Vision - May/June 2008 - (Page 8)

c4 trends viewpoints on Ce evolution ] • [ by susan sChreiner Service providers are beginning to recognize that some movement toward open standards may be appropriate and in their long-term best interests. Scaling the Walled Garden W 8 May/June 2008 hile mobile handsets have skyrocketed in popularity in the U.S., the functionality and applications have not kept pace. One of the main challenges inhibiting greater innovation, range of services and creativity is that the networks today do not permit the use of open devices and software. Virtually all phones and embedded software in the U.S. are controlled by the telecom service provider, in what is known as the “walled garden.” While some shifts are the result of government pressure and/or regulation, service providers are beginning to recognize that some movement toward open standards may be appropriate and in their long-term best interests. The need to compete may force acceleration of adoption of open standards. 1 2 34 Kamalova/Getty Images A number of significant developments are unfolding that offer greater clarity about future direction, trends and new business models that will impact the consumer technology business. Look at what happened several months ago with pricing in the U.S. market. While all-you-can-eat plans for cable, Internet and wire-line are common, in February this phenomena hit the cell phone business. Within hours of Verizon announcing its $99 unlimited mobile calling plan, the other three carriers matched and even cut their pricing policies. The lesson is that once open standards get a foothold, natural market competition will lead to broad-scale adoption. In March, the FCC mandated open access, and when the 700-MHz spectrum auction was completed, Verizon and AT&T were the big winners. These open access rules call for the ability to use any phone on this spectrum, and those phones do not need to use the software provided by the cellular provider. So now some of the same players may control the spectrum, but they are required to loosen control over their portion. This is the first time that cracks have appeared in the walled garden without the use of illegal hacking. When Apple’s iPhone came out in the summer of 2007, it was yet another walled garden—a locked device with tight control over the software. Apple cut separate deals in each country with only one company offering Apple iPhone service (AT&T in the U.S., O2 in the UK, T-Mobile in Germany and Orange in France). However, recent events suggest that this may be changing. Last December, the German courts mandated that consumers be allowed to buy unlocked iPhones without buying a T-Mobile contract, allowing them to use Vodaphone as an alternative provider. T-Mobile complied, but set the price for an unlocked phone at 999 euros, vs. 399 euros for a locked phone as part of a T-Mobile package. While the court’s ruling was overturned shortly after, the point was made that governments could mandate the use of unlocked phones. If they won’t, the grey market may intervene. Evidence points to Apple and the discrepancy between the number of iPhones that Apple announced as sold, vs. AT&T’s reported iPhone contracts. Apparently massive quantities of iPhones have ended up in China, where they are being used in unlocked mode. Apple’s recent moves suggest that they are rethinking their card-carrying membership in the walled garden. In February, Apple released an iPhone SDK (software developer kit) to allow third parties to write software for the iPhone. One reason was to facilitate iPhone use by businesses; another was to counter the Google Android SDK threat. Consider this factoid: in the first four days of its launch in March, more than 100,000 iPhone developers downloaded the iPhone SDK, according to Apple. Leading developers such as AOL, Electronic Arts, Epocrates, salesforce.com and Sega already have demonstrated innovative applications using the SDK, and developer response continues to be phenomenal with more developers embracing the platform. In anticipation of the availability of the new 700-MHz spectrum, 34 companies formed the Open Handset Alliance in November 2007. Founding members included Google, Motorola, Nvidia and Qualcomm. The goal was to develop open standards for mobile phones, using the Android platform developed by Google and based on Linux. Android is a direct attack on the walled garden of mobile providers and is a natural platform for phones and other devices using the new spectrum. Word is that many new conssumer devices built on this platform are in the works. Throughout 2008, watch how free market dynamics encourage innovation, as well as accelerate and revolutionize wireless connectivity and consumer technology. Please send your comments to susan@c4trends.com. • www.ce.org http://salesforce.com http://www.ce.org

Table of Contents Feed for the Digital Edition of Vision - May/June 2008

Vision - May/June 2008 Contents Shapiro's Spectrum In This Issue The Economist C4 Trends Visionary Making the Smartphone Truly Intelligent Shipping Strategies for CE Companies IP in BRIC Countries CEA Newsline Tech Speak Eye on Business Tech Policy Market Insider Just the Stats

Vision - May/June 2008

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