January 12th, 2007
End of the PC? No, iPhone is the end of the cell phone
You can read a lot from what the Apple iPhone will do, and surely there are a lot of glaring deficiencies. What can we read of them?
And what should we make of the iPhone's company on stage at this week's Macworld? Google, Yahoo, and Cingular. The best of the Internet, and arguably the worst of the cell and broadband wireless providers, albeit with some AT&T heft yet to be leveraged.
What this tells me is that Jobs and company are forging a bold stroke, and forcing a major confrontation. Ultimately, in the long run, would you as a business user and consumer rather have ubiquitous Internet access and VOIP, or the current piss-poor assemblage of mangled handset (but it's sleek and pretty!), hopscotch cell networks, analog-to-digital dreck, call drops and poor customer service, bad software, bad billing, and lack of integration to your PC and content?
The fact is that the needed convergence between handset makers, network providers, content aggregators, and software third-parties (including Microsoft, screwing around with Vista) have failed miserably — at least in the U.S. This has left a huge hole open through which Apple will drive the iPhone.
It's a longshot in the short-term, but if they succeed the cell industry will be soon shrinking rapidly into irrelevancy. All that wasted money! Too bad because all things will be Internet Protocol-based — the best true convergence. The Wi-Fi spots today will burgeon and blossom via new WiMax meshes, and later via satellite-based Internet canopies (for higher "roaming" cost, for sure). Your PC and iPhone (using the same guts and GUIs) will hop along an IP constellation, with certain "visitor" fees applied but no single-provider lock-in.
Connection costs should drop away; advertising-oriented services will pick up the economic slack. The true cost will be in buying the best devices, and pay-per-view content. You know, the Apple way plus the Google way.
The trick, as Apple well knows is to provide enough stick and enough carrot to drag the users to this inevitability. The design and feature set of the Apple iPhone as described is that combination of stick and carrot, and that best describes its odd selection of strengths and weaknesses. If successful the iPhone could destroy massive global industries while advancing the newer Internet-based companies, largely to the users' benefit.
Because if the software-hardware-UI designs are so compelling, as they seem … And if the voice capabilities can be good enough to just keep up with an existing mediocre cell service ecology … And if Google and Yahoo can provide the compelling content and services (and ad-based financial support) … Well, then the tug of the user may be enough to drag the telcos and others in the colliding industries along — or into the dust. The iPhone may be able to finally push all the convergence over to the top to all IP/VOIP/OS X all the time, everywhere.
And so what remains to sew up are the essential missing ingredients: the VOIP and sufficient WiFi/WiMax mesh. I expect that Google will soon unveil a beta VOIP offering. If they were smart they would share it with Yahoo, but not MSN. You recall that Google collects cell phone numbers when one signs up for certain Google "free" services, such as Gmail? These call numbers are convertible.
While I have been less then wowed by VOIP as a replacement for a landline, I expect that VOIP on a mobile device such as an iPhone would be an amendable transition from cell service, as long as I have sufficient mobile broadband. Google has most everything in place to do VOIP right, and, by the way, integrate its advertising and location capabilities right in there. Talk about a killer application.
Cisco will do quite well allowing these networks to work together well. They should get out of the way on the iPhone trademark and focus on the iRouter instead. One should know when they are a pick and shovel.
One corporation missing but not unfelt on the stage at Macworld was Intel. My blue-sky musing here would be pie in the sky without Intel as a behind-the-scenes kingmaker. Intel forges together the disparate architectures of the end point with the mesh. I'm thinking of the massive investment in time, clout and partnerships needed to bringing about the continental WiMax capabilities for the major metro markets. Perhaps the governments would like to weigh in? Would general productivity be in the national interest?
If this all somehow works out in near the fashion I envision then the U.S. approach could spread around the globe. That's right, no G3. No G3 ownership! Auction it all back and write off the loss. It all goes IP, and the same BRIC countries that like Linux may also like state-managed WiMax. The once-nationalize telcos will follow, no doubt.
So in June, vote with your dollars and drop your cell phone and pick up an iPhone. It's the Internet. It's the future.
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Dana Gardner is principal analyst of Interarbor Solutions. For disclosures on Dana's industry affiliations, click here or to view his full profile click here.
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