I wish Apple had taken on the telcos

by Matthew Gast

Anything that threatens the sacred cow of metered business, whether it's minutes or bits you're metering, is something that needs to be blocked at all costs by the telcos. Fortunately, the structure of the American mobile telephone industry gives them a solid way to play defense. Carriers buy the phones and sell them on to the end users, which handily makes them the major buyers of handsets, and the de facto arbiters of taste and consumer preference. ("Nice VoIP client in the handset. We'll take...zero. If you'd stop dabbling in VoIP, though, we'll take several million.")

The "control your customers and force feed them" model cuts against my entire experience, which is based on open systems and architectures. In theory, an upstart could design a cool GSM phone and sell it directly to end users, bypassing the control-freak middlemen telcos. I had hoped that Apple would do just that. They are the one company that could build a phone that they could sell directly to hordes of consumers without help from the carrier.

Instead, it appears that Apple is building a traditional phone, with all of the carrier lock-in. There's a big step forward in voice mail usability in the iPhone, and obviously a big short-term benefit to apple in working with the Cingular sales channel. In the long term, there is a much more diffuse long-term benefit of breaking the innovation choke-hold, though it is questionable as to how much of a changed market Apple could capture. Now that Steve Jobs has decided that DRM is evil, I'd like to see him come to a similar conclusion about the mobile phone business.

Until he does, at least I have a true open mobile phone platform on the way, even if it is slightly delayed.

6 Comments

Aswath
2007-02-17 12:40:44
Isn't there a story in WSJ that claims that Apple will be sharing in the monthly revenue. This suggests that the cost of iPhone is more than what Jobs stated.
MacVicta
2007-02-17 13:36:48
Let me start by saying that this isn't a rabid attack from an Apple fanboy who feels your opinion is a threat to the Cupertino Empire. I simply wish to rebut.


I believe the iPhone has "taken on the telcos" more than you realize, Matt.


Steve Jobs & Co. had two lanes to go about bringing the iPhone to consumers: buddy up with a carrier or take the oft-speculated independent route by selling the iPhone unlocked through Apple stores and Apple.com.


The former route was the easiest and least detrimental to their bottom line so of course they tried it first. Steve shopped the idea around to the biggest cell carriers but not in the traditional submissive sense of Motorola and Samsung when they have a hot new product.


It's HOW he went about this that tells the story of Apple's intentions. You say Cupertino is "building a traditional phone, with all of the carrier lock-in." I say the iPhone is far from traditional. If it were, it would run Cingular software. If the iPhone were traditional, it would be Cingular branded. If the iPhone were traditional, it would be a white handset with an Apple logo subsidized and therefore hijacked by Cingular Wireless (now AT&T).


I direct you to an interview of Steve Jobs by Steven Levy of Newsweek after the Macworld announcement.


http://www.msnbc.msn.com/id/16566968/site/newsweek/


"Jobs himself once referred to the Cingulars, Sprints and Verizon Wirelesses of the world as "orifices." But a couple of years ago, he realized that he would have to deal with them. "We talked to several of them and educated ourselves," he says. He finally decided to deal with AT&T's Cingular network. "[They] were willing to take a really big gamble on us. We decided what the phone is. We decided what software would be on the phone. And so we could make the product we wanted."


On top of that, the WSJ revealed through inside sources familiar with the deal that Apple will share part of the monthly revenues collected from iPhone users.


Two months ago, Matt, could you fathom the idea of an America cellular carrier turning over so much control to a handset manufacturer? Could you imagine Motorola collecting revenue off RAZR owners who sign up with Cingular to have their phone? Could you imagine LG dictating to Verizon that their Chocolate Phone would go without crippled Bluetooth, the Verizon badges marring the phone's surface and that they wanted a new voicemail system for specific use with it?


There are compromises, the most glaring of which is that the handset will supposedly be locked to Cingular. I find it hard to believe that it can't be unlocked and used with T-Mobile at the expense of some Cingular-only features, but the fact that Apple agreed to this at all shows they also had to bend.


Steve Jobs has done the impossible, what Nokia never could and subsequently led them to drop the American market from their radar. Had he gone independently, it would've probably taken him a decade to change the industry the way he already has and that's IF the iPhone succeeded. He has gone right into the heart of the wireless telecom industry and tamed the biggest beast of them all. If the fruits are great, this will open up doors for so many possibilities that before seemed out-of-reach.


Remember, Matt, Steve hasn't changed. Through it all, he stuck with his convictions. He still believes they're a bunch of "orifices" but, in my opinion, he's knocking the walls down from the inside.


From the Wall Street Journal,


"Mr. Jobs once referred to telecom operators as 'orifices' that other companies, including phone makers, must go through to reach consumers. While meeting with Cingular and other wireless operators he often reminded them of his view, dismissing them as commodities and telling them that they would never understand the Web and entertainment industry the way Apple did, a person familiar with the talks says."

tom B
2007-02-18 06:37:34
All in good time. He hasn't slain DRM yet, either, though it looks increasingly like he will.
Mike Perlman
2007-02-18 13:04:46
One step at a time. Remember iTunes was in the razor and we all laughed. Now there is the iPhone and we ain't laughing. Now we have bad sex with Cingular. And tomorrow oor so (or in Europe or Asia) Apple may try an mvnm.
GoCatGo
2007-02-19 04:42:10
Overall, I agree with you on the broad issue of more open platforms. What we don't know is the scope of the agreement between Apple and AT&T... or what Apple's plans are long-term.


As tom implied: time will tell.

Elmo
2007-04-11 20:43:36
Hi, =D!!!