Apple, Cingular and the Case of the Missing iPhone SDK

At Apple’s annual developer event this week, Steve Jobs announced that there was no native SDK for the iPhone and that developers wanting to add functionality to the device could write web applications with limited hooks into some of the phone’s native functions. Steve has cited concerns for the sanctity and stability of Cingular’s network, but that’s a veil for other, far more salient reasons behind this. Let’s walk through some of the more interesting ones.

The Apple/Cingular deal represents a significant departure from the typical relationships found between device manufactures and mobile operators. To close their deal, both companies had to evaluate and learn new ways of operating in partnership, and the concessions made on both sides were by industry standards considerable. Apple insisted on driving the launch marketing and channel strategies, including restricting pre-sales, defining retail locations and point of presence collateral, and managing the messaging given to the media. In return they ceded to Cingular on matters related to managing customer acquisition and retention costs, protecting Cingular’s existing revenue models and competitively positioning Cingular against its rivals.

One of the more visible examples of Cingular’s wins - from their perspective, anyway - is the lack of an instant messaging application on the iPhone. iChat, one of Apple’s marquee software products and a core component of Leopard’s personal and enterprise communications strategy is noticeably absent. Why? Cingular offers a competing service - SMS/MMS - which when combined with the other carriers in the US represented a $2.5B market in Q1 2007. As the #2 provider in that market, you can count on them fighting to hold onto their share of it as long as they can.

Steve - and by proxy, Cingular - is concerned that third-party application on the phone represent a threat to the network? Well, there’s a shred of credibility to this one, but it’s a stretch. Others have pointed out that Windows Mobile, Symbian, Palm and myriad Java-capable mobile devices have been able to load and run custom applications for years so it should be a non-issue on the iPhone, but the counterpoint to this argument is that the predicted early popularity of the iPhone combined with what would undoubtedly be a dramatically simpler process for loading apps onto it were an SDK available could drive unprecedented levels of network traffic. This would degrade the overall end-user experience and lead to a devaluation of the iPhone and Apple brands, higher support costs for both Apple and Cingular and reduced follow-on sales opportunities for both companies.

It this possible? Maybe. But anyone who’s used a mobile phone knows just how spotty the experience can be. Even with the upgrades Cingular is making to their network in support of the iPhones launch, people are going to get frustrated with slow web browsing, dropped network connections and funky network behavior from Apple’s first generation of mobile Apps independent of any massive, third-party application strain. So is it likely? No.

Sure, this is just the first generation release, and from the tone of the initial keynote announcing the iPhone Steve made it clear that the product teams were pushing hard to get it to general release. But there isn’t such a shortage of talent on the market that would have prevented Apple from staffing up a developer tools iPhone team had they wanted to concurrently launch an SDK. Undoubtedly there’s an element of wanting to see how the market responds to the device before making commitments to developers, but Apple’s lineage is tightly enough enmeshed with the software development community that it’s hard to give this argument significant credence. John Gruber had much stronger words on this.

Where does this lead us? Without question there will eventually be a toolkit that gives developers more than hooks into the browser to build iPhone apps. Apple will start dealing with other operators who will have different wants and needs than Cingular, the software stack will launch through revisions, market forces will drive down flash memory costs and increase capacity, and Apple’s key partners will apply considerable pressure to open up new revenue streams for their applications and services.

Apple has been dallying with selling apps for the iPod through iTunes for several months, so there’s a precedent that this is the likely model for loading applications onto the iPhone. If so, Apple could potentially maintain control over which apps make it into the ecosystem, define how they’re sold, and in the process take a cut of the transaction revenue. In that situation, do you think anyone else might ask to share?

[tags]apple,iphone,steve jobs,cingular,mobile,sms[/tags]

Category: Mobile || Tags: apple, cingular, iphone, Mobile, sms, steve-jobs ||