Thoughts on iPhone SDK and MS Exchange Support

I spent some time thinking about the SDK and MS Exchange Support, and apart from the obvious implications of Apple’s announcement, I think there is the more dramatic idea that this can really shake up the wireless industry in the U.S.

One of the biggest challenges that carriers face is not becoming a dumb pipe (like wireline internet providers). Right now, carriers control the distribution of apps, ringtones, wallpaper, games, etc. There are hacks to get around this, but nothing user friendly enough to be adopted by mass markets. These add-ons not only provide revenue for carriers, but also allow them to have significant control over the types of devices that are allowed on their networks. On the other hand, internet providers lost the content war in the late 90s (when AOL stopped being the portal of choice), and wired data has essentially become a commodity. This has increased competitive pressure, and carriers who cannot offer extra value through bundles (triple play phone-internet-tv) cannot compete. Wireless carriers do not want to become dumb pipes!

Apple is the only device company I can think of that has significant power to influence wireless carriers.  It has allowed for iPhone to make AT&T a dumb pipe. Once the Appstore is launched, AT&T’s value to consumers is dramatically decreased. The device gains more value than it previously had, and power shifts to device manufacturers (this is already clear with Apple charging AT&T $400+ per iPod user).

Another major player has been pushing hard for the same thing that Apple may be accomplishing – Google. Google succeeded in having the C-block of the current spectrum auction be open to any software. They even may have bid to ensure that the auction reaches the minimum $4.6bn. Google’s goal is to not become a wireless carrier; even if they win the auction, they will play as a wholesaler and sell the spectrum to MVNOs. Instead, they see huge revenue potential in mobile search, and need to ensure an open network so that all mobile users have access to mobile Google, which may be a larger revenue generator than PC search. Google is at a disadvantage as long as carriers have the power to block them from the market. Turning wireless carriers into dumb pipes is key for Google.

I think turning wireless data into something similar to wireline internet is also key for consumers. The U.S. telecom industry is notoriously un-innovative, and not consumer friendly. If more innovative companies such as Google and Apple gain access to consumers through mobile devices, the field will see a dramatic spark in innovation, which can only be good for consumers. The iPhone is a very cool device, however, its impact on the telecom carriers may be even more important than its pretty curves and slick user interface.