Last Updated May 11, 2010 1:52 PM EDT
The rumors have always circled, but now they're getting more and more voluble, as Engadget writes. While this kind of banter is usually limited to geeks and fanboys, the terms of AT&T's (ATT) extant five-year contract with Apple (AAPL) have suddenly become mainstream discussion fodder. Over the weekend, two not-typically-geeky friends asked me if the rumors were true, gripping their battered Verizon flip-phones in excitement.
As most anyone who tracks these things will tell you, it would be terribly uncharacteristic of Apple to release a CDMA iPhone right now. But what's more important is how incredibly disastrous it would be for the smartphone market if Apple did. So damaging to the competitiveness of the mobile sector, in fact, that it should leave us all wondering if Apple is actually ruthless enough to go with Verizon right now after all.
Consider Farhad Manjoo's recent diatribe against the FTC's antitrust investigations into Apple and Google (GOOG) for their respective mobile advertising deals. He argues that both companies, which make the two most popular smartphone operating systems on the market, iPhone OS and Android, are engaged in nothing more than healthy competition:
But that's just the thing--they're both very powerful. If you have to ask whether either Google or Apple is too big for the mobile business, isn't that a pretty good sign that neither one of them is? Only one of them can be a monopoly, after allTrue enough, Farhad: the inchoate mobile sector actually has several viable platforms. Palm's webOS has earned itself an estimated $1 billion shot in the arm with the HP (HPQ) acquisition; Windows Phone is looking killer; several developers have told me that interest in RIM's (RIMM) underserved Blackberry app platform is growing. Twenty years ago, when the tech industry was watching Windows and the Mac OS duke it out for desktop dominance, there were only two truly viable players. In mobile's OS wars, there are at least five.
But if Verizon's customers suddenly gain access to the iPhone, that fragile competitive ecosystem would almost certainly collapse, and it would be Windows 95 all over again.
Why? The iPhone has much better brand recognition than the legions of me-too Android phones, all of which have their own marketing campaigns, hardware, and advantages. (For some proof of the branding problem, read the user comments here and here). Phonemakers like Samsung and Motorola (MOT) are still trying to figure out how to distinguish their offerings, and in Motorola's case, that's meant making some mistakes; its early iterations of Android have been entirely hit (the Droid) or miss (the Cliq). Only HTC has really done great things with Android so far, but they've spent so many years behind the scenes making carrier-branded phones that most consumers have no idea who they are.
The iPhone, by contrast, has a stellar marketing machine behind it, and a whole suite of devices (iPod, iPad, Mac) that to keep the press mill going. If an Apple phone came to Verizon, that carrier's 90 million customers would buy it in droves. That's part of the reason we're hearing so much excitement about these rumors: pent-up demand for a big red iPhone.
Sure, Android sales have been booming -- but only as people reach for a simulacrum of the iPhone, which has become eponymous with "the smartphone experience." Broaden the reach of the iPhone and demand for Android phones would collapse, making the iPhone the de facto smartphone platform, its closest competitor deflated.
Android is in a particularly vulnerable position right now: it hasn't yet birthed its defining features, although it may be very close, owing to its acquisition of BumpTop, as I argue here. Not close enough, however, to withstand and iPhone-Verizon deal. Given nine more months or a year, it might be able to hold its own against the iPhone, not only in feature parity (which it has arguably reached) but also in branding.
Should the iPhone suck the wind out of the Android boom right now, it will only make Apple's iAd platform that much more attractive. And more ad money goes into iAd buys, the more money will go into iPhone development, and vice versa, in a virtuous cycle. Since creating an app for iPhone relies upon the OS X integrated developer environment, or IDE -- the last revision of Apple's terms and conditions precludes the use of third-party tools like Adobe's -- that means more developers pouring time and energy into learning Apple frameworks, objects, and design conventions. The more time they spend in Apple's sandbox, the less time and inclination they have to play in those of others.
This doesn't so much matter now, when most apps are relatively simple (by computing standards). But with multitasking and faster chips on the way, iPhone programming is going to reach new levels of complexity, demanding more training, more learning and more time. If the iPhone is the far-and-away most profitable platform, developers will be locked into the Apple environment, and the others will more or less starve for cutting-edge apps. And since the quality of apps is ultimately what appeals to buyers -- witness Verizon's "Droid does..." campaign -- iPhone app superiority would be a real death knell to the competition.
Competition breeds faster innovation and lower prices for everyone; let's hope, for the sake of the consumer, that this market continues to exhibit it.