The March Of Mobile Phone Progress Isn't Always Smooth Or Direct

from the be-patient dept

Tim Wu is discouraged. Writing in Slate last week, the telecom expert lamented the terms he's facing as an aspiring iPhone 2 owner: a two-year AT&T contract thanks to the handset's newfound inability to be unlocked and a move toward a more conventional subsidized handset model. Wu sees this as emblematic of a shift in the mobile industry:

The fact that someone like me is switching to AT&T is a sign of the times in the telephone world. The wireless industry was once and is still sometimes called a "poster child for competition." That kind of talk needs to end.

He's right -- but then, that kind of talk shouldn't have been started in the first place. The mobile market was defined by long contracts, locked handsets and a lack of prepaid options long before Apple arrived on the scene. Now it appears that it'll remain that way long after Apple.

Admittedly, this is a disappointment. Many looked at Apple's choice of a second-rate carrier -- one they could bully around -- as a sign that everything was about to change. Finally a handset manufacturer had arisen that was powerful enough to break the industry's self-serving revenue model and empower consumers! With the recent declaration of the iPhone 2's retreat toward conventional industry shadiness, those counting on Apple's benevolent technological dictatorship have found themselves disappointed (as they have before, and no doubt will again). They were fooling themselves anyway: did anyone really think Apple was going to tolerate phone unlocking forever?

But the outlook isn't all grim. As Wu notes, the Google-led Open Handset Alliance is trying to follow in Apple's footsteps with its own game-changing, must-have handsets -- only this time there seems to be a more expressly ideological slant to the effort. And Verizon's Open Development Initiative, while less than perfect, is perhaps even more encouraging in that it shows the industry has begun to acknowledge the market's need for more flexibility in data services.

And that's the real reason for hope: the march of progress. Anyone who tries to paint the mobile industry as the picture of efficient market competition is either in denial or deeply dishonest. But wireless services will inevitably become more important and more available, whether thanks to WiMAX, revived municipal wifi projects (now without capital costs, thanks to the magic of bankruptcy!), spectrum freed by digital broadcasting, or some other wireless technology. The mobile carriers haven't been great at competing amongst themselves, but you can bet they'll begin responding once consumers have reasonable alternatives.

Tom Lee is an expert at the Insight Community. To get insight and analysis from Tom Lee and other experts on challenges your company faces, click here.

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If You Define the Market Narrowly Enough, Monopolies Are Everywhere

from the fun-with-definitions dept

It's almost become a cliche to note the decline of Microsoft as a competitive force in the software industry. True, it's still a large and profitable company, but it's been consistently unsuccessful in its attempts to dominate new markets the way it did in the 1990s. The XBox and Zune are fine products, but they're not market leaders. Neither are its software offerings. Microsoft's mobile OS is getting clobbered by Symbian and faces more stiff competition from Blackberries, iPhones, and soon Google phones. Its online offerings often run in third place behind Google and Yahoo. Internet Explorer is still the leading browser, but competition from Firefox and Safari have brought its market share down from 95 percent in 2004 to 82 percent today. This sure looks to me like a vigorously competitive market.

However, in recent filings, ten states and the District of Columbia argued that Microsoft is still a monopoly facing no serious competition from Google, Mozilla, or other firms. They're seeking to have federal monitoring of Microsoft's business practices under antitrust law extended until 2012. To make their case, they've stuck to the narrow definition of the relevant market they adopted in the 1990s, arguing that Microsoft has a monopoly for "Intel-compatible PC operating systems." I'm not sure that definition made sense in the 1990s, but it certainly doesn't make sense now. Microsoft's smartest competitors haven't attempted to launch a frontal assault on the company's operating system business. Instead, they've focused on beating Microsoft in related markets, including search engines, mobile phones, music players, and consoles. Companies like Apple and Google now enjoy commanding market shares in those markets, and their dominant position in those markets gives them considerable leverage and customer loyalty. If Microsoft forced its customers to choose between Windows or iTunes, or between Windows or Google, a lot of them would choose the latter. There's no longer any serious reason to worry that Microsoft's large Windows market share will allow it to squelch innovation in the technology industry, because Microsoft now faces a lot more competition on a lot more fronts than it did in 1998. The rise of web-based applications has made it far easier for companies to get their products into consumers hands, and the rapidly-growing mobile market gives companies some new platforms to target that aren't controlled by Microsoft. Most of this competition is outside of the "Intel-compatible PC operating system" market, but that definition of the market was always somewhat arbitrary, and it looks ludicrously narrow now.

Timothy Lee is an expert at the Insight Community. To get insight and analysis from Timothy Lee and other experts on challenges your company faces, click here.

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