Government // Mobile & Wireless
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7/30/2012
01:39 PM
Mike Feibus
Mike Feibus
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The Death Of 'Open'

Apple controls everything from your hands to your head. Google and Microsoft are moving in that direction, too. Here's what the end of tech populism means for the mobile ecosystem.

When this century's platform war first flared up, it had all the trappings of a sequel to the epic battle between Macs and PCs.

But don't get sucked in. The current struggle between Apple, Google, and Microsoft is nothing like the quaint conflict between an open and a closed system. On the contrary. In this war between the smartphone and tablet platforms, it appears that all comers agree on that issue: It is better to have a closed platform.

That plops a lot of power into just a few hands. On a closed system, the platform provider takes on the role of middleman, lodged between us and the content we consume and the stuff we buy. At a time when Internet usage is shifting rapidly to smartphones and tablets--combined, they've already overtaken the PC in the United States, according to a recent survey--this has wide-sweeping ramifications. For consumers, it might mean fewer choices and higher prices. For Internet shopping outlets, it could translate into lost sales as the hardware hinders the direct line of communication you have with your customers. For Intel, Nvidia, QualComm, TI, and other mobile silicon providers, it means you will need to offer an entire platform solution to compete.

Amazon, are you listening? Obviously, you are. That's why you have your own line of tablets. And why you're expected to come out with your own branded smartphones. It's not a stretch to think that Amazon is developing its own OS. If I was Amazon CEO Jeff Bezos, I'd already have signed the check for that investment.

[ Read Apple Vs. Samsung Trial: What's At Stake. ]

The titanic platform battle now underway more closely resembles the early days of consumer Internet connectivity than the decades-old conflict between Mac and PC. Indeed, the playing field looks more like the arena that hosted the battle for our eyeballs--that's what they called page views in those days--between companies like AOL, Yahoo, and Prodigy.

They sold proprietary, prepackaged Internet experiences. And it worked for a little while. But as the Internet matured--and consumers along with it--they got left behind. In a sense, the old guard was peddling peepholes through a three-foot-high wall. Consumers quickly learned that they could just look over the wall without them. So they did. In retrospect, it's astounding that they remained relevant for as long as they did.

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This century's combatants have a far better chance of succeeding because they have much more control over your portal to the Internet. You couldn't buy an AOL computer. Now, though, you can buy an iPad, with a crafted Internet experience that includes a direct line to the music Apple sells, for example.

Indeed, Apple isn't really a hardware supplier anymore. Today, Apple is a content distributor. And the hardware is just a means of delivering the content.

In that sense, Apple has leapfrogged the level of power and control that record labels once enjoyed. Imagine what Columbia Records, EMI, or Elektra could have accomplished if they also designed and sold us our stereo equipment.

So the issue of open versus closed has been settled. Open lost.

Increasingly, the big players are adapting to this new world order. It helps explain why Microsoft isn't allowing competing browsers on Windows RT tablets. And why the company is developing Surface, its own line of branded RT tablets. And why it's only allowing a few system vendors into the fold.

It also lends credence to the speculation that Google may begin to focus future Android development on Motorola Mobility now that that acquisition is consummated.

For all their newfound power, though, there are limits to how much Apple, Google, Microsoft, and--one day, maybe--Amazon can exploit it. They are still operating on the World Wide Web, after all, the same wide-open connected platform that proved to be AOL's undoing.

Consumers will pay a premium for convenience, and that's the opportunity that smartphones and tablets afford the platform gods. It's why 7-Eleven thrives.

There are limits to that, as 7-Eleven knows all too well. We'll only pay so much more for a carton of milk at a convenience store. Price it too high and we'll just put the carton back and head off to the supermarket.

Today, our browser functions as the equalizer, the great supermarket in the sky that keeps the convenience store operators honest. But that leverage fizzles once the platform provider closes off and controls everything from your hand to your head. Apple is already there. Microsoft and Google are close behind. And Amazon looks like it's joining the pack.

We still have an open Web and open PCs. But when it comes to mobile, it's so far looking like any countervailing open alternatives are DOA. Without them, consumers and companies alike are facing a dim prospect--paying far more for far fewer choices.

Mike Feibus is principal analyst at TechKnowledge Strategies, a Scottsdale, Ariz., market research firm focusing on client technologies. You can reach him at mikef@feibustech.com.

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dschreiber
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dschreiber,
User Rank: Apprentice
8/5/2012 | 6:32:15 AM
re: The Death Of 'Open'
Not only is this article well written, stating the point with useful analogies and background, but I believe in your assessment completely. Apple IS becoming a content company. The only thing they don't own at this point is the delivery pipe. Imagine what will happen when they do. How is this not a monopoly?

This stuff is really scary and most people are oblivious to it. Not scary in the sense that you should run out and wrap your apartment in tin-foil to thwart aliens. No, scary in the amount of control a small number of organizations will have. I've tolerated this for years with Viacom and never been happy about it. The control is now shifting instead of the problem of diversification being fixed.

The internet allowed some period of being a level playing field for some time, but now it's the platform and hardware operators who are garnering control by attaching their equipment to backend services that don't allow much choice. And even when the consumer believes they're getting "choice" those manufacturers are holding hostage the content delivery mechanisms. Take for example the fact that Apple garners a premium from Verizon for being able to even offer the iPhone. That's a pretty backwards kickback system if you ask me - the consumer is led to believe that the device is $199 and that Verizon is the "expensive one" when they charge a PDA/Smartphone fee, or charge extra for data. Meanwhile, it's Apple that's fueling the demand and putting in these constraints.

Scary stuff indeed.
EVVJSK
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EVVJSK,
User Rank: Apprentice
8/3/2012 | 5:46:05 PM
re: The Death Of 'Open'
In my mind Google is pretty open. Jellybean is hardly released and there are people with 3rd party ROMs that can be installed for phone models that don't have ICS from the vendor yet. Google does quit a bit for cross platform products also.
Rocwurst
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Rocwurst,
User Rank: Apprentice
8/1/2012 | 1:52:02 AM
re: The Death Of 'Open'
And yet on Apple's iOS platform you can buy or rent as much music, video, movies, ebooks, and other media and content for download or streaming from other online stores such as Amazon, Rhapsody, Netflix, B&N, Pandora, untold magazine and independent publishers etc as you wish using native apps or the web browser.

Sure Apple takes a commission for sales thru native apps, but not from web sales.

Unlike Amazon's Kindle platform for example, Apple does allow other ebook store apps on their platform. Unlike Microsoft's Metro apparently, there are dozens and dozens of alternative web browsers including Chrome, Dolphin, Opera, etc available for iOS devices.

Apple only makes a tiny fraction of their income from content - the vast majority of their income comes from hardware sales.

Apple is an integrated platform company - it makes the whole widget and you have failed to mention the advantages of that strategy.

An unprecedented 5,580 different malware apps and malicious exploits were detected targeting the "open" Android platform last month alone and 78% of the 13 million phones infected so far this year were Android phones.

In contrast, one harmless trojan made it thru Apple's App Store review process but was promptly killed by Apple on discovery.

In addition, the iOS App platform is a revelation in convenience, compatibility, reliability and perhaps most important of all - developer revenue - making it the premiere platform for developers and thus for consumers the world over.

With 600% the developer revenue of Android, 90% of all mobile e-commerce revenue, 84% of all mobile games revenue, 97.3% of all business tablet activations, 73.9% of all business smartphone activations (excluding RIM), 63.9% of all mobile web browsing, 80% of the entire cellphone industry's profitshare, Apple and iOS users have demonstrated the enormous advantages of a vertically integrated model for developers, consumers and Apple themselves.
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