Richard Martin Blog: In Smartphone Wars, Carriers Outgunned

A long post by Jean-Louis Gassée, of Allegis Capital, on the Monday Note blog provides a comprehensive overview of the coming smartphone wars (which happens to be the name of Brian Hall’s blog), which will largely define the tech and telecom industry over the next decade. We cover the smartphone struggle fairly incessantly, but the view of Gassée, a former Apple executive, is worth quoting at length.

Essentially he argues that while the iPhone has “disintermediated" (lovely to hear that term again) the big carriers –“ Consumers woke up to a different life, one where the carrier supplied the bit pipe and nothing else" -- Android, Google’s open-source mobile OS, has opened a path for them to regain supremacy, or at least a measure of control

“Handset makers and software developers love Android," which will likely assume the top spot in the handset market by 2012, Gassée notes. But carriers like it too, for two reasons: it allows handset makers to make inexpensive devices that can run powerful Google applications, and “because Android is an Open Source platform, carriers can work with handset makers, they can dictate the feature set and, as a result, revitalize the revenue stream."

Google executives, meanwhile “all think carriers are greedy bumblers, short-term thinkers, technically and culturally incompetent in matters of smartphone OS and applications."

You’ll get no argument from me on that last point. Google, though, has entered into a marriage of convenience with Verizon, which offers the popular Droid smartphone, believing it can slip a dagger between its partner’s ribs at the opportune moment – say, once consumers get definitively fed up with the soul-shattering experience that is big-carrier customer service.

“The battle is on," concludes Gassée. “The carrier is serious but, based on past performance, it remains to be seen how it can beat Google at the software game."

Meanwhile other contenders in Europe – including the Webinos initiative, backed by the European Union, and the CEO’s of Orange, Vodafone, Telefonica and Deutsche Telekom, are taking a platform-based approach to winning back mindshare and revenues in the smartphone ecosystem. “The OS is the Trojan horse Google and Apple use to establish their relationship with our customers," said the new Orange CEO Stéphane Richard, announcing an October 8 meeting of the Four Carriers of the Apocalypse. “We’re striving for the most open world possible. The four of us represent close to one billion customers, we have momentum, we can influence the industry."

If that sounds a bit petulant – “We matter too, dammit!" – it’s because the carriers have seen the moment of their greatness flicker, if you’ll pardon the Eliot allusion. Even the reference to “our customers" betrays an outdated world-view. The customers don’t belong to them anymore. As the carriers lose control, the customers will increasingly go where fashion and personal preference dictate. That’s the genius of Steve Jobs – and, increasingly, of the troika that runs Google. Watching the carriers flounder, like harpooned tuna, in this disintermediated world is one of the primary fascinations of the smartphone revolution.