With the introduction of the iPhone, Steve Jobs achieved something that might be unique in the history of business: he single-handedly upended the power structure of a major industry. In the US, before the iPhone, the carriers (Verizon, AT&T, Sprint, T-Mobile) had an ironclad grip on the rest of the value chain – particularly, handset makers and app makers.
Ask anyone who ran or invested in a mobile app startup pre-iPhone (I invested in one myself). Since the carriers had all the power, getting any distribution (which usually meant getting on the handset “deck”) meant doing a business development deal with the carriers. Business development in this case meant finding the right people at those companies, sending them iPods, taking them to baseball games, and basically figuring out ways to convince them to work with you instead of the 5,000 other people sending them iPods and baseball tickets. The basis of competition was salesmanship and capital, not innovation or quality.
The carriers had so much power because consumers made their purchasing decisions by choosing a carrier first and a handset second. Post-iPhone, tens of millions of people started choosing handsets over carriers. People like me suffer through AT&T’s poor service and aggressive pricing because I love the iPhone so much.
I’ve talked to a number of mobile app startups lately who say their former contacts at the carriers are shell shocked: no one is knocking on their doors anymore. I guess they have to buy their own iPods and baseball tickets now.
Yes, Apple has rejected some apps for seemingly arbitrary or selfish reasons and imposed aggressive controls on developers. But the iPhone also paved the way for Android and a new wave of handset development. The people griping about Apple’s “closed system” are generally people who are new to the industry and didn’t realize how bad it was before.
