In 2007, Apple energized the smartphone industry with the introduction of the first-gen iPhone. Within a year, they had gone from a non-player in the cellular phone market to an innovative industry leader. Indeed, Apple’s tremendous success in the marketplace is exemplified by their capture of 48% of the Q1 2010 mobile phone revenues, despite being limited to GSM carriers and garnering only an estimated 3% of the total handset market.

If rumors of a CDMA phone in 2011 are correct, Apple is poised to once again make an historic leap, this time not for its innovative technological advances, but in terms of a significant – possibly even dominant – market share increase. In order to explain why this might be, we need to understand how smartphone adoption has evolved (very rapidly) over the past 3 years.

Prior to 2007, the RIM BlackBerry was the preeminent mail-enabled smartphone. Owners tended to be for any of 3 different reasons:

  1. They were early adopters in the mobility world, and the BB was a natural fit. It was first to the dance, and as an email device, it worked exceptionally well. Internet access and apps were typically a lower-priority concern.
  2. Their companies only supported the BB, and equally likely, the BlackBerry Enterprise Server (BES) for email. In an enterprise environment, the BB/BES combo was favored because of the ability to manage devices. IT pros such as myself were happy that they could wipe a lost/stolen device at a moment’s notice, push apps (allowing or disallowing user-installed apps), and proxy their users’ web browsing. Because of this, the BB has been the traditional choice for business smartphones. Indeed, “choice” may not even be the operative word, as “mandate” was more often the case in large organizations.
  3. They were accustomed to the physical keyboard and trackball navigation, and in most cases were not enthralled by other UIs and form factors as competitor hardware evolved. Aside from the Blackberry Storm (and now Torch), the BB design had been mostly conservative and relatively unchanged for many years. And most BB users were perfectly fine with that.

Enter the iPhone. With its large screen, robust web browser, multitouch interface, and chameleon performance via hundreds-of-thousands of downloadable apps, the iPhone was revolutionary in a world of otherwise utilitarian BlackBerries, Nokias, and Motorolas. It had certainly taken the consumer market by storm, allowing people to surf, update their social networks, and check their Yahoo/AOL/Internet mail while on the run.

In general, iPhone users were some combination of:

  1. Apple zealots, believing that all things Apple are gold.
  2. The in-crowd, those interested in the latest hip/cool accessories. The iPhone was a luxury item, a reflection of fashion sense and personal style.
  3. Consumer-oriented and often not computer savvy, where the clean design and user-friendly intuitiveness were distinctly un-geekly. The iPhone was a tool with which to get things done, not something that had to be constantly configured and tinkered with.
  4. Experienced users who recognized the power of a full computer in their hand and how installable apps could transform it for a multitude of purposes. They were interested in the convergence afforded by having Internet, mail, and multimedia in a single device, with no need to carry a phone and an MP3 player (and a camera and…).

The iPhone was incredibly alluring but, for many, still strictly a consumer/personal device. Unattainable in a business world that had locked out all but BES-managed BlackBerries, the landscape changed when Apple released an iOS software update that addressed many of the security concerns surrounding iPhone usage in an enterprise environment.

With the corporate workforce becoming increasingly tech-savvy and mobile, the benefits of anytime/anywhere access was seen as a boost to productivity and availability. If users were more likely to continue working after-hours on their favorite smartphone (as opposed to leaving their corporate tether on the dresser), then why not take advantage of it? Email systems (notably MS Exchange) began to get easier to setup/maintain for mobility purposes, while the phones themselves became simpler to configure.

As the iPhone evolved enterprise-friendly features and corporate IT weaned themselves off the idea that Draconian BES control is mandatory, the BB stranglehold gradually loosened. But there was still something preventing the iPhone from completely replacing the BlackBerry.

  1. A fear of Apple is present in many Windows-centric corporate environments. Whether real or imagined, Apple products are considered difficult to integrate in a Windows world – they are unfamiliar to IT staffs,  the required applications are unavailable or imperfectly compatible, it is awkward to share cross-platform documents, etc. Virtualization and platform-agnostic web-based apps have somewhat softened those perceptions, but many companies are still a strict Apple-free zone.
  2. A mistrust of Apple is growing as the iPhone ties you to the Apple monoculture. This AppStore-controlled environment determines what programs you can and cannot have on your phone, not always of your own choosing. If Apple decides they do not like Flash, then no matter how much you may pine for it, and no matter how eager Adobe may be to provide it, Apple will not allow it. If Apple decides that Google Voice is not complimentary to the AT&T voice features, they will not allow it. If they feel that any app is morally, legally, aesthetically, or architecturally objectionable, they simply will not allow it in the AppStore.  There are definite advantages to this kind of controlled environment – the approval process ensures some semblance of security, reliability, and consistency – but some feel that freedom-of-choice is not a worthwhile sacrifice.
  3. An arrogance of Apple is perceived by some. There is a sense that Apple believes that they can use their position to improve on the ideas of others (similar to the “embrace and extend” criticisms levied on Microsoft in the 90s), which, when coupled with the closed monoculture, puts them in a potentially unfair and powerful position in the control of the platform.
  4. A hatred of Apple is lingering after bad experiences with iTunes. The bloated (though very capable) multimedia manager is still suffering from early Digital Rights Management issues that handcuffed music sharing. Though DRM heavy-handedness had been long abandoned, it still has left a bad taste with purists. And along with iTunes, the other applications (QuickTime, Bonjour, Safari, etc) that Apple bundles only further increase complaints about unwanted bloat.
  5. And lastly, there is AT&T. In terms of nationwide 3G coverage and performance in densely populated areas such as NYC and San Francisco, the AT&T cellular network is the butt of many jokes. Although many subscribers (myself included) may have had no significant issues with performance, even AT&T admits that there are trouble-spots that they are working hard to correct. Some people desperately wanted an iPhone but were unwilling to suffer with AT&T. Given the overall perceived quality of AT&T vs Sprint or Verizon, it is almost as if the iPhone has succeeded in spite of AT&T.

Now enter Google’s Android OS and the many phones that support it (Droid, EVO, etc). Android phones had all the appeal of the iPhone with a couple other advantages, namely:

  1. It wasn’t an Apple product.
  2. It wasn’t on AT&T.

The Google Android platform came at a perfect time to capitalize on the iPhone revolution and steal from a softening BlackBerry market. Android phones approximate the appeal of the iPhone without actually being one. Users were not forced to use the AT&T network, and were not locked into a closed Apple environment under Jobsonian control.

Google has parlayed the Android ‘ouvre’ across multiple device manufacturers and carriers. But when viewed as a single platform, it now finds itself where Apple was in 2008: going from a non-player to a key market leader within the span of a single year. In fact, the 2010 numbers show that Android has now displaced iPhone and BlackBerry as the most popular smartphone platform.

But look again at that anti-iPhone list. Why has Android been able to surpass the iPhone? The over-arching issues regarding that choice fall into two categories: geek vs practical. Criticisms over freedom-of-choice, DRM, and bloated software are mostly geek issues that are not on the corporate radar, nor are they things that the average consumer worries about. Yet carrier reliability is a universal concern for enterprises and individuals alike.

For how many would-be iPhone buyers was AT&T a deal-breaker? A lot. And Android has prospered as a result – not necessarily because it was a far superior product, but because it was playing against the iPhone/AT&T synonymy. For Verizon and Sprint customers, an Android phone was the next best thing. On the technical front, GSM supports simultaneous voice and data – something not possible with CDMA. But in the grand scheme of things, that is probably a nice-to-have when compared against call integrity and a larger 3G coverage area. The absence of talk-and-data certainly hasn’t harmed the Android market. And when the carrier is apologizing, you know things are not exactly ideal for AT&T.

How do the phones compare on other practical issues?

  1. Feature/Functionality: dead heat. With all apologies to fanboys on either side, today’s iPhone (or Droid) may be superior, but it will soon be leapfrogged by another in the next hardware release cycle. Android phones tend to compete on the technical specs (bigger screen, more megapixels, etc) while iPhone emphasizes “the experience”.
  2. Compatibility: dead heat. The iPhone is no more or less compatible with most desktop (or cloud) environments than is the Android platform. Some may point to the availability of Cisco VPN on the iPhone or poor quality of the early Android browser as compared to Safari, but we’ll let those issues slide.
  3. Application availability: advantage iPhone. By all accounts, the iPhone has a far greater application footprint than Android (even if the AppStore policy is difficult to fathom).
  4. Security: advantage iPhone. Both Android and iOS support ActiveSync, providing basic security functionality for enterprise mail environments. And while no OS is perfectly secure and it would be tempting to chalk this up to a dead heat, I still give the nod to Apple for two reasons. Firstly, the much-maligned “closed environment” of the Apple AppStore does offer some protection given that all apps are vetted before being made available. “Android Market”s are not as well monitored and I’m sure we’ll be seeing more virus and spyware incidents as time goes by. Secondly, the adoption rate of iOS upgrades is unusually high – 75% within a week for v3, 50% in 2wks for v4 – which suggests that critical patches will usually be applied by iPhone users in a timely manner. Android rates have been far less, and are compounded by the fact that many devices are not upgradeable and each carrier ultimately controls when new versions are released. This fragmentation of the Android market makes it very difficult for developers to produce robust apps across all hardware and OS releases.

So is the only thing preventing iPhone world domination the dependence on AT&T? That could very well be the case. When/if Apple delivers on the rumored CDMA iPhone for Verizon, they will have immediately addressed the single biggest concern that has hindered a more widespread iPhone adoption, and the #1 selling point that has spurred Android market penetration. I believe that a CDMA iPhone would be a positively huge strategic play for Apple. The Android adoption rate, while meteoric in 2010, could slow substantially once the iPhone is more carrier-agnostic.

Wilson Rothman contends that such a move is too little, too late – that letting Android grab a toe-hold was a fatal mistake that will doom the iPhone to 2nd place status. I’m not convinced. Rothman believes that Android is “the new Windows”, soon to be dominant. I say that Android is just the old Linux, and not just because that is what is under the hood.

For a majority of consumers, Android was a 2nd-choice concession, not a brand-loyal decision. Read almost any smartphone review and the conclusion is usually “almost as good as the iPhone”. It is the standard-bearer, praised for its features but condemned for its network. The iPhone – not HTC or Motorola – leads customer-sat metrics by a goodly amount. So if 75% of surveyed Verizon users – not to mention 25% of Sprint and 22% of T-Mobile – would consider switching to iPhone when it became available, what will that do to the Android juggernaut?

The addition of a Verizon version will finally put Android and iPhone on a level playing field. How those CDMA customers react could radically reverse today’s Android-dominated trending. At last, the highest rated phone coupled with the highest rated US network. It will be a deadly combination for the competition (and even for AT&T, who will suffer defections).

I won’t say that iPhone will reign supreme for the next century, because people change their phones at least as often as they change their mobile contracts. The Windows vs Mac style of loyalty should never be assumed to carry over to the handset market. But I do believe that iPhone will win the next round. There is an untapped market of CDMA customers yearning for the mainstream iPhone “experience”, and with availability on Verizon they will no longer have to settle for an imitation. Android will certainly remain popular, but it will mostly appeal to the iconoclasts, geeks, and tinkerers who shun iTunes, pleasure in knowing arcane features hidden in the OS, and relish having a fully-functional Star Trek Tricorder app.

Meanwhile… WinPhone? PalmOS? Meego? Yeah right. If RIM had a stranglehold and lost it, there is not much that such small-market players will be able to mount in 2010 to challenge the outcome. By Q3 2011, Apple is likely to be the unquestionably dominant mobile phone leader (both in revenue and units sold), an inverse to their Mac vs Windows penetration at the desktop. Now whether a dominance at the handset level will allow Apple to increase their share of the desktop market is a story for another time…