The backstory of last year’s film Tron: Legacy picks up where the first film left off. Kevin Flynn teams up with Tron to create a new Grid, one meant for programs and users. But Flynn realizes that he can’t be in the system working on this constructed world all the time, so he creates another program, CLU, to help with the effort. Together, the three of them work on creating this new perfect system.
Then something happens.
I’m reminded of this story when reading Kevin Fox’s post last night entitled: Is Microsoft trying to end the reign of mobile carriers? (MSFT+Skype+Nokia). In it, he lays out a scenario in which Microsoft uses their acquisition of Skype alongside Windows Phone 7 and their new deep partnership with Nokia to disrupt the system that we’ve all been familiar with for far too long: carrier dominance. Their aim is to create a new Grid, if you will. And they’re not alone. Google and Apple are also working on this goal. Flynn. Tron. CLU.
When you read it, it sounds great. But just like in the movie, something is going to happen. Because we’ve actually already seen it happen before.
Back in January 2010, following Google’s much-hyped Nexus One unveiling, I wrote a post entitled: Apple And Google Just Tag Teamed The U.S. Carriers. In it, I argue that the biggest part of Google’s announcement wasn’t any one device, it was the new model they were putting out there. Google’s ambition to sell devices directly to consumers would build upon the consumer-friendly mobile foundation laid by Apple with the iPhone. Under the new system, consumers would go to a website and click on the phone they want, click on the carrier they want, and boom, they’re done. This was going to change everything. It was going to be beautiful.
Then something happened.
While Apple (some would say stubbornly) clung to their exclusive agreement in order to continue to bend AT&T to their will, Google backed down. When it became clear that the Nexus One was simply not selling, Google seemingly panicked and went running with open arms to the carriers.
“Open” is the keyword there. Google spun this close relationship with carriers like Verizon as giving consumers more options, more choice. This was “open”. It was also “open” in that the relationship allowed Verizon and the other carriers to begin taking advantage of Android and use it for their own, insidious purposes. And the OEMs too. We’re seeing this now with Android devices that aren’t upgraded to the newest builds for months (and sometimes not at all), pre-installed bloatware apps (that can’t be uninstalled), new carrier-run app stores, etc.
The carriers and OEMs are slowly but surely using Android to ensure that we stay a world in which they’re in control. And I’m sorry Android fans, but Google is letting them. The company showed so much promise in their initial Nexus plan. And as we hear it, Google initially had even more ambitious plans for the Nexus phones — how does a $99 unlocked Android phone sound? But the carriers quickly brought the hammer down on these plans. And Google, making a business decision, abandoned them.
So you’ll forgive me if I’m skeptical when I read Fox’s grand plan for how Microsoft is now going to come along and reshape the industry. As he notes:
Making calls, placing calls, searching for signal and scrimping minutes hasn’t changed much since the mobile phone came out, because carriers have little incentive to innovate. Mobile carriers make their money either way, and ‘innovation’ comes down to increasing the bottom line, whether it’s charging $1,300/megabyte for text messages or adding 20 seconds of instructions on how to leave a voicemail so that the carrier might get an extra minute’s revenue.
Not only do the carriers have little incentive to innovate, there are plenty of disincentives if they innovate — or let others innovate. Everything that changes has the potential to ruin their model. And worse, changes that are adopted take away their control. Now that Verizon has given into (most of) Apple’s demands and gotten the iPhone, they’re saying all the right things about their love of the device. But the truth is that they hate it. They hate its very existence because it’s a very slippery slope for them. It points to a future where they’re no longer in control.
So why bother offering the iPhone at all? Because consumers demand it. Again, this is what really scares the shit out of the carriers. Consumers in control.
And that’s where Fox’s Microsoft plan may run into problems. Using Windows Phone 7 with Nokia hardware and Skype built-in all sounds great, but how is Microsoft going to sell them in any meaningful capacity? By pretty much all accounts, Windows Phones are not selling very well at the moment. Nokia phones have never sold well in the U.S., and their market share is quickly declining worldwide. That’s not to say both of those things can’t be turned around, but it will be very hard. Google and Apple are now the entrenched players with RIM also strong (though also seemingly in decline).
The easiest way for Nokia Windows Phones to get traction will be with the help of — surprise — the carriers. And do you think they’re going to help if Microsoft/Nokia plans to screw them? Perhaps Google can best answer that question.
As I see it, Apple is now the only short-term hope for true carrier disruption. Why? It’s simple, really.
Apple’s insanely successful retail stores give them one huge piece of leverage that the others don’t have. If a consumer wants an iPhone, they don’t have to go to an AT&T store or a Verizon store, they can just go to an Apple store. If a consumer wants an Android phone, it’s carrier or bust. (Again, this is why it’s so disappointing that they killed the website idea — it would have taken a long time to take off, but it deserved more time.)
Microsoft has their own retail stores as well, but there are only a handful currently. And it’s far from clear if they’ll ultimately work out or not. If they do, great. Then maybe Microsoft will have a shot at mobile industry disruption. But without them, they need the carriers.
It’s because of the retail stores that Apple is able to possibly do things like create a carrier-crippling SIM card, as has been rumored. Imagine having an iPhone that you buy at an Apple store that can seamlessly hop between Verizon, AT&T, Sprint, etc, as a consumer sees fit? That’s the dream.
Of course, even Apple is far from that dream at the moment. They too rely on the carriers for the all-important subsidy that brings the iPhone down to a reasonable price point. (Remember when the iPhone first was released and sold for $600? Apple had to learn a lesson the hard way as well.) But the talk of Apple working on a significantly cheaper iPhone may be related to this. Or there are other options…
…such as the “soft carrier” idea Fox talks about. If these phone makers can start getting customers to transfer more and more of their airtime minutes over WiFi, using things like Skype and FaceTime, things will get more interesting. But that’s going to be a very slow road.
Talk of change and disruption is great. But I’m skeptical since we’ve been here before. I have no doubt that things will eventually change — everything does. But it just seems like it’s going to take a long time and be more of a natural progression because the carriers aren’t stupid — they know that they still hold most of the cards. The only real hope in the near term may be for Apple, Google, and Microsoft to team up to turn the tables on the carriers. It would take a coordinated effort. But Google already walked away from one such effort.
It’s starting to sound like Google may be interested in trying again. And perhaps the shake up under new CEO Larry Page alongside Android’s now powerful market position will lead to that. But Apple and Microsoft have their own issues that they must overcome as well before we can start talking about the creation of a new, perfect system.
We’ll see. All I know is that it ultimately didn’t end well for Flynn, Tron, or CLU.
Started by Steve Jobs, Steve Wozniak, and Ronald Wayne, Apple has expanded from computers to consumer electronics over the last 30 years, officially changing their name from Apple Computer, Inc. to Apple, Inc. in January 2007. Among the key offerings from Apple’s product line are: Pro line laptops (MacBook Pro) and desktops (Mac Pro), consumer line laptops (MacBook Air) and desktops (iMac), servers (Xserve), Apple TV, the Mac OS X and Mac OS X Server operating systems, the iPod, the...
Google provides search and advertising services, which together aim to organize and monetize the world’s information. In addition to its dominant search engine, it offers a plethora of online tools and platforms including: Gmail, Maps, YouTube, and Google+, the company’s extension into the social space. Most of its Web-based products are free, funded by Google’s highly integrated online advertising platforms AdWords and AdSense. Google promotes the idea that advertising should be highly targeted and relevant to users thus providing...
Microsoft, founded in 1975 by Bill Gates and Paul Allen, is a veteran software company, best known for its Microsoft Windows operating system and the Microsoft Office suite of productivity software. Starting in 1980 Microsoft formed a partnership with IBM allowing Microsoft to sell its software package with the computers IBM manufactured. Microsoft is widely used by professionals worldwide and largely dominates the American corporate market. Additionally, the company has ventured into hardware with consumer products such as the Zune and...