Thursday, October 02, 2008

The State of "Openness" in the Wireless World

Two years ago, consumers began to get vocal about all of the closed aspects of their cellular experience. For some, it was the inability to take their expensive smartphone with them to another carrier. For others it was the disappointment of not having the same features that others with the exact same phone had only because they were with a different carrier. While there are a number of areas that could use some “openness” in wireless, I am going to focus on three areas from a PDA or smartphone user’s perspective.

PDA Operating Systems

Every operating system (OS) company has a different approach to how it provides its product to PDA manufacturers. Microsoft charges a royalty to manufacturers to use the Windows Mobile OS on its devices. Microsoft has many manufacturers who purchase and use Windows Mobile on their devices, but Microsoft doesn't manufacture any PDAs themselves. Because any company is welcome to purchase and use Windows Mobile, this has been the model of an open environment for more than a decade. Palm and Research In Motion (RIM) have long been held up as the poster children for the closed environment. Palm started out as the PDA manufacturer and the OS developer under one roof. Eventually another company licensed Palm's OS for its PDAs. This company was starting to challenge Palm's market share, so Palm purchased them (Handspring). Today Palm is its own biggest customer for the Palm OS. Although Palm still manufactures PDAs with the Palm OS, the majority of its revenue comes from the sale of Palm manufactured PDAs running the Windows Mobile OS. Research In Motion is also a PDA manufacturer and OS developer. Like Palm, the primary customer for their OS is themselves. RIM has made several attempts to establish relationships with other manufacturers. BlackBerry Connect, BlackBerry On Board and BlackBerry For Windows have all met with lackluster support from other manufacturers. So despite their attempts, RIM is still a model of a closed OS environment. Two new entrants to the game are taking completely different approaches to the issue of open operating systems. Google is an OS developer that does not manufacture PDAs. Like Microsoft, Google is relying on manufacturers to pick their OS for their devices. Google’s approach to distribution of its Android OS is to give it away. That is correct, manufacturers do not have to pay Google a dime to use their PDA operating system. Now how Google will generate a profit from free software is the subject of some future blog. For today, just know that Google is the new face of the open OS. The new face of the closed OS is Apple. Like Palm and RIM, Apple manufactures the PDA (iPhone) and has developed the OS. Where RIM and Palm made attempts to entice other manufacturers to their OS, Apple has made no such overtures to date.

Software Development and Distribution

For some people, the PDA is just another phone until they install specific software applications to turn it into a productivity tool. There are plenty of applications available for every smartphone and PDA on the market. Every device has a myriad of business and personal software titles available to them. There are two challenges to the consumer here though. Because each PDA platform uses a different operating system, software developers need to write a different version of their software for each platform. This either multiplies the work required to release and support a new program, or it forces the developer to limit the number of devices its new program will run on.

Another challenge is distribution. For many years a consumer could purchase software from the publisher, the carrier, or even on-line stores. Today this is not always the case. RIM, Microsoft and Palm have always allowed software publishers to distribute their programs as they saw fit. Apple brought a new model to the market in 2007. Apple added a cool application to the iPhone that allows users to purchase and install applications right from their handset. Apple was not the first to allow customers to do this, but they were the first ones to make it easy. The problem with the App Store concept is not in the technology, but in the business model. The App Store is the only source of software for the iPhone. This may simplify things for consumers, but it actually makes a software company’s life much harder. Not only does the company have another PDA platform to support, but it loses control of distribution. The company has only one distributer to work with; a distributer who has already set the product margins and marketing guidelines; a distributer who also reserves the right to refuse to sell the program if it chooses. In the Apple business model, there is no small distribution house that would be willing to take a chance on a strange, new, innovative application. If they can’t sell to Apple, they can’t sell to anybody. Google has adopted the App Store software model, but appears to be maintaining the open market stance of RIM, Palm and Microsoft. At least one on-line store has already announced that it will also distribute Google Android applications through its own application store. Again, Google follows the open road.

Carrier Availability and Portability

Carrier portability refers to a user’s ability to use their existing PDA with another carrier if they choose to change carriers. In some cases this is a technical issue. AT&T and T-Mobile use one technology (GSM) while Alltel, Sprint and Verizon use another (CDMA). This means that today it is technically impossible to take an AT&T BlackBerry over to Sprint’s network or for a Verizon customer to bring their Treo over to T-Mobile. In the case where a customer wants to move from one GSM carrier to another GSM carrier or one CDMA carrier to another CDMA carrier, it is more procedural. Carriers add value to their offering by pre-configuring their devices with network settings and software. When a Sprint customer wants to take their Windows Mobile device over to Alltel, there are a number of settings that need to be changed or added to the device to ensure that it works well on Alltel’s network. Some technically savvy customers do this themselves on a regular basis. The existing steps are not for the faint of heart and by no means customer friendly. Another option that is available today for GSM customers is to purchase an “unlocked” PDA. These devices work equally on AT&T or T-Mobile but do not include any of the customization that the carriers do before shipping their own branded phones. Each carrier announced plans to make carrier portability easier for its customers, but only a handful of devices (modems and industry specific devices, no consumer or business PDAs) have been certified by the carriers.

Carrier availability refers to the availability of certain PDAs on each carrier’s network. For example, while I can’t take my T-Mobile BlackBerry Curve with me if I move to Sprint service, I can purchase a Sprint BlackBerry Curve so that all of the software I own is compatible and so I don’t have to learn a whole new system. While there are a number of exceptions, the vast majority of devices on the market have versions for each of the carriers. One notable exception is the Apple iPhone. Now it is not unusual for a carrier to negotiate a period of exclusivity when they introduce a new phone. In most cases this is 30 or 60 days. This means that when AT&T launched the BlackBerry 8800, T-Mobile wasn’t able to sell it until 60 days after AT&T introduced it. Verizon and Sprint launched their BlackBerry 8800s a short time after T-Mobile. Today, every carrier sells a BlackBerry 8800 series device.

One phone has ignored the concept of openness in terms of carrier portability and carrier availability. That phone is the Apple iPhone. Apple doesn’t just tweak the phone’s settings to make it work better on AT&T’s network; they actually program the phone to fail if you try to change those settings. On top of that, Apple is rumored to have granted AT&T a five year exclusive. This means that the only way to get and use an Apple iPhone is to sign a contract with AT&T.

Amazing isn’t it? Two years ago the consumer was asking for open networks and open software. A year later Apple replied with the only phone in history where the manufacturer was the same as the operating system developer and the sole source for software solutions. At least you can buy the phone from one of three dealers (Apple, AT&T and Best Buy).

As you can see, the call for an open cellular experience has been met with very contradictory responses. Like most PDA enthusiasts, I will watch the evolution of the market to see who comes out with the best hardware and software. I will also be keenly aware of which manufacturers and carriers decide to open the cellular experience and which ones decide to put the prison on lock down.

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