Deciphering
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Why Phones Lost

Tue 16 June 2009

This morning I was reading Antonio Rodriguez's "Path Dependence And Smartphones" post, where he muses about different perspectives on the "smartphone" market; in particular the European / American divide outlined by Tomi Ahonen in "A Tale Of Two Smartphones".  Antonio tends to think a few years ahead of his time, so I'm always interested in his take on trends like this.  It seems that he's very cautiously optimistic that the "user customized mobile computer" thing is an important trend, but he also notes that Mr. Ahonen believes that the "[smartphone] operating system and any applications had ZERO bearing on the decision [of which phone to buy]. Not for mass market consumers"; and maybe we're looking at this the wrong way.

As I started thinking about my own reactions to this, I realized: I've heard this tune before.  Remember when pundits used to talk about "convergence" between television and computers?  Since the advent of the computer, futurists have been predicting the dawn of a strange new device: part computer, part television, part telephone, part vacuum cleaner.  What would it look like?

Well, a few months ago, I feel like Paul Graham answered that question pretty definitively.  For years, we've wondered what you would get if you mixed computers and televisions.  In Mr. Graham's words: "We now know the answer: computers."

As a child of the digital age — I've been using computers with keyboards, mice, color displays, and networking almost as long as I've been able to read — I always found this conclusion somewhat obvious.  A few of the early computers that I had the opportunity to use, an Atari 800 and an Amiga 1000, both used televisions as monitors, so I have always thought of a television as an output device — you could plug it into a VCR, a computer, or a cable box, but fundamentally it was just a bag of pixels.

I remember the exact moment that it dawned on me that computers were going to take over from TV: I was 14 years old, playing Myst for the first time, and monkeying with the configuration of system extensions that were loaded on my computer in order to squeeze the last few ounces of performance so that the video clips in the game would play smoothly.  I remember thinking, "This is just a problem with RAM and CPU.  In a few years computers will have so much of both that you'll be able to play full screen video without even turning off any extensions."

I, uh, had a pretty limited idea of how optimization worked at the time (the video was still jerky even after I turned off all my extensions), but I am frequently reminded of this insight when I am watching YouTube movies on my LCD "television".  That television, by the way, is just a monitor for a computer that runs Ubuntu so I can watch Hulu and YouTube.  I think maybe I have cable bundled with my internet service, because it's cheaper that way but I've never plugged it in to anything.

I didn't realized how powerful articulating this particular idea is until recently though, because I didn't realize just how much money is spent protecting obsolete infrastructure from the relentless onslaught of microprocessor technology.  Phone companies — which, increasingly, are combination cable/phone/internet companies — are stuck between a rock and a hard place.  As Internet service providers, they are a facilitator of the transition, and make a huge amount of money selling network services to people to make their computers more useful.  But, as cable companies, they want people to think that television is some special, extra expensive thing that needs to be delievered over a different cable.  As phone companies, both wired and wireless, they want people to think that voice and SMS data are special, extra expensive things that need to be delivered via special, magical wireless signals that can't be reduced to the simple and banal "internet".  At the same time, especially as wired phone companies, they want the cost savings that comes from doing all of their networking as plain old IP, with no actual pesky phone circuits to worry about.  Except they still want to sell you the service as if the phone were a different thing from your "internet" connection.  (Whenever I see an ad for Comcast Digital Voice, I can't help but think, "Do you think that's air you're breathing?".)

There's still a lot of speculation in each of these industries that some new, hybridized technology is going to create a special and unique relationship with the consumer.  But that's one thing Mr. Ahonen got right: the consumer doesn't care about your "operating system".  They don't care about your "applications".  They just care what they can do with their technology, and they care how much it costs to do so.  The thing is, computers do more, and cost less, than any other specialized, dedicated technology.  If your industry is fighting computers in the hopes of holding on to some residual value, you are going to lose.  Here's a simple formula:

Computer + X = Computer

Consider a few specific examples: the convergence of computers with television has resulted in three general categories of technology: YouTube (and other flash video sites, such as Hulu), Tivo (and other DVRs), and digital cable boxes with on-demand technology.  YouTube is a program you run on a computer to watch videos.  A Tivo is a computer (running linux) that is running a program to let you watch and record videos.  And those cable boxes are computers (running some crappy cut-down embedded OS) that let you watch videos on the cable company's terms.  Whether or not your customers care about choice, all these things are computers because it's fundamentally cheaper and easier for the vendors to produce these things out of commodity PC components rather than specialized "media" electronics.

But Mr. Graham neatly outlined that trend already, so let's move on to other industries.  What happens when you add a computer to an accounting ledger?  You get a computer program (like BusinessMind, or QuickBooks) which lets you do accounting on your computer.  Computers and books?  The Kindle, which is a hand-held computer that lets you read books.  If you look a bit deeper, you'll find that the Kindle is actually a computer program that can run places other than its dedicated device.  Only crafty marketing folks prevent it from being more widely accessible; say, on your desktop or "television".

Let's get to the point of this whole schpiel: phones.  Phones are already computers, pure and simple.  They are just small computers with microphones and speakers, and soon, cameras and screens.  You can look at the exciting developments in the world of phones and see that this is so.  What are the hottest phones of the last few years?  The iPhone, which is a small Macintosh computer, and the G1, which is a small Linux PC.  Microsoft would have you believe that their small Windows PCs are equally relevant, even if they are clearly an also-ran in this category.  (Disclosure: I actually have a Windows Mobile phone, and I'm fairly happy with it, but I'll be glad when I can finally ditch it for Android.)  None of these "phones" does anything interesting in the area of phone-ness.  They don't have particularly awesome voice quality or particularly awesome reception or even particularly awesome voicemail, although the iPhone certainly raised the bar.  They're just better computers than the previous generation of "phones"; computers that can run a wider variety of programs.

However, phones are still computers with weird restrictions, restrictions that are purely a function of the "path dependence" that Antonio mentions, which dragged them out of the muck and the mire of the telecom industry.  SMS is my favorite example of this: 10¢ to send a 140 character message.  How much does a tweet cost on twitter?  How much does an instant message cost on AIM, or Google Talk, or any IRC network you please?  If you were billed at SMS rates to read this post, it would have cost you $10; the cost of a decent paperback.  I know I'm wordy, but I'm not that wordy.  If you were charged at SMS rates for a day's worth of casual web browsing, images and all, you'd probably have to take out a mortgage just to pay for it.  Phone companies have been able to sustain the myth that SMS data is somehow special and deserves to be treated as sacred and precious, fully 1000 times more expensive than the regular bytes you get off the internet, even at the obscene prices they charge for usage-based data plans.

SMS is particularly egregious, but voice isn't that much different.  Phone companies charge such ridiculous rates for "voice" data that Skype built an entire profitable business around giving people the same service for free, and only making money by piggybacking on the phone companies' greed and charging you when sending voice messages over phone networks rather than the internet.  I can't imagine casting the wasteful overhead of legacy phone networks in any sharper relief.

So, we're not there yet, but the market pressure is tremendous to treat data as data, regardless whether it's voice, or SMS, or IM, or "internet" (in other words: everything else, including voice and SMS and IM messages which are sent via different mechanisms).  Until the advent of the recent crop of smartphones, it was difficult and expensive to get an unlimited data plan.  Now, unlimited data plans are the norm, except for "tethering" - using your phone as a proxy for your laptop.  The phone companies are still desperate to convince you that you should pay $60 per month for the privilege of having a USB dongle that you can plug into your laptop rather than just using the mobile IP endpoint — which, by the way, probably aleady has a USB port — that's already in your pocket.

The "mass market" user might not care about operating systems or APIs, but they do understand that a bill with seventeen different break-out metered sections is a bald-faced attempt to rip them off, and a flat-rate or easy to understand pay-as-you-go plan with one number on it is better.

To the extent that phones are not yet interchangeable, unrestricted mobile IP endpoints, it is due to the high barrier to entry to telecom providers, lack of regulation of misleading pricing schemes, and the symbiotic relationship between government and the telecom industry.  However, if one wireless carrier moves to provide simpler billing with more features, the others are forced to follow suit - even more so than cable companies and land-line providers, who can hold their customers hostage via development deals with local governments.  So, this progression is happening, albeit slowly.  For example, when AT&T introduced its iPhone plans, many of the other metered PDA and Blackberry plans, both on AT&T and other providers, began receding from their marketing materials.

Fifteen years ago ... ugh, I feel old.  Let's say ... ten years ago, my computer was barely powerful enough to dedicate all of its processing power to playing one low-resolution movie that took up maybe half the screen.  I was still paying for internet over a phone line with a cap on the number of hours I could use it.  Today, I have real-time two-way video connection to anywhere in the world, 24-7, for a single flat rate.  I own a device that fits in the palm of my hand which contains days worth of continuous music, a library of dozens of books, and connects to the internet.

So, back to that "mass market consumer".  Maybe they don't care about my Python console or IRC chat or SSH access applications, but most "mass market" people do listen to music and read books.  And they're going to care about those features being on their phones, and remaining cheap enough that they can use those features without worrying that they'll go broke if they feel like changing out their playlist.  Also - nobody is really a "mass market" consumer, anyway.  You might not be technical, but maybe you're a golfer, or a swimmer, or a finance nerd.  You want to be able to check the weather on your mobile, or update your latest personal best lap time, or get updates when stocks hit certain price threshholds.  Nobody cares what APIs these apps use, or even whether you call them "apps", but everybody has one extra thing they'd like their mobile to do.

The increasingly ubiquitous, user-customizable, network connected, commodity pocket computer is exactly the technology that is going to deliver that.  It's going to have to become commoditized, which means it's going to be standardized, and secured, which means it's not going to be locked up in carrier notions of what's a "text message" and what's a "voice call" and allow for precise price segregation of every different type of data.

In the future, almost every device will be a computer, albeit with specialized peripherals to assist with performing tasks.  If we're lucky, they will be networked together in standard ways to allow us to control all of them in a consistent and convenient way.

This progression towards computers is good for all of us.  Trust the computer.  The computer is your friend.