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5 ways iPhone will change the wireless biz

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Steve Jobs’ WWDC keynote, demo of upcoming Leopard and Safari for Windows may have generated a lot of oohs and ahhs, but it was towards the end that His Jobness revealed the game plan to irreversibly change the world of wireless.

No one knows for sure how many million units of the iPhone Apple will sell – 5 or 10 million in the first year, an insignificant number when compared to over 950 million phones shipped worldwide every year. It is still not clear if and when Apple will be able to sell this device in Europe, Asia and rest of the world.

And still, it will challenge some of the conventional notions of the wireless business, take the hidebound industry by the scruff of the neck and give it a good shake. Nokia will join Microsoft and Dell in experiencing Apple envy.

“I am certain that the mobile telecoms world will count its time in two Eras. The Era BI: time Before the iPhone, and the ERA AI: time After the iPhone,” writes Tomi T Ahonen, co-author of book, Communities Dominate Brands, who believes that even media business should be very very worried about iPhone.

A true web applications platform for the mobile

“We have been trying to come up with a solution to expand the capabilities of the iPhone so developers can write great apps for it, but keep the iPhone secure,” he said. “… And we’ve come up with a very innovative new way to create applications for mobile devices… it’s all based on the fact that we have the full Safari engine in the iPhone. And so you can write amazing Web 2.0 and AJAX apps that look and behave exactly like apps on the iPhone, and these apps can integrate perfectly with iPhone services.” (Steve Jobs keynote at WWDC via Engadget.)

Charles Ying thinks that Apple just reinvented the mobile applications platform. “This isn’t mobile Flash, mobile Java, or even the mobile Web. It’s the real Web, the real deal,” he writes. (True web should also mean 3G and not pokey EDGE connections that the device currently offers, one major Achilles heel of this device.) The ease, with which developers can develop and deploy apps on both web and the phones, will put pressure on other companies (and OS vendors) to play catch-up or lose developer attention.

Break the Wireless Walled Gardens
iPhone is fully functional iPod, with full tracks of music. Do you need to download ring tones for $2.99 a pop, when you get a full song for a third of that price? Ditto for Wallpapers, and themes, and everything else that is being sold on the carrier deck.

Shift of control to the customers

If the embedded (Safari) browser if it performs the way as hyped by Jobs & Co., will give us the choice-control we have on the web. Search engines to web sites – nothing will be determined by the wireless carriers who have thus far done nothing but create barriers between what we want, and giving us what they want to sell.

Slow demise of subsidized, boring phones filled with bloat ware

The introduction of the unlocked iPhone will do two things – it would basically get US buyers savvy to the idea of buying full priced unlocked phones. Secondly, it is going to cause a behavior change – of buying phones instead of freebies. (Will iPhone save the handset business?)

Keep it simple or else

One of the lasting (at least for me) changes that iPhone will bring to the mobile market is simplification. Their new user interface is going to make complex mobile services relatively simple, and can have the same impact as Blackberry had on the corporate market.


Photo courtesy of Engadget

56 Responses to “5 ways iPhone will change the wireless biz”

  1. Om, imagine that wireless service gets commoditized into a broadband wireless pipe. The iPhone evolves very well into that future; does AT&T really evolve as well? Also one of the big issues with the iPhone is that from the available information it’s not clear how well it integrates with corporate IT systems (blackberry, exchange servers). Perhaps Apple doesn’t intend to let it integrate super well, and will use that as a leverage point to sell more of its own middleware server software to enterprises (with AT&T providing distribution, they might have a shot).

  2. “buying full priced unlocked phones”. As several other posters have noted, getting to a situation where the American wireless operators accept this will be very difficult. Contracts and locked phones allow the operators to retain control of the customer. There already are no-contract operators in the US. If they start getting better traction having locked phones will be one of the few remaining impediments to true wireless competition.

    Let the games begin!

  3. David Millsaps said:

    ” … Safari apps which will probably work in Firefox and Opera as well.”

    Highly doubtful unless Firefox and Opera ripped out their rendering engines and supplanted it with … have you checked out WebKit < > ?

    Todd wrote:

    “If you have ever met with a carrier you know that they are control freaks, and are terrified of compromising the network.

    Just because someone shows them a shiny iPod with a microphone doesn’t mean they are going to roll over.”

    Ah Todd dude, have you forgotten that Cingular is rolling over and re-branding as AT&T leveraging the iPhone release event to do that? They may be control freaks but there are control freaks in every industry. Microsoft is a company full of control freaks from the top down and they didn’t see the Internet coming in 1995 (remember Windows95 and the Microsoft Network)? The mobile telecom carriers have been touting data services for years and years and years but the reality is that not many people have been using a lot of data because of the costs. So these guys can be control freaks all they want but if what they really fear is eroding sales due to alternative ways to dial (Vonage, Skype, et al) then they really have no choice but to give up at least some control and Cingular has done just that with Apple. If there’s no carrot dangling in front of the customers, then the carriers can be control freaks until the end of time and it won’t matter. This crap about the walled gardens of content is for the birds and it obviously doesn’t work and doesn’t generate huge revenues for the mobile carriers.

    Stephen wrote:

    “Many software developers want to do more than Ajax in a browser-based rendering engine. They want hooks into native to do real 3rd party app innovation.”

    Oh really Stephen? But do the “mere mortals” who depend on a mobile phone doing what its supposed to do really give a rat’s butt what the developers want to do? The iPhone is NOT about developers its about customers. Have you ever met (like I have) three people who have thrown their Treo against the wall and shattered them because the Treo’s operating system would crash during a phone call? Ooh la la, there are lots of developers of apps for the Treo. Do you think that Steve Jobs is an idiot and that he didn’t study the Treo?

    Tony wrote:

    “Can you write web apps that scale down to the iPhone (480×320) and up to the desktop (1024×768 to 1920×1200)?”

    Oh Tony dude, you obviously haven’t studied WebKit have you.

    Om wrote:

    “… actually if you read the last point, what is said, iphone could do for consumers, what blackberry did for corporate workers. just clarifying.”

    Om good point but have you by any chance read Von Hippel’s “Democratizing Innovation”? One can’t help but wonder if the lines between “consumer” and “enterprise” are not starting to blur perhaps? What I mean is that there is no reason why the iPhone can’t also function (with excellent back end infrastructure in the clouds) as a “corporate” tool. Really, no reason at all (hint: Scott Forstall, VP of iPhone yesterday showed off in the Keynote presentation a web-based app on the iPhone that was using serious network-based cloud tools to look up an address of a business person).

    Om wrote:

    “… I think the web apps that scale to fit the iphone screen/browser combo could be at an advantage.”

    Om: WebKit WebKit WebKit (note: Nokia S60 also uses WebKit)

    Todd wrote:

    “As I said before, SMS would be cannibalized by a fully open environment.”

    Why on planet Earth would SMS be cannibalized? SMS is a totally different protocol. Do you really know how SMS works at the nuts and bolts level? I have my doubts.

  4. Chris P.

    Two things splash cold water on some of the far-reaching predictions you make. One is the slow connection speed — which you acknowledge. Two is incorrectly saying the i-Phone is unlocked –if I wasn’t forced to use Cingular/AT&T, then yes i-Phone would be a dramatic break from present choices.

    One thing i-Phone is that hasn’t been mentioned — a harbinger of why the .mobi domain doesn’t make any sense. Eventually we (the masses) will have devices that give a true web experience, making a separate site designed for mobile superfluous.

  5. Allowing access to the iPhone API only throgh the browser is really quite limiting. It is a PR stunt to show a token effort by Apple to allow developer access to their revolutionary device.

    So developers loose with minimal possibilities to make money and innovate on the iPhone. Did you really expect anything different from Jobs inc.?

  6. techuntangled

    Wow, Om – very interesting insight.

    Regarding “Slow demise of subsidized, boring phones filled with bloat ware”, I think that purchasing an unlocked phone and buying phones instead of freebies are part of the same thing. The reason to buy a phone at full price (behavioral change) is to have an unlocked phone that can be used on another network. otherwise, purchase a 1 or 2 year contract at a subsidized price (some carriers don’t have contracts and still use subsidization as an purchase incentive ).

    I too, am very interested in how the Apple and iphone will challenge long held notions and ‘change the world’. An article I penned today on Smart iPhone Strategy to launch on June 29. Let me know what you think.

  7. I hope that the iPhone shakes up the industry. Anything the forces service providers to examine their often arcane practices is a good thing.

    I also have a Nokia E61 w/ 2GB memory card. Plenty of music and photos, browsing via wifi, and multiple IMAP accounts. Although I love the E61, I must admit the media player and multimedia manager software used to transfer music to the device could use more attention.

    Agreed, many of the aforementioned features are not new. But neither was portable digital music when the iPod was released. What is new will be the ease of use and consumer awareness.

    Just a couple of comments:

    Consumers have had the ability to purchase full featured (unlocked) phones for some time. On mid-high end devices you can transfer music, wallpapers, and movies to your phone without paying 2.99 to the carrier. I think the problem here is behavior, and not the walled garden. I don’t think many consumers are in the habit of paying full price, for full featured unlocked phones. The iPhone may be able to change this.

    There are good mobile browsers, including Opera Mini. The problem of consumers not being able to visit the sites that they want is not a technical limitation, but rather artificial controls derived from business decisions.

    This “kiosk mode” for mobile browsers is part of the problem. Another part is restrictions imposed on the network level. There are content type, IP, port, and protocol restrictions that are not circumvented by full-featured in-hand devices. In fact, the mobile web could be a lot more open to consumers today if the carriers made gateways changes.

    We will have to see how well the service integration and AJAX works. I think we will see some cool apps. It is definitely a good thing for making web applications mobile, but I will take a wait and see approach for mobile applications. Nokia has widgets (widsets?), which combines AJAX, CSS, and HTML and offers a level of service integration. “Chatty” applications may not go over so well with consumers who are billed for data.

    The ability to leverage the hardware and local services is paramount for mobile applications. We have full featured browsers on our desktops. But we will not set out to build the next Skype, SSH client, Joost, or VLC in Javascript.

    Security, distribution, and performance concerns aside, we need to see mobile applications the make the most of the GPS, voice, storage, multimedia, PIM database, and connectivity capabilities of mobile devices.

    Apple has an advantage here. Mobile application development as it stands today needs much improvement. Media formats, keycodes, key layouts, screen sizes, memory, storage, connectivity, color depth, API support, and more vary between models. A single, stable, rich platform will definitely ease development.

    Also, we can not overlook the interdependency between the carrier billing model and the walled garden. Almost tautological, I don’t think there is an easy way to remove the walled garden with changing the way that consumers are charged. After all, something will need to change when the average consumer is able to use voice (VOIP) or messaging (socket) over WiFi on their carrier subsidized device.

  8. @Curtis

    I’m not suggesting that the carriers should be the main content provider or have a walled approach; simply that they do.

    If you are a content provider today and sell non-porn content, the carriers are your biggest channel. Most people, especially in the US, don’t know any better. They probably should be dumb pipes, but they certainly don’t want to be.

    As I said before, SMS would be cannibalized by a fully open environment. Voice isn’t defensible as the price wars continue and Wi-Fi makes Skype more usable.

    Anyway, I agree with you in theory, but don’t expect the carriers to go down without a fight.


  9. Hi Om,
    I think your article is yet another overhyped article on iPhone and let me counter each of the point that you mentioned as breakthrough

    << Break the Wireless Walled Gardens >>

    All features like wall paper,ring tones etc that you mentioned can be done in all smart phones and even some feature phones today .Example you can create your own theames using Nokia theme studio from long time .

    << Shift of control to the customers >>

    Again this not new all Nokia S60 phones have full blown browser infact it uses same browser engine as safari.(both are using same open source khtml engine).So in your words shift has already happened .the real problem is not if you full blown engine or not it is due to small screen size of these devices including iphone which makes big screen optimised webpages not so lucrative on small screens .

    << Slow demise of subsidized, boring phones filled with bloat ware >>

    This is anyway not happening with iphone so i was wondering why did you mention this at all .Today Nokias N95 is sold unlocked so that is an example that justifies your heading .

    << Keep it simple or else >>
    This may be true but again we need to wait till iphone start shipping and what are the services that it offers and how accessible and easy to use it is .so till that time we can just speculate on apple track record that it might be really easy to use .

    And regarding the point in your article that Ajax is development platform .First of all ajax will not serve all usecases as mentioned in earlier comments .Ajax has mobile development platform is not new it is already supported in Nokia S60 platform and also by Opera mobile Browser so again this neither new or anything brea through in mobile world .
    My feeling is apple would open up os X for developers in future release as they stabilise the platform as they need to tweak a lot the orginal OS X to fit into phone .So their decision of not opening up is more due to technical difficulty in stabilising the API in short period of time rather than that they believ that AJAX can replace the native development platform for 3rd party developers.This is infcat the same reason that all linux phones released so far even by Motorola dont open up the native linux as developer platform .

  10. Tony,

    I have trying to get some data on mobile app downloads and hopefully that would give a better sense towards the whole argument – whether this browser based approach is actually good or not.

    regardless, you make good points. I think the web apps that scale to fit the iphone screen/browser combo could be at an advantage. i am sure that is easier to achieve than create specific apps.

    lets see how it shakes out…

  11. SmartPhone has been on the market for a couple of years. I still don’t see what iPhone brings on the table that warrant any breakthrough.

    I used Danger since it came out, switched to a HTC phone recently (because T-Moible’s signal does work out for me). Both of them does a fine job of putting a browser that works for many web sites. But I can’t say they provide great value for me in anyway. Poor signal means it is used no more than a last resort mean for me to access the web. Things that take you 30 seconds to do on a desktop, like looking up a branch address closet to a zip code, take 5 minute on the mpbile because of the small screen and slow speed. For aspired iPhone web application developers, the network is your reality check.

    I finally dropped the data network plan to save $40 a month taht I don’t use that much. Turns out that a simple note taking app is the killer app for me. Since iPhone does not has a keyboard it will offer no value for me in this respect.

  12. francis

    why am i not crazy about the iphone. and what is the craze around it? it is just macmania or is there something the iphone is offering isnt already available?

    instead of going to battle in a new market sphere, apple should have capitalized on its music business where there is room for growth .. can apple become a music studio, yes it can.

    As for an corporation buying iphones for its workers as a blackberry replacement, thats a laugh, blackberry become popular because of its push server. As individuals, throwing away their mobile phones, just to get an iphone, another laugh.

    Anyway bets are on.

  13. Can you write web apps that scale down to the iPhone (480×320) and up to the desktop (1024×768 to 1920×1200)?

    There is a lot to be said for mobile apps, meanings applications specifically written for mobile hardware.

    Now, if the iPhone leads to 480×320 smartphone screens everywhere, that’s a good thing.

  14. Dear Om and readers of Gigaom

    Good posting. Wanted only to correct the number you quote. The annual sales volume of mobile phones is not in the 700 million range. Last year they sold 950 million (sources: Gartner Dataquest, Informa, etc) and this year its likely to be over 1 billion mobile phones.

    Notice the scale, worldwide there are about 800 million PCs total installed base; 850 million cars on the roads; 1.3 billion fixed landline phones total in use around the world. Yet the mobile phone industry ships a billion phones this year alone.


    Tomi Ahonen :-)

  15. Stephen

    Om, regarding “reinvention of the mobile applications platform”, not quite yet. I could see that in later version, sure if there’s a proper SDK someday. But for now: “No iPhone SDK Means No Killer iPhone Apps ”
    Great analysis really worth reading–

    Let me know what you think. Many software developers want to do more than Ajax in a browser-based rendering engine. They want hooks into native to do real 3rd party app innovation.

    I agree with the rest of your points, most notably the huge shift users will now have in higher expectations for gorgeous UI and user experience simplicity/delight.

  16. It’s too bad that the iPhone can’t help (encourage? force?) the carriers to open their pipes. Think of how ridiculous it is to pay additional fees to send text or pictures. They want to charge for airtime? That’s fine (and necessary). But why tack on additional fees for services that use the network? We wouldn’t put up with it for Internet access, even in the dial-up days.

  17. @Todd,

    The mobile carriers are already “dumb pipes”. Their value is the voice and SMS service.

    Their content offerings pale versus market offerings, and have higher prices. Ultimately, market forces will tear down their walled gardens in the same way that market forces tore down AOL’s walled garden.

    If they focused their efforts on their communication technologies we wouldn’t suffer through poor quality voice and data connectivity. The carriers would also be much more than dumb pipes if they drove innovation in their core technologies instead of positioning their services as entertainment hubs.

  18. Dimitris

    Well, I think that the real barrier is indeed the wireless telephony providers but not in the sense that they promote what they want to sell (instead of what is or the users find interesting). What’s killing almost all mobile phones potential (the iPhone being no exception) is the cost for accessing the web through the provider. The key factor is that providers have huge infrastructure (cf investments) in place and they will not give away their control over them – as people have already mentioned. So that can pretty much exclude a large fraction of ‘openness’. Even, if we the users can put up with this, it’s probably too much to ask of to access the net when we know that every minute spent online on the phone ‘bleeds’ us. And it’s only so much that can be done using telephony packages such as “x MB of online transfer using your phone for y USD/mnth”. The wireless capabilities of iPhone are quite something but still limit it if access to the internet is crippled.

  19. “Search engines to web sites – nothing will be determined by the wireless carriers who have thus far done nothing but create barriers between what we want, and giving us what they want to sell.”

    well put, couldn’t agree more.

  20. This of course assumes that the mobile carriers will all simply hand over the keys to the castle, right?

    The iPhone will be fantastic (well, the 3rd version anyway), but it’s a bit far fetched to think that the carriers will give up and just be dumb pipes.

    Think about what a fully open browser with AJAX would do.

    1. SMS revenues would be cannabalized by a resurgance of web based IM style applications. In the sender pays model of SMS, it would become free due to web based SMS services.

    2. XSS attacks, on your phone. This will go over really well! Keep in mind the massive amounts of data that could be pushed through even a simple AJAX bug. The carriers data networks are not exactly resilient.

    3. As this post says, a total lack of carrier control. If you have ever met with a carrier you know that they are control freaks, and are terrified of compromising the network.

    Just because someone shows them a shiny iPod with a microphone doesn’t mean they are going to roll over.

    I’m sure I’ll still buy one eventually, but lets not get ahead of ourselves, shall we?

  21. Interesting post. Makes me courious about the things to come with the iPhone.

    Until now I am quite happy about the liberties my Nokia E61 gives. It already feels like a small computer where I can install the applications I like. But there could be more of them.

    I very much like the idea that my phone could behave the same way as my computer because they use the same browser.

  22. The ‘real web’ is certainly the clutch feature in the iPhone’s arsenal- and once again their distribution of a development ecosystem is as strong as anyone’s. Redmond will have a tough time moving a proprietary mobile silverlight in the face of the Safari apps which will probably work in Firefox and Opera as well.