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The mobile handset market tipping point has arrived, and it is a wonderful thing to watch.

In very short order (relatively speaking) the mobile market has seen:

  • Google/Android advance a Linux mobile operating system
  • Symbian convert to Open Source
  • Motorola release Eclipse-based mobile development tools
  • Verizon open its network to certifiable devices not sold by Verizon
  • Wi-Fi handsets are now commonly sold by network carriers, eliminating some data network revenues

In short, the mobile market has opened up and this trend will accelerate (which is seemingly impossible, but I never bet against an avalanche). Two dominate forces are causing this to happen: competition and customer resentment.

In a rare moment of governmental lucidity, regulatory agencies in charge of frequency allocations made sure that no company could monopolize the cellular industry. This came as a huge surprise to AT&T who is unaccustomed to real competition, and it showed in their perpetual inability to focus on their market mission.

Congress - in an even rarer show of caffeinated consciousness - made your telephone number your property, forcing cellular carriers to release your number if you ever decided to switch to another network. This removed vendor lock-in based on the obvious need human and business continuity through numerical IDs.

Competition required each cellular providers to keep trying new things in order keep their customers happy, and thus keep their customers. Better and simpler service pricing, faster data networks, fancier and heavily subsidized handsets. The technology and markets have evolved so rapidly and brought so much new end-user convenience that many people would rather do without television than their mobile handset.

But there was a weakness in the market induced when the carriers tried to keep customers locked-in. The choice of handsets for any carrier was limited to what they sold and supported. The back room economics of this had to do with the terms of your service contract. The logic (so to speak) went like this:

  • To encourage you to subscribe to our services, we'll sell you a $500 handset for $1.95 (we, the network carrier, eat the $498.05)
  • In turn you agree to subscribe to our services for no less than two years, and pay massive fees for an early cancellation
  • Don't worry, we'll earn enough off of you in two years to more than make-up for this initial loss (unless of course you don't use your hands free kit, fly your car off a bridge, drown and thus fail to pay your cellular bill on time)
  • And if you use some foreign device on our network, don't expect to get any help from us

The carriers then would write sole-source deals with handset manufacturers for the latest and niftiest new handsets. So if you wanted a SuperCell X400L then you could only get it by subscribing with Honest Earl's Cheapo Celluar. This limited the number of X400Ls, the number of applications and accessories that worked with it, and thus your choices.

This model is about to break and break hard. As more and more people start carrying these portable computers we call cell phones, they want more functionality which means more applications. Carrier network are not software companies and cannot possibly design every type of application for their set of phones. Thus, customers are a bit disgruntled by the limitations of what handsets run on what networks. What do you mean I have to subscribe to Sprint is I want to play Mega Reversi?

Led by the techie caste, people have started using “unlocked" devices - unsupported devices on carrier networks. The carriers may offer support for unlocked devices, but the end-user success rate has been high enough to spawn a thriving market in unlocked devices. This is in part because the handset manufacturers earn a better margin by selling more directly to the customer and also broaden their markets in the process. Want an AT&T Tilt without the AT&T? Buy an unlocked HTC 8925 and slip in your SIM card from your old Alaska Wireless handset (unwise if you are not in Alaska).

Vendor lock-in was beginning to break, so the rest of the market decided to help the process along. Nokia will gladly sell their handsets to anyone as will HTC. Google wants to make one operating system to cover all cell phones (which has to keep Steve Jobs up at night) and Symbian was released into the wild as Open Source to counter Google. The networks are beginning to see the trend and not fight it.

When competition is assured and customers can collaborate on alternatives, it is better to lead the trend than to be crushed by it. Cellular customers will have the final say and it will eventually be that all devices will work on all networks (tower protocols being the current, and perhaps temporary limit).

Want to make some money? Start thinking about mobile applications. That is where the next next thing will be.

Guy Smith is the chief consultant for Silicon Strategies Marketing (http://www.SiliconStrat.com ). Guy brings a combination of technical, managerial and marketing experience to Silicon Strategies projects. Directly and as a consultant, Guy has worked with a variety of technology-producing organizations. A partial list of these technology firms include ORBiT Group (high-availability backup software), Telamon (wireless middleware), Wink Communications (interactive television), LogMeIn (remote desktop), FundNET (SaaS), Open-Xchange (groupware), VA Software (enterprise software), Virtual Iron (server virtualization), SUSE (Linux distributions and applications), BrainWave (application prototyping), DeviceAnywhere (mobile) and Novell.

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