Choice, end to end control, distributed innovation and that iphone thing

A lot of chatter about the iphone — just read Dave Winer's piece — lots of conspiracy theories about how real the Job's demo was and people are starting to focus on the question of how closed the platform is.  Jobs has said that the platform will allow third party development but it will be "restricted" and managed — like ipod games.  Apple believes that in order to get a product into market — out of the box — end to end control of the hardware and software experience is the easiest and fastest way to deliver something that works to users.   This worked in the case of the ipod — it wasnt the first MP3 player to hit the market, it was just the first to work as seamlessly as it did, from the device to the pc.   There are smart phones of many flavors out there today — but they all require a lot of setup, maintenance etc.  The iphone is clearly going to be different — take a look at the Pogue's list of what is does and doesnt do.    

Last year I lived in Italy for six months and I made some notes about what an insanely mobile the country was — 57M people with 70M cell phones.   There are more mobile phones here than fixed lines, estimates are that 18% of the population have cut the cord (chk). Kids and couples walk around listening to cell phones playing music, like 30 years ago people would walk around listening to a radio.    Someone we know was chatted up by a waiter at a restaurant — for follow up, he offered her a SIM chip instead of offering his phone number.   SMS is everywhere and its far more conversational than in the US. The rates and pricing plans push people to SMS.    Wifi is fairly available and the cell co's are clearly nervous about voip / skype – 3 (Hutchison Whampoa) has an offer in market for $15 a month unlimited voip calling to over 25 countries from your handset.    And in Italy Apple has next to no presence (as of 06 they had no stores and next to no market share).  In Italy Apple has next to no presence (as of 06 they had no stores and next to no market share).

Over time the iPod functionality needs to merge into the phone.     Yet Apple has created a business model that is based on tethering hardware to software and reaping all of the margins on the hardware.    The result is that music that I have "bought" on iTunes isn't transportable to other non apple devices.   I really haven't bought it, its a rental agreement – with the a right to listen to that music on 5 apple pc's / devices.  Jobs knows that the ipod is close to its peak and its time to move the ball — the question in my mind is whether open and unlocked alternatives — palm, symbian, rim and even linux phones can out run Apple. 

The pressure points are in my mind (a) apple's dependency on the ipod and its related business mode — the iphone needs to have everything the high end ipod has (focus will be on music, video and phone — watch how they execute on core ipod features (eg: access to itunes store from the device (which today is not available), music and video sharing (also not available)) and then non ipod functionality.    The phone is a messaging device, music and ipod functionality needs to balanced against great messaging capabilities — voice and text (Phones outside of the US are used more for messaging that voice — calling them phones is a cultural artifact — they are messaging devices with voice as a secondary features)   (b) apple's tie to cingular (2 years), and the associated restrictions this brings with it (re: no voip, open wifi roaming, no HSDPA/3g, requirement for a 2 year contract, no unlocked alternative etc.)  (c) the tension between a closed end to end platform with controlled innovation vs. an open platform with distributed innovation and lastly (d) the execution of the hardware / device and the lack of a keyboard.  If this is mostly a media device Apple will miss the broader market. 

I have no doubt people will buy this product — it seems like a beautiful piece of hardware and simply postioned as the highest end ipod it will find a market –  just like the nano or video ipod.  But neither the nano or the video ipod defined a new category — they were devices in a long stream of innovation that started with the orginal ipod.   The iphone needs to define a whole new stream of innovation independent from the ipod.  And the business model will likely also have to evolve — in more developed markets (south korea the flip has occurred to a subsription model, $5 a month for all the music you want / can eat).     I am going to be watching the pressure points listed above to see whether similar to the ps3 vs. Wii the lowend offer some real alternatives, without all the restrictions that Apple's business model now imposes on it as the category leader – the mobile world needs to see some real innovation and what I saw last week suggests that not going to come from Apple.