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Breaking the cell-phone deadlock

When Apple introduced the iPhone, the story I read - by reading between the lines - maps pretty much exactly to the contents of this article in Wired.

The Untold Story: How the iPhone Blew Up the Wireless Industry By giving so much control to Jobs, Cingular risked turning its vaunted — and expensive — network into a "dumb pipe," a mere conduit for content rather than the source of that content. Sigman's team made a simple bet: The iPhone would result in a surge of data traffic that would more than make up for any revenue it lost on content deals.

So much of this is predictable. The cell phone companies - big business used to doing things in a particular way - tend to want to see the future the same way as in the past. This works well when the present is like the past, and always fails across a discontinuous change. The internet is a discontinuous change.

The network is a "dumb pipe". The business of network providers is moving bits. Content is a different business, and not one at which the network providers have any expertise. When a business tries to work outside the area in which they are competent, they usually do very poorly. This pretty much explains the current/past deadlock. Cell phones have generally lousy software. The added services offered by the networks (cell phone companies) are poorly done, over-priced and under-used. As long as the mindset of the phone companies remain unchanged, and as long as they can maintain their "walled-gardens", the situation will not improve.

But this is an unstable and temporary situation. All that is needed to break the deadlock is one company willing (or forced) to change their business model to more closely match their customer's needs. It appears Apple's iPhone (through Steve Jobs) was the catalyst, and Cingular (now AT&T) was the carrier - to break the deadlock and start long-needed forward progress.

It may appear that the carriers' nightmares have been realized, that the iPhone has given all the power to consumers, developers, and manufacturers, while turning wireless networks into dumb pipes. But by fostering more innovation, carriers' networks could get more valuable, not less. Consumers will spend more time on devices, and thus on networks, racking up bigger bills and generating more revenue for everyone. According to Paul Roth, AT&T's president of marketing, the carrier is exploring new products and services — like mobile banking — that take advantage of the iPhone's capabilities. "We're thinking about the market differently," Roth says. In other words, the very development that wireless carriers feared for so long may prove to be exactly what they need. It took Steve Jobs to show them that.

I give Steve Jobs a huge amount of credit, for applying the right amount of leverage at the right place in the time - from which all users of cell phones will derive a benefit, over time. Jobs helped bring us a better future just a bit sooner.

(Not that I own an iPhone - yet. My Verizon contract was up in February, and I am waiting for the new iPhone models in June...)