal with RIM, whose stock has outperformed Google’s in the past two years, trading now five-times above what it did in 2006. For those in our space, some will start to build applications for Apple and Android, but it won’t have the instant gratification that Facebook applications do. The rest of us, we just have to figure out how to play nice enough with Google, as they aren’t going away.
