Born Weird

Overlooked, I think, in today’s arrival of the iPad 3G (as differentiated from its non-3G brethren) is its unique potential to act as a disruptive technology — that is, an innovation that reorganizes the operation of the marketplace.

In the run-up to the release of the iPhone in 2007, many analysts and enthusiasts (myself included) were excited by the prospect of Apple’s new device being a game changer. We hoped it wouldn’t just be a shiny new device, but that it would actually transform the mobile marketplace.

Half our hopes were realized; the other half, dashed on the rocks of the telecommunications industry.

The iPhone certainly disrupted the mobile hardware and software markets. No longer were smartphones just for businesspeople. No longer were they saddled with clunky (to put it kindly) interfaces and differentiated by largely meaningless hardware, form-factor variations. In came touchscreens and useability and even joy. In came an OS that allowed — encouraged, even — users to install third-party applications. All of this was new, and all of it has been transformative. Some handset makers haven’t really recovered (Nokia), some are just coming around (Motorola?) and others have reapt huge benefits (HTC) as a result of the changes in the handset marketplace. In software, there’s now a premium on offering a quality OS, and the iPhone (together with Android, a bit later) essentially created the mobile software development industry.

The telecommunications (that is, carrier) side of the story is rather different. Before the iPhone’s release, rumors swirled that the phone might be sold apart from a carrier, completely unlocked and ready to join any network. More reasonable prognosticators shied away from such hyperbole but still held hope that the iPhone would challenge the existing marketplace mechanics for handset sales and distribution.

Instead, however, things haven’t changed a bit since 2007. The iPhone was released in the U.S. on just a single carrier (AT&T née Cingular) and three years later is still only available on AT&T. While Apple and AT&T did originally experiment with selling the handset for the full price up front, rather than go with the typical subsidized-over-a-two-year-contract approach, that got scrapped pretty quickly. Of course the iPhone’s being shackled to AT&T didn’t stop some enthusiasts from attempting jailbreaks, but Apple’s software updates bricked enough iPhones to put a damper on that. Today, if you want an iPhone, you have no choice of carrier, you’re required to sign a two-year contract, and you (still) don’t even get to tether. The iPhone is only disruptive to telecom insofar as heavy usage tends to distrupt AT&T’s ability to actually provide service.

Ironically, the iPad may have precisely the opposite effect as the iPhone.

Whether you think it represents the first viable device in a new third computing category between phones and PCs or not, it seems pretty unlikely (at least to me) that the iPad will be particularly disruptive in the sectors the iPhone was, largely because it uses the same OS and therefore the same paradigms for software distribution and so on. It may certainly force some transformations in certain markets (e.g. netbooks, e-readers), but I don’t see potential for being truly disruptive.

But take a look at how Apple and AT&T are offering mobile connectivity with the iPad 3G. It’s radically different from what every other carrier is offering, be it for handsets or netbooks. It’s even different from how prepaid plans work. In fact, it’s barely a plan at all, though that’s how it’s described. You can sign up at any time. You can upgrade at any time. And you can cancel at any time. No service initiation fees, no ETFs, no first-use-per-day surcharge. Nothing. It’s completely straightforward, completely no-nonsense.

That may not sound all that revolutionary. In the grand scheme of things, it’s not. But it certainly is for telecommunications providers like AT&T. It’s a completely different way of obtaining 3G service than we’ve seen before here in the states. And if it catches on, it has the potential to completely reshape how we pay for such services in the future.

I believe Apple wanted to challenge the telecom status quo with the iPhone but didn’t have the muscle to do it. With the iPad they appear to be trying again. Here’s hoping they’re successful this go-around.