Who Closed the iPhone? The iChat Test

This is the 20th posting to this blog. Since I vowed to limit iPhone coverage to no more than 10%, I felt it was time to write the iPhone post that prompted me to blog in the first case. (I’ll quickly gloss over the original ideas to get to the new stuff).

The most complete (positive) coverage came from David Pogue (with his hands on and later FAQ), an excellent writer, former Macworld columnist and author of various Mac books. The most complete list of iPhone gripes (parts 1 and 2) came from Jason O’Grady. The best analysis is from Mike Mace (former strategist for both Apple and Palm), who say that “It’s not a phone, it’s a PDA done right” and that “it changes the terms of the debate for everybody.”

Many have complained about the price — $500 with a contract, equivalent to $700 without a contract. But as Steve Jobs said, the price will come down over time. Let’s not forget that people said the same thing about the $400 price of the original iPod in 2001. Since then, Apple has released more than a dozen models and today has a product family of 5 models ranging from $79 to $349. So in 3-4 years, Apple is going to have a family of iPhones for different users and price points. To use the iPod analogy, some will have bigger screens than 320x480, and some will have smaller screen (or maybe even buttons).

With those user issues out of the way, I wanted to focus on the central iPhone issues for this blog: how closed is the iPhone, is that a bad thing or a good thing, and who dunnit?

In the open innovation sense, it’s more open than a typical Nokia phone or Matsushita phone, in that Apple doesn’t try to make its own chips or hardware: we all know that today Apple specs a design but all they make is software. The iPhone is made by Hon Hai, which began its relationship with Steve Jobs and Apple making iMacs.

The two major ways that the iPhone is closed are on distribution and 3rd party applications.

After Verizon reportedly turned down Apple’s conditions for carrying the iPhone, Apple made it exclusive to Cingular. Tom Evslin (a friend who developed Mac fax drivers when I did printer drivers) wrote

While the GUI is new, "the business relationship is as old school as it can get: exclusive US distributorship through Cingular (which will soon be exclusively owned by AT&T).

However, some believe the 5-year exclusive is only for this model, which would make sense because Apple won’t achieve its desired volume putting all its American eggs in the Cingular basket. But obviously Apple prefers to closely control the distribution of its products, as demonstrated since its Apple store days.

The more obvious lack of openness is the ban on downloadable applications, except for widgets. My initial reaction is that this was a reversion to Steve Jobs’ natural instincts. The Lisa was almost entirely closed, then Apple widely sought third party applications for the Mac. (Mike Mace, who as Apple’s Director of Competitive Analysis knew Jobs better, has another theory)

The two forms of closed-ness are allegedly linked, as with this quote of Steve Jobs by Apple chronicler Steven Levy:

“You don’t want your phone to be an open platform,” meaning that anyone can write applications for it and potentially gum up the provider's network, says Jobs. “You need it to work when you need it to work. Cingular doesn’t want to see their West Coast network go down because some application messed up.”

However, Cingular already sells 4 different types of phones that take downloadable applications: Symbian, Windows Mobile, Palm OS (i.e. Treo) and Blackberry. For me, many an airport wait has been ameliorated by playing Leo Singleton’s hearts on my Treo 650 (or Samsung i500 or Kyocera 7135 6035). Of course, if you allow the application to control the phone layers, you need signed applications, but that’s not rocket science. With the Unix-strength memory protection of OS X, it seems straightforward to allow limited-functionality applications today — not just a widget implementation of solitaire, but real OS X programs as long as they don’t touch the network access code. The technical problem is an easy one.

A big problem is that Cingular (now AT&T) prefers a closed business model. For example, they finally introduced a Symbian OS phone, the Nokia E62, but it’s just the Nokia E61 with WiFi deleted; Cingular doesn’t want WiFi Skype on any phone.

Evslin and Mace are both smart guys, but right now I’m going with Evslin (or Charles Ferguson) in blaming US cellular carriers for the ongoing barrier they pose to industry development. First, the heavy upfront handset subsidies (rare until recently in Europe) make the lock-in motivations irresistible. Second, the top carriers include the two largest U.S. local exchange carriers, plus Europe’s largest LEC; Sprint is the exception after its Embarq spinoff. The two vertically-integrated Baby Bells (plus Deutsche Telekom) like to control cellular customers, because that was their wireline modus operandi. Steve Jobs himself complained about likely industry barriers at the May 2005 “D” conference.

Here I propose the iChat test of closed-ness. If you can do iChat AV videoconference on your iPhone without going on the telephone network, then Apple’s the one locking the doors. If not, blame it on AT&T/Cingular.

Update (11:30am): According to David Pogue’s FAQ, it already fails the iChat test, suggesting Cingular is the culprit. But if it lacks Java web pages (and maybe Flash too), that would be Apple’s decision.

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