Forbes published an article yesterday titled “Why Your Smart Phone Is So Stupid”. The article is about whether or not telecommunications companies are abusing their market power and hurting innovation. Let us know your thoughts!
Why Your Smart Phone Is So Stupid
Brian Caulfield, 07.08.09, 06:00 PM EDT
That shiny new phone? It’s been crippled by your carrier. But is that a bad thing?
BURLINGAME, Calif. — Whether you own a multimedia-packed Sony Ericsson or an iPhone, the handset you carry around these days is pretty smart. It’s not as smart as it could be, however.
That’s because if you want to exploit a phone’s capabilities in the U.S., you’ve got to go through the carriers, entrepreneurs say. It’s expensive. It’s slow. And you have to do it again and again for each carrier.
It’s a process that could soon receive fresh scrutiny. The U.S. Department of Justice is investigating whether big U.S. telecom companies have abused their market power, The Wall Street Journal reported. The federal government may ask questions about whether wireless carriers are impeding competition through various practices, such as locking up popular phones with exclusive deals that can make it tough for software developers to break through to a mass market.
It’s as if you had to buy a computer tailored to your online service and could only use the software that that online service lets you use, says David Grannan, chief executive of Vlingo, which provides speech recognition software for mobile phones.
The flip side is that carriers can also unlock big opportunities for entrepreneurs with the resources to build showpiece software. “That’s where the real investment opportunity is. It’s just much harder to get to: a high-value application that the carrier really cares about,” says Salvatore Tirabassi with M/C Venture Partners, a Boston-area venture capital firm that has backed MetroPCS and mobile e-mail software developer Seven Networks.
There is a price to be paid for a system that hands carriers so much clout, however. GadgetTrak founder Ken Westin, for example, gave up an effort to put his mobile-phone tracking software onto Sony Ericsson handsets last year.
GadgetTrak’s software goes to almost comical lengths to help customers find their phones. It can help you track it based on GPS and cellular network signals. It can sound an alarm or send a message to the device. And if that doesn’t work, it can remotely backup your contacts, before wiping the phone clean.
But while Westin’s software worked fine on the phones Sony Ericsson sent him, it didn’t work on the phones most consumers carry. Some of the software hooks that programmers rely on to make their applications run had been turned off.
Westin’s business case for developing for Sony Ericsson’s handsets evaporated. To make his software work on handsets distributed through AT&T ( T – news – people ), Westin would have to go through a long and expensive certification process. Then he would have to repeat the process with each carrier.
Apple’s ( AAPL – news – people ) iPhone, of course, has broken that pattern, somewhat. While developers building applications for the iPhone bypass AT&T and submit their software directly to Apple, the phone’s App Store merely substitutes AT&T’s walled garden with Apple’s.
And even the iPhone has been dumbed down for the U.S. market. While the new iPhone allows users to use the phone as a modem for their other devices, the feature isn’t available on AT&T, which has an exclusive contract to sell subsidized iPhones in the U.S.
Yet the same barriers that make it a challenge for one entrepreneur to build software for a wide array of phones can provide an express lane for others. A large carrier can provide some order to a market fragmented between hundreds of handsets running on a half dozen major software platforms and a handful of different wireless protocols.
“If the operators have a monopoly, it’s a pretty awful monopoly, with three giant competitors and a lot of upstarts nipping at your heels all the time,” says Dan Shapiro, chief executive of Ontela, a start-up that helps users manage the pictures they snap on their mobile phones.
Moreover, most phones are subsidized by carriers. Without those subsidies, the feature-packed phones carriers hand out for free would cost several hundred dollars. “They’re subsidizing a significant portion of the handsets. If they’re paying for it, it doesn’t surprise me that they’d want to exert some control over it,” M/C Ventures’ Tirabassi says.
In other words, you get what you pay for. Want a really smart phone? Maybe you should reach into your wallet and pay for it yourself. The problem: With so few customers in the U.S. willing to do so, who will build the software that will make that worth your while?