Wu vs. Felten on the iPhone

by on June 30, 2007 · 10 comments

Ed Felten and Tim Wu both have interesting posts on the release of the iPhone. In a sense, they make precisely the same technical observation—that more open wireless networks would be good for innovation—but Felten is an optimist about it, while Wu is a pessimist. First, here’s Wu:

the iPhone is locked, as is de rigueur in the wireless world. It will work only with one carrier, AT&T. Judged by the standards of a personal computer or electronics, that’s odd: Imagine buying a Dell that worked only with Comcast Internet access or a VCR that worked only with NBC. Despite the fact that the iPhone costs $500 or so, it cannot yet be brought over to T-Mobile or Verizon or Sprint. AT&T sees this as a feature, not a bug, as every new iPhone customer must commit to a two-year, $1,400 to $2,400 contract.

If Apple wanted to be “revolutionary,” it would sell an unlocked version of the iPhone that, like a computer, you could bring to the carrier of your choice. An even more radical device would be the “X Phone”—a phone on permanent roam that chose whatever network was providing the best service. Imagine, for example, using your iPhone to talk on Sprint because it had the best voice coverage in Alaska, while at the same time using Verizon’s 3G network for Internet access. Of course, getting that phone to market would be difficult, and Apple hasn’t tried.


And here’s Felten:

You would expect competition to have forced the mobile networks open by now, whether the carriers liked it or not. But this hasn’t happened yet. The carriers have managed to keep control by locking customers in to long contracts and erecting barriers to the entry of new devices and applications. The system seemed to be stuck in an unstable equilibrium. All we needed was some kind of shock, to get the ball rolling downhill.

Only a company with marketing muscle, design mojo, and a world-historic Reality Distortion Field could provide the needed bump. Apple decided to try, in the hope of selling zillions of the new, more capable devices. The real significance of the iPhone, whether it succeeds or fails in the market, is that it will trigger the transition to more open networks. Once people see that a pretty good phone can be a pretty good mobile computer, they won’t settle for less anymore; and mobile networks will be pried open.

Wu does mention this possibility at the end of his piece, but he seems to be leaning toward the pessimistic account.

I think the optimistic account is the more plausible one. If the iPhone is a success, as looks likely, Verizon, T-Mobile, and Sprint will start scrambling for a competitive response. They’re not likely to completely open up their networks, but makers of innovative phones will suddenly have a lot more bargaining power, and so they’ll have an easier time persuading wireless carriers to allow more features on phones. If Wu and Felten are right that open networks are more innovative (which I think they are) the carrier that opens its networks the most will be able to attract the best phone makers, which will reinforce the value of an open network. It won’t happen as quickly as some of us would like, but in the long run I think competitive pressures will lead to much more open wireless networks.

  • http://www.jerrybrito.com Jerry Brito

    Well, I’m very happy with my brand new iPhone, which works like a dream. Here’s something Wu and lots of others are overlooking: one of the great features of the iPhone is what Apple calls “Visual Voicemail.” When you check your voicemail on every other phone, you have to listen or skip over messages one through four before you can listen to message five. On the iPhone, a numbered indicator tells you how many voicemails you have waiting and when you tap on that a list of the names of who each voicemail is from appears. Tap on any name to listen to that particular voicemail. This is a wonderful innovation that will save consumers time and aggravation. And guess what? It required that AT&T make changes to its network. This is a special network feature. Even if you could take your iPhone and plug it in to the Verizon network, “Visual Voicemail” would not work. Apple and AT&T were able to work together to make unique network/software offering that may be proprietary, but sure has real value.

  • http://jerrybrito.com Jerry Brito

    Well, I’m very happy with my brand new iPhone, which works like a dream. Here’s something Wu and lots of others are overlooking: one of the great features of the iPhone is what Apple calls “Visual Voicemail.” When you check your voicemail on every other phone, you have to listen or skip over messages one through four before you can listen to message five. On the iPhone, a numbered indicator tells you how many voicemails you have waiting and when you tap on that a list of the names of who each voicemail is from appears. Tap on any name to listen to that particular voicemail. This is a wonderful innovation that will save consumers time and aggravation. And guess what? It required that AT&T; make changes to its network. This is a special network feature. Even if you could take your iPhone and plug it in to the Verizon network, “Visual Voicemail” would not work. Apple and AT&T; were able to work together to make unique network/software offering that may be proprietary, but sure has real value.

  • http://markgamis.blogspot.com Mark Gamis

    My initial reaction to Wu’s article was: What’s wrong with this guy? He seemed to be expecting too much from a single device (on its first version). So I google’d him to learn about his background (learning about the author helps a lot in being a fair “critic” of his work) and realized that Wu, whose forte according to Google is network neutrality, is not just another iPhone skeptic: he is a technology idealist. And though his view on the iPhone is indeed on the pessimistic side, his views are valid observations on the industry from a larger perspective.

    I come from the Philippines, where open networks is the default rather than the exception, and all I can say is that choice is really great for the consumers here. Yes, telcos here are still on the “evil” side (but its no match to what you have there in the US), but because consumers can easily switch to other networks, the telcos are forced to offer discounts and value added services to compete.

    The scenario here is much like the the computer way of things, as what Wu was saying in his post, where your first consideration is the phone that you want, then the network/telco will come next as a preference. One of the few gripes that I have though is that here, your mobile number (the first 3 digits) is dependent on you network, and maintaining your number (all except the first 3 digits) as you transfer from one network to another is not one that is really considered.

    In the end I hope Apple will indeed become a catalyst of change from closed networks where telcos rule (and hamper device innovations) to a one that is more open, more competitive and more conducive for technology innovation.

  • http://markgamis.blogspot.com Mark Gamis

    My initial reaction to Wu’s article was: What’s wrong with this guy? He seemed to be expecting too much from a single device (on its first version). So I google’d him to learn about his background (learning about the author helps a lot in being a fair “critic” of his work) and realized that Wu, whose forte according to Google is network neutrality, is not just another iPhone skeptic: he is a technology idealist. And though his view on the iPhone is indeed on the pessimistic side, his views are valid observations on the industry from a larger perspective.

    I come from the Philippines, where open networks is the default rather than the exception, and all I can say is that choice is really great for the consumers here. Yes, telcos here are still on the “evil” side (but its no match to what you have there in the US), but because consumers can easily switch to other networks, the telcos are forced to offer discounts and value added services to compete.

    The scenario here is much like the the computer way of things, as what Wu was saying in his post, where your first consideration is the phone that you want, then the network/telco will come next as a preference. One of the few gripes that I have though is that here, your mobile number (the first 3 digits) is dependent on you network, and maintaining your number (all except the first 3 digits) as you transfer from one network to another is not one that is really considered.

    In the end I hope Apple will indeed become a catalyst of change from closed networks where telcos rule (and hamper device innovations) to a one that is more open, more competitive and more conducive for technology innovation.

  • Tim Wu

    There seems to be substantial disagreement on whether visual voicemail needs network cooperation to work. I have heard both versions of the story.

    Anyhow, despite its cast, my view is in fact quite optimistic.

    I didn’t have a chance to say this in that Slate piece — however, Apple’s strategy is similar to iTunes. Apple would like to get its foot in the door, and then change the market from within.

  • Tim Wu

    There seems to be substantial disagreement on whether visual voicemail needs network cooperation to work. I have heard both versions of the story.

    Anyhow, despite its cast, my view is in fact quite optimistic.

    I didn’t have a chance to say this in that Slate piece — however, Apple’s strategy is similar to iTunes. Apple would like to get its foot in the door, and then change the market from within.

  • http://blog.actonline.org Mark Blafkin

    I think the Tims have a great point: “The iPhone can be a catalyst for change in mobile networks.” This kind of revolutionary product can make that happen and we’d all prefer this to happen through market forces rather than a ham-handed response by the FCC or Congress.

    In the end, however, we do want to preserve flexibility in the business model. Personally, I like the fact that T-Mobile gave me the MDA at a subsidized rate for choosing their service plan and commiting for a couple years. I think that kind of option is great, as long is it isn’t the ONLY option.

  • http://blog.actonline.org Mark Blafkin

    I think the Tims have a great point: “The iPhone can be a catalyst for change in mobile networks.” This kind of revolutionary product can make that happen and we’d all prefer this to happen through market forces rather than a ham-handed response by the FCC or Congress.

    In the end, however, we do want to preserve flexibility in the business model. Personally, I like the fact that T-Mobile gave me the MDA at a subsidized rate for choosing their service plan and commiting for a couple years. I think that kind of option is great, as long is it isn’t the ONLY option.

  • http://deanlandolt.com Dean Landolt

    I believe there’s yet a third possibility which is just starting to get a little chatter — the iPDA, so to speak. A completely unlocked iPhone sans phone, sans contract complications with AT&T. And a precedent has already been set: lost in the coverage of the iPhone-media-madness, T-Mobile just released a phone that picks up a wifi signal and switches to VoIP seemlessly. I’m with you, Tim — this is where things will end up. And it’s already starting…

  • http://deanlandolt.com Dean Landolt

    I believe there’s yet a third possibility which is just starting to get a little chatter — the iPDA, so to speak. A completely unlocked iPhone sans phone, sans contract complications with AT&T.; And a precedent has already been set: lost in the coverage of the iPhone-media-madness, T-Mobile just released a phone that picks up a wifi signal and switches to VoIP seemlessly. I’m with you, Tim — this is where things will end up. And it’s already starting…

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