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.

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