This is very insightful.

Re: subsidising Android: My guess is that Google will continue subsidising Android until there is a far more effective platform of deploying analytics, Checkout and Voice out on the mass-market of devices. However, there's none such Google platform on the horizon.

Re: mobile performance. Yes, chipset vendors are optimising with hardware acceleration (e.g. graphics, browsing), platform vendors are optimising (with developer NKDs), OEMs are optimising (e.g. Java performance on SEMC). But there will always (IMHO) be a gap between the very low cost devices for emerging markets and the general-purpose smartphones / computing devices. Smartphones and feature phones will merge over time, and I would dare (!) say in 1-2 generations rather than three, as software can simplify access to common services (FB, etc) without needing the performance – Opera Mini and Snaptu are good examples of this.

Jeff,

Well said and argued. But mobile is a controlled market, i.e. it's most often not consumers but the companies working within the industry that decide. In North America, Japan, Korea and to a lesser extent Europe, it's operators that decide what goes in and on a handset.

Having worked for an operator, there's no remedy for the ivory-castle, self-important, ego-boosting notion that the operator knows best how to customise devices and brand their own logo, apps and locked-down services onto consumers.

Mobile handsets is not a 'free market', so that consumers can freely decide on what's best for them – it's a tightly controlled, highly verticalised market where only a limited number of operator propositions (services and handset customisation bundles) exist per country.

Google and Apple want to break that and turn it into a different kind of verticalised system, controlled by them.

The DELLification of mobile and the emergence of a 'free market' might eventually emerge, but that lies beyond the predictable future of the mobile industry.

Andreas

Previous attempts have been met with contempt by the users.

Also customers don't want operator/provider lock-in. I can take my iPhone or Nexus one to any provider in the world, buy a SIM and am ready to go without investing in a new device. I can move my internet access to a number of different ISPs and still use my router and computer.

A branded device by an MNO would be worthless if I switch to a different operatar and I would need to buy a new phone.

I'd also have a whole new experience to deal with. The vodafone branded services work differently than the t-mobile branded services and so on.

With an Android device or an iPhone I am still using the same thing but get phone service/data access from a different provider and I retain the experience I am used to.

People don't buy services and use specially branded devices, they buy devices and then use services, and they want the ability to use the same device and the same services regardless of the ISP or MNO.

I don't want a freakish vodafone clone of Facebook, I want Facebook, I don't want a freakish t-mobile clone of internet access I want Internet access (that's why WAP was such a failure).

Any branding you can do as a MNO is superficial or you alter the experience people are used to which they not only won't accept but will despise.

People buy an iPhone, an Android Phone, a Nokia phone and they expect to do everything that they could before regardless of MNO or ISP.

The alternative would be that the phone business turns into the travesty that is Cable where each company only offers a very small number of cheap branded cable boxes (although there is a large number of offerings available), that usually fail at even the most basic tasks but can't be replaced because the Cable companies don't allow it.

Something that the operators would have needed to implement 20 years ago when the business was new but today would not be accepted by your customers.

I simply don't see any opportunity for branding

Also, on the Mac vs PC at half-the-cost point – an equivalent PC has an RRP of around 85% of the price of a bottom end Mac. Cheap PCs are still noticeably inferior to premium PCs at many tasks (3D gaming, video and audio editing, compiling code, and even running the latest version of MS Office. The quality of video encoding in video calling is also noticeably different).

On the other hand, for the task most PCs are used for (web browsing and older versions of MS Office) commodity PCs are fine.

I think that gives some hint as to where product differentiation is likely to remain – it’s notable that both Android and Palm introduced NDKs for games developers to get lower level access to phone hardware.

From a development point of view, it feels like people are having to ‘think performance’ on even the highest end phone models, in a way that hasn’t been true on the PC for a decade.

My gut feel is that we are about 3 generations away from the point where the commodity platform is ‘good enough’ (i.e. the point on the PC where it ran Office on XP with no frustrating slowness, and prices started to fall) – although it will likely be good enough for most simple uses (Facebook, etc) in the next generation.

The handset are starting to appear independently (Nexus 1), and the voice call will dissappear as Voip becomes the norm. That will be great for us consumers.

Just like we don't buy our PC from our ISPs, we will not depend on the operators anymore.

Regards

Great way of putting it – 'paralysis of wealth'. And agreed – there's so much simple services operators could be using to add unique brand value – from tariffs like you mention (can I call my kids for $5 a week?) to safety/insurance (24h device replacement if lost and automatic contact backup when you move to a new handset) to a concierge service for VIP users. But as always, innovation never manages to 'bubble itself up' within operator organisations..

- Andreas

Android, WinMo, Symbian etc have always been a double-edged sword for OEMs; on one hand a way to reduce platform R&D and instead invest in differentiation; on the other hand a way to abstract value into platform services which co-opete with OEMs. But in this 10's decade, OEMs have no option but to adopt third-party platforms as there's no more budget for software R&D, and there is still plenty of room for technical UI differentiation in Android (and commercial, depending on how tightly Google continues to run its CTS). Plus, as long as Android is being pushed by operators, OEMs will follow.

- Andreas

Qualcomm is most definitely the market leader in Android designs and STE and Broadcom are still playing catch-up. But I 'm not convinced that the Wintel of mobile will need to *fix* the 'tel' part to a single chipset vendor, as chipset vendors are not defining bus architectures (ARM is) and there is no unique features to chipsets that are being exposed to apps (although Qualcomm is the first one that is pledging to make a difference). So perhaps it's going to be a Win* strategy for mobile..

- Andreas

I agree with you, but the MNOs biggest problem is not Android, but the paralysis of wealth – sitting on a gold mine does not make one stare death in the eye, get your act together, or be innovative and increase risk.

Android is commoditizing the OEMs and opening opportunities, at the same time as the vertical niche OEMs (RIM and Apple) are short time wins but brand-killers, and the Internet players will become a co-opetition. Right now MNOs could take the step and create their own vertical propositions like INQ and Vodafone 360, and with a fraction of a cost of what 360 cost Vodafone.

There are so many services that the MNOs could be innovative around – what about a "tariff app store" where you pay for reduced rates to certain people or certain times: "I'll be in the UK for the day, I would pay €60 for a full day data pass", "Can I call my kids for free for €5 a week?" – even auctions about tariffs which would make people call/watch streaming video less during peak hours to unload the net.

If I was an MNO I would hire you directly to help me with the strategy for the new undisturbed company within that in 2-5 years will become my game changer.

So game is not over yet, and I don't see (hope) the OEM doing the same mistakes as IBM (HP/Compaq/etc).

As for the operators, I tend to agree with you, even if we never know if they'll finally manage to raise their billing and customer control strengths.

Rendez-vous taken

The future of Android is looking bright, but after recently purchasing an Android device (Nexus One), and using it for about a month now, I can say for sure that it needs some time to mature. What will the Android of this time next year look like is a very interesting question.

The next 3 years, as you said, are going to be very interesting, but then again we've been saying this every year!