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1/10/2007
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Is A Closed iPhone Doomed To Fail?

Apple made a closed system work for the iPod. Can it do the same with wireless phones?

The blogosphere devoured news of the iPhone and now comes the inevitable indigestion. Among the various gripes about price, carrier exclusivity, a non-removable battery, lack of 3G support, and the inability to download or sync wirelessly, to name a few, it is the iPhone's closed system that may be the device's most controversial feature or flaw, depending on your perspective.

Apple proclaimed that it had "reinvented the phone with the iPhone," but as blogger and former telecommunications executive Tom Evslin pointed out in his blog, Apple failed to reinvent the phone business.

Asked about that observation, Tim Bajarin, president of consulting firm Creative Strategies, Inc., agreed with Evslin's lament. "That's because all of us hate the phone business," he said. "One of the things that a lot of us had hoped was that Apple was going to reinvent the phone business by becoming an MVNO [Mobile Virtual Network Operator], as opposed to working directly with a carrier and being stuck with a carrier's rigid rules."

The Apple iPhone will not allow users to install their own software. It is a closed system, or so it appears at this point. Apple declined to elaborate on whether third-party developers might be able to petition Apple to get their software onto the iPhone. That means users will be unable to do things like install Skype for cheaper calling.

Venture capitalist and blogger Paul Kedrosky sees this as the kiss of death. "Is Apple serious that it won't let third-party developers build software for the thing?" he asked in a blog post on Wednesday. "If so, and put simply, the device will fail. A closed-box consumer electronics mentality will work in music players, but the future of mobile devices is as a platform, and that requires developers."

Closed systems, moreover, are out of vogue. Amazon, Google, Yahoo, and the rest of the Web 2.0 crowd have made virtue of open-source software and of open networks. Many of those that held out against the tide, like AOL, have since converted. Even Microsoft has opened up, in part because its customers demanded it. Only the phone and cable companies want to remain closed, which is why, as Bajarin put it, everyone hates them.

Not everyone agrees closed systems are doomed, however. "It hasn't hurt the iPod," said Bajarin, who added that a closed system may be better for the iPhone, too. "One of the things that Apple wants to be very clear on -- this is an important control point for the user interface -- is they want everything that is done to work around the UI conventions that are fundamentally scripted by Apple, so there's a single user interface across every application. And if you open that up to third-party developers, that won't be the case."

In fact, the iPod thrived by being closed enough to win the participation of the music industry with a system that deterred song copying while simultaneously being open enough that users could copy songs with a bit of effort. The iPod did not stop illegal copying but it certainly has transformed the music industry. It was a Trojan Horse for change.

The iPhone may well manage the same feat. It is closed enough to convince Cingular that it can continue with its business model and open enough to give users something better: the Internet. That's how third-party developers will provide software for the iPhone -- they'll write Web apps and users will access them using the iPhone's Safari Web browser. Apple's heavy hand will make sure it looks nice.

Within a few years, it will become clear that the Internet is a far better network for communications than the phone system. Cellular connectivity in the iPhone will serve the same function as the VHS slot found in many DVD players: legacy support.

On the other hand, that may just be wishful thinking. Bajarin doesn't see change coming to the telecom sector except through an act of Congress. "It's got to be regulatory," he said. "None of these guys are going to give up any territory that they have tight controls over without a fight."

Of course, the same might have been said about the music and film industries a few years ago, and now they've mostly fallen in line behind Apple.

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