Apple has become one of the most successful companies in the world, and definitely a 500-hundred pound gorilla of the phone industry. Wireless carriers are growing leery of having one player so powerful it can push them around, and that may be enough to drive them to take sides in the smartphone platform wars.
The winner in this will likely be Microsoft, as the carriers are getting tired of Apple's hegemony and are leery of the Android market in light of Google taking ownership of Motorola.
Gathering Around Windows, Dissing BlackBerry
A number of recent reports in the press indicate carriers are lining up behind Windows Phone as a blunt against Apple and Google, yet another slap in the face of Research in Motion. Despite being an established, mature platform, people continue to abandon the BlackBerry OS, and the predictions of doom are starting to become self-fulfilling prophecies.
The New York Times notes that AT&T is making a king-sized push behind Nokia's Lumia 900 phone, while Verizon's CFO Fran Shammo said flat out the company hopes to use Windows 8 phones as leverage against Apple. "We're really looking at the Windows Phone 8.0 platform because that's a differentiator. We're working with Microsoft on it," he told Reuters immediately after Verizon's quarterly earnings call.
Windows Phone 8, a.k.a. "Apollo," has not been formally announced but it is widely believed to be scheduled for release later this year, around the same time as Windows 8. WP8 will have a lot of shared code with the PC/tablet OS and porting apps between the two will be very easy, with lots of code reuse, according to leaks from Microsoft.
That means the two largest carriers in the country are picking sides with a platform that has single-digit market share, according to IDC, an odd move to make but that's because they want to blunt Apple's power. "Apple's got all of them over a barrel," said Jack Gold, president of J.Gold & Associates, a mobile communications market research firm. "Apple says 'you want our phone, you're going to sell a lot of them, we want a lot of money.'"
Apple gets a royalty on top of the purchase of the hardware, which is estimated to be somewhere around $600. That's how iPhone sales have come to account for so much of Apple's revenue.
Apple Might Be Getting Too Pushy
Adding to this momentum for Microsoft is a blog post by Yankee Group analyst Katie Lewis. "Mobile operators are sick of taking orders from Apple but that's not the only reason why carriers like AT&T and Verizon are backing Windows Phone... iPhones are occupying an increasingly dangerous share of mobile operators? smartphone sales," she wrote.
In 2011, iPhones represented half of AT&T?s smartphone sales, and Verizon has said its sales are increasingly being consumed by the iPhone. It's only getting worse for the carriers. A U.S. Consumer Survey from Yankee Group shows 39% of consumers intending to buy a smartphone in the next six months plan to get an iPhone, which means that market share will only continue to grow.
"The success of the third mobile ecosystem would put control over the U.S. smartphone market back into the hands of mobile operators ? backing Windows Phone is AT&T and Verizon's chosen method of self-preservation," Lewis concluded.
Apple has a fair amount of power because of this, Lewis noted. Note that Verizon puts its stylized logo on all of the phones it sells except the iPhone. There's a reason for that. "If carriers want to offer the iPhone, they are obligated to follow Apple's rules. In other words, Apple dictates the relationship it has with carriers and this isn't something the carriers are comfortable with," she said.
A Better Alternative?
So the carriers are trying to promote a third platform to customers whose minds are not made up. "AT&T trained its employees to push the Lumia 900 to consumers before other phones such as an Android-based smartphone or an iPhone. Without AT&T's support and marketing dollars, the release of the Lumia 900 wouldn't have been such a big deal," said Lewis.
To be sure, carriers can't force you to buy anything and if you walk in the door and say "I want an iPhone," the only thing a smart sales rep will say is "check or charge?" There has to be some market pull. So carriers can only promote Windows Phone so much. "Unless consumers come in demanding it, that's not going to happen. A lot of Apple sales are referrals," Gold notes.
Lewis doesn't think the carriers will revolt against Apple too forcefully, either. "Android and iOS are currently running away with the smartphone landscape and it will take a lot to turn this around. But the landscape as we know it today can't last forever, especially with the carriers pushing for and openly supporting the success (or comeback) of a third eco-system," she said.
"Eventually, a strong third ecosystem will emerge or re-emerge to compete against iOS and Android-based smartphones, whether it be Windows Phone, BlackBerry or other," she added.
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