How Special is the iPhone?

Apple's products, at least since the return of Steve Jobs, have been an oasis of quality hardware and software in the sea of cheap, ugly, and crash-prone products that is the computing industry. As much as I like Apple and my iPhone, however, I would like the option to buy my next phone from a different company and not feel like I'm settling for second-best.

So far things are not looking good. The Palm Pre had outstanding software, but it never had enough backing from major carriers. As a result, both the Pre and Palm itself, are for all intents and purposes no more.

Android was also promising at first, and it still is promising in the abstract. Unfortunately, nearly all the actual Android phones on the market come with some combination of a lack of software upgradability, crippled features, obnoxious bloatware, and unhelpful user interface overlays. The main exception seems to be Google's own Nexus One, which lacked the marketing support of major carriers and is for all intents and purposes no more. Though it is technically possible to hack your Android phone or buy a new Nexus One, it's not reasonable to expect a typical consumer to go through the effort involved.

And while Android phones in aggregate are outselling iPhones, those sales are spread across hundreds of different devices from dozens of manufacturers. Given the wide variety of hardware, OS versions, and customized software commercial Android phones are sold with, it begs the question of whether Android is even a single platform.

Why is that after over three years since the original iPhone introduction no other manufacturer has been able to match Apple's combination of commercial success and high quality design?

Or, as an acquaintance recently said as he was showing off his beautiful new Droid phone, "It's great but let's face it: we all just want iPhones."

A Three Ring Circus

In order to successfully bring a mobile phone to market, three different elements must come together: the hardware, the software, and the service. That means that up to three different companies are involved in creating the customer experience, though often the hardware and software are from the same company.

Of these, the service is the hardest to differentiate, since consumers generally notice the service only when it fails: when calls drop, when the bill is wrong, etc. When everything is working properly the mobile phone service is like oxygen in the air, invisibly supporting the customer's daily activities.

However, the service provider also owns the customer relationship, since the carrier sells the customer the phone (in most cases), provides customer support, and sends the customer the monthly bill. In most cases that monthly bill is not only paying for the actual cost of delivering mobile phone service, but also most of the cost of the phone itself.

So the mobile phone companies--Verizon, AT&T, Sprint, T-Mobile, and others--use their customer control to force handset makers to make handsets the carriers want, which might or might not be the handsets which customers want.

At its most benign, this results in the carriers' logo being featured more prominently than the manufacturer's logo on most mobile phones. More importantly, phones are often shipped with important features (like data tethering) crippled or disabled to help the carriers sell more expensive services, and useless applications and overlays added which the carrier uses to "differentiate" its handsets (for example, Sprint's infamous Nascar App). It's also hard for a handset maker to innovate in ways which require the carrier's cooperation, since the handset company has very little power in the relationship and phone companies (as a rule) don't like changing their networks if they don't have to.

The iPhone, on the other hand, seems to exist entirely outside this world. Every iPhone ships with the same interface and user software (no carrier-specific apps or overlays), carriers have updated their networks specifically to support the iPhone's Visual Voicemail feature (Apple did not invent the graphical interface for voicemail, but only Apple convinced a carrier to support it), and Apple doesn't even include the carrier's logo anywhere on the phone. An iPhone from anywhere in the world is essentially the same product, with the same branding, features, applications, and interface. 

[The one exception is data tethering, which is enabled in most markets but costs extra under AT&T. In My Humble Opinion this is obnoxious but at least understandable, given that the usage profiles of a smartphone and a wireless modem--which it what a tethered phone is--are very different.]

Uniquely, in the power relationship between carriers and handset makers, somehow Apple has come out on top where every other mobile device manufacturer has had to kowtow to the phone companies.

A Unique Confluence of Circumstances

I'm starting to believe that the iPhone and its success is due to a set of circumstances which make it unlikely any other company will be able to repeat Apple's feat.

At the time Apple was developing the iPhone and looking for a carrier partner, AT&T was still working through the aftereffects of a series of mergers and rebrandings which had, in the course of only a couple of years, confusingly merged Cingular and AT&T Wireless, killed the AT&T Wireless name, then returned the AT&T name and eliminated the Cingular brand.  Network and customer service integration was also rocky, and the company needed something unique to offer customers.

Apple is notoriously finicky about its products, and other carriers (notably Verizon) wouldn't give Apple the degree of control Apple wanted. But for AT&T, this was exactly what it needed: Apple was (thanks to the iPod) a powerful brand associated with hip, cutting-edge gadgets, and could be counted on to produce something special. AT&T would give up control of the handset and the customer relationship, but in return would get a phone no other carrier (in the U.S.) could offer.

Only Apple could make this deal, since only Apple had the Apple brand. Had Palm, RIMM, Motorola, Nokia, HTC, or any of the other handset companies built a similar product, it never would have gotten the carrier support required to succeed without the branding, crapware, crippling, and overlays which plague those same companies' products today. The fact that Apple is still the only handset maker to succeed without compromising its product to get access to the customer just proves the point.

It took the unique combination of a powerful brand, a groundbreaking product, and a desperate phone company to break through the carriers' reflexive need to be front-and-center with the customer. These circumstances aren't likely to happen again in the near future, and as a result, Apple's position is likely to remain safe for some time to come.