App stores shift power balance in mobile market

New mobile app stores launched by Apple, Google, and Research In Motion could shift the balance of power in the mobile market away from wireless operators and toward device and platform developers.

Until recently, wireless operators served as the gatekeepers of what content and applications made it onto mobile phones. Now mobile platform developers such as Apple, Google, and Research In Motion are providing marketplaces where consumers can get access to thousands of new applications tailored specifically for each of these device platforms.

On Tuesday, Research In Motion, the maker of the BlackBerry smartphone, became the latest device maker to announce it will offer an application storefront branded specifically for its own operating system.

Earlier this summer, Apple made headlines with the launch of the App Store, an online marketplace of games and other software designed to run on the iPhone and iPod Touch devices.

More than 3,000 applications are currently available, and Apple has said that users downloaded more than 100 million applications between the site's launch on July 11 and the beginning of September.

Google followed with its own application store for phones that use its Android operating system. The first phone, called the G1, will go on sale Wednesday on T-Mobile's network in the U.S. And the on-device application marketplace will also go live with it.

For developers, these new storefronts should make it easier to develop and distribute applications. For consumers, it means more choice in applications. But for operators, it means ceding some control over what applications make it onto their phones to other companies.

"The big picture trend is that mobile carriers are playing less of a central role in the marketing and distribution of individual applications," said Charles Golvin, a principal analyst with Forrester Research. "It's analogous to what happened on the Web. People initially accepted the walled garden of AOL, but as they became more skilled users they found that to be too restrictive."

To a certain extent, wireless operators appear to have accepted the trend. Verizon Wireless, which has developed a new open network initiative to speed up certification of devices and applications running on its network, claims that it is happy to allow new applications and services on its network, since ultimately it will drive network usage.

"We want users to bring any device or application to the network that they want," Eric Reed, vice president, Market Issues and Policy for Verizon, said during a panel discussion at the Consumer Electronics Association Industry Forum in Las Vegas on Tuesday. "That is what our open development initiative is all about."

But it's clear that carriers don't want to give free reign to application developers to put anything on their network. Wireless operators still insist there needs to be certification.

"We also have a responsibility to make sure that these applications and devices don't crash the network or hurt the user experience," Reed added.

That said, Forrester's Golvin believes that wireless carriers see the writing on the wall, and they realize they must be more open to new applications if they hope to drive usage on their networks.

"It's true that the role of the carrier as the key distributor of applications is dissipating," he said. "But the upside is that these same operators still stand to make money on their data plans."

The danger for wireless operators is that by ceding application distribution to handset makers or platform developers, they are essentially making themselves into dumb pipe providers. This is a wireless operator's worst fear and one they have already begun to see play out in the broadband market.

But Reed of Verizon said he still expects wireless consumers to come to Verizon for applications, too.

"There is not a one size fits all solution here," he said. "There will be multiple business models."

RIM has also acknowledged that there will be multiple ways for consumers to get applications. And it will continue to work with its carrier partners to provide on-device application centers that are created by the carriers to help promote application downloads. These centers will allow each carrier to offer a catalog on the device so that customers can discover and download applications.

[jeromatron]

"But Reed of Verizon said he still expects wireless consumers to come to Verizon for applications, too."

Ummm... Verizon applications is actually why I *left* Verizon Wireless and got an iPhone.

I still remember having a Motorola phone and a PowerBook G4, both with Bluetooth. I looked at the phone's specs online and found that it supported the Bluetooth data profile, but it wouldn't sync my contacts with my computer. I asked a Verizon rep about why it wouldn't work. They said, oh, because we can't charge for that.

Yep - there is a seemingly endless supply of anti-consumer gall at Verizon Wireless - decent network, pretty crappy business practices. It's like - yes I really would like to be gouged for every ringtone and 3rd rate copycat app out there - please.

[Jonthin]

And as of TODAY Oct 22, the iPhone App Store sees its 200 millionth download. They expect a BILLION sometime next year which would be incredible.

One of the reasons Apple will be hugely successful at this game is that they have but one single phone. All the others have myriads of hardware designs and writing software for those individually becomes a nightmare...

Surprised the writer didn't see or discuss this crucial point...

[inachu]

I can still see it where Apple will remove an app as it would be a duplicate but the program was changed just to make it easier to read by making the colors in the app high contrast.

I could see a person who has trouble with his/her eyes making a class action lawsuit against apple for removing such changed programs.

[irondog1970]

The lesson here is that competition is the key factor in getting better programs (or settling for a decent program that is free). This can turn into a theology discussion (why Android/iPhone is better than the iPhone/Android), but in the end, the important point is: the power to decide is given to the consumer.

I had an unlocked Nokia 6682 that I absolutely loved. The Symbian operating system was terrific, and most the apps I got for it were free or cheap. My Nokia could do as much as my iPhone & was probably better in some regards (copy/paste was available; white list/black list programs were cool), and I loved it. It just didn't do WiFi, and that is what made me switch over to the iPhone.

I got spoiled by the Symbian operating system, and I loved the ability to decide what my phone could do. So, I'm glad to see this concept be exported to the general public.

[Penguinisto]

Not so sure that wireless operators would become just mere ISPs. I can switch ISPs with only a minor disruption if I plan it right. With mobile companies (at least in North America), they demand $$$ to get out of a contract (unless you wait until there's some minor change in the carrier's policy, then use that as an excuse to claim you do not agree, at which point you can back out of a contract w/o paying fees to do so).

There are exceptions of course (e.g. Cricket, and other pay-as-you go plans), but in North America these are restricted to mostly minor carriers which only basic voice service and limited coverage.

@"inachu": I doubt it. The costs of doing so, coupled with the risks of having it dismissed out-of-hand means that even contingency ambulance-chasers won't touch such a thing. Why? Because Apple doesn't have a monopoly, and the "victim" can always go buy a, say, a Jitterbug phone (the one with abnormally huge fonts on the screen), or a competitor's smartphone, or a netbook to compliment their cell phone, or...?

/P

[AppBeacon]

"More than 3,000 applications" Actually, as of 2008-10-22, AppBeacon is tracking 4603 apps. We are seeing nearly 100 new apps per day for the iphone.