Jun 29, 2007

Maybe They Deserve Sir Rupert

Today’s Wall Street Journal (pay site, sorry) has an op-ed piece from “venture capitalist and CNBC analyst” Paul Kedrosky called “The Jesus Phone.” It’s a tediously obvious rehash of all the wonders of the iPhone that concludes with Mr. Kedrosky’s none-too-original epiphany that the real reason people are clamoring for iPhones is that they hate their current cell phones. Okay no one is debating that cell phones seem to be purposely designed for maximum discomfort and confusion. But let’s examine Mr. Kedrosky’s assertion that a second reason is that people hate their current cell phone providers.
(P)eople hate their cell phone carriers. Hate, hate, hate, hate. The major cellular providers—with their ham-handed “support” and fascist control of software that can run on phones directly—are right up there with the IRS in terms of inspiring your average mobile phone user’s disgust and loathing.
Okay, first off, can we point out that your “average mobile phone user” (emphasis added) has no idea that there is such a thing as “software that can run on phones directly.”

But that’s besides the point.

Because what I really want to know is who the heck does Kedrosky think is providing service for the iPhone? The Phone Fairy? I mean does he not know that it’s AT&T, arguably the worst of all the major carriers? Has he not read the hundreds, if not thousands of reviews and articles all of which point out the fact that limiting the iPhone to AT&T may prove to be its Achille’s heel? It’s true that people are generally frustrated with the companies that provide cell service but I’m baffled at why he thinks choosing an iPhone will let them avoid that.
What’s more, isn’t someone editing him? Didn’t someone on the Journal’s editorial board read this and think “hey, this is just plain factually incorrect.”

Amazing.

5 comments:

KBAM said...

Will try to reconcile this, Toad.

Don't know Kedrosky, but read his piece in your honor. Actually, you both make fair points.

What he's saying is essentially true, but his rant is somewhat crude. While presuming altitude most readers lack, it naïvely calls the foul.

What's wrong with wireless for a nation of 230mm hostages is that asleep-at-the-switch-regulation permits a punitive, anal business model--the very scourge that, decades late, toppled Ma Bell in 1984. The fix: Wireless carriers must be dismissed from the hardware business and forced to operate as ISPs.

We'll get there eventually. Last fall, the US Copyright Office ruled that breaking a cell phone's "subsidy-lock" could not be construed as copyright abuse (but it couldn't mandate that carriers unlock phones on demand). Jobs' iPhone is another small step toward mobile empowerment--forcing some carrier concessions--but there's a long way to go.

Kedrosky closed his piece with this rattle:

"Cell phone carriers are going to have to respond by cutting the length of contracts and eliminating exclusivity, and most important, by finally being responsive to their market. If not, iPhones (or their successors) will finish them off."

Close, but not quite. What will "finish them off" will be a combination of threats: more hardware from baggage-free players, competitive tech (e.g., Wi-Fi, VoIP, WiMax, etc.), class-action suits, and political/regulatory pressure. As my corp finance prof used to say, "Better days are coming..."

--BAM

P.S. More on the crisis:
http://pdaphonehome.com/forums/samsung-sch-i760/81902-samsung-i760-release-rumor-thread-90.html#post629003

Toad said...

KBAM: My issue was not with his assertion that cell phone carriers like AT&T were widely disliked: I think that's more or less a given.

It was his assertion that somehow the iPhone was going to bring them to their knees.

Which is patently false.

By making the phone available through one carrier only-- a carrier whose user-UNfriendliness seems the exact antithesis of everything Apple stand for-- they're not doing anything to bring down the current system. If anything, they're reinforcing it by rewarding and helping to prop up a company that is worst-of-breed.

KBAM said...

Toad,

Kedrosky isn't a disciplined writer. While his analysis is valid, he didn't quite deliver the payload.

What he would tell you over a drink is that iPhone is a Trojan horse. By seducing AT&T, two things happen:

First, the carrier concedes some sacred business-model ground to Apple. For example, AT&T (all iPhone network operators) will be paying Apple a monthly override/license fee (say, $5 per sub) for its IP. This is huge--at least $60mm per year per million units (and Apple should easily sell 10mm globally over the next year or so).

Second, iPhone sets in motion a new era of device innovation--under *manufacturer* control. Traditionally, handsets (even branded ones) are "private-label" goods. They're designed for carriers, not consumers, and they're essentially owned and sold by the networks.

What iPhone does is legitimate the ability for a hardware OEM/ODM to develop advanced products *independently* and say this to the networks: "If you don't take this device on my terms, I'm going to offer it, unlocked, directly to your subscribers."

Keep in mind the limitations of this sort of grandstanding: 1) The product has to be terrific; 2) The device-maker has to be an authentic "outsider" (or perceived as such), as is Apple, and not an incumbent, private-label "ho"; and 3) For now, this game only works with open GSM systems (AT&T, T-Mo, Rogers, Vodafone, etc.), not with locked-down CDMA operators (VZW, Sprint).

So, sure, in the short run, iPhone appears to empower AT&T. But ultimately, hardware will be liberated from anal carrier control and these networks will start to resemble ISPs, For us, it's axiomatic that separation of church and state is the soul of mobile empowerment.

You're right that the WSJ editors failed at clarity. This stuff is elusive and apparently, they sorta missed the big picture.

--BAM

KBAM said...

Toad,

Here's another Kedrosky piece on iPhone/AT&T. Once again, he's off on a tangent. The "tying" rant doesn't play.

The restraint of trade abuse is this: While you pay list price for iPhone (no subsidy), 1) it's locked to AT&T (so, in effect, you don't really own it), and 2) you're still subject to an ETF if you terminate (for which you receive no consideration).

Practices like these are arrogant, anti-competitive, predatory and shameless. Some day, they'll be illegal.

--BAM

http://biz.yahoo.com/seekingalpha/070702/39804_id.html?.v=2

George Parker said...

Most journalists are useless, but the one's who write for the ad press - AdAge & AdWeek - are truly pathetic. You get better information and coverage of news etc on-line now, particularly on blogs... Like ours!!!
Cheers/George