Friday, July 25, 2008

Good news for mobile phone industry

Two developments this week presage well for the mobile phone industry, despite declining consumer confidence in the US that seems to be spreading elsewhere.

Most concretely, Qualcomm and Nokia settled their patent dispute yesterday with a 15-year licensing agreement and termination of all existing disputes. Given the pivotal role the two play in the industry, I have to think that having the two companies working together will help the industry more quickly develop and deploy new wireless technologies.

More subtle is the broader implications Handango CEO Bill Stone sees in Apple’s July 12 rollout of its iPhone 3G, specifically the new App Store. In RCR News, Stone argues that the success of iPhone apps will help sell more applications for all smartphone platforms.

Normally, I’d be skeptical about his claims. After all, in August 1981 Apple took a full page ad in the WSJ welcoming IBM to the PC industry. Fifteen years later, facing the deluge of Windows 95 Apple was on life support en route to certain bankruptcy.

However, Stone makes three convincing points — so convincing that I wish I’d made them. (Actually, I did make one).

  • Having more people install apps will raise the awareness of applications among owners of all mobile phones.
  • As I’ve argued, competitors won’t sit still: Apple’s efforts will cause competing handset makers and carriers to redouble their efforts to create and distribute compelling applications.
  • Apple’s success in bypassing the carriers will encourage more experimentation beyond just the carriers’ (largely failed) walled gardens.
Despite his blatant self-interest, I think Stone has it exactly right. There are only two ways to fight innovation: with price cuts or more innovation. In the developed world, the cellphone industry depends on replacement sales to maintain revenues: people don’t buy a replacement phone because it’s cheap, but because it offers something they don’t have in their current phone.

So both developments are good for innovation in the industry, particularly in pushing users away from cellphones as merely voice terminals and towards their ubiquitous adoption as converged computing and communications devices.

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