Monday, October 19, 2009

Vertical integration, cell phone edition 

Some people are saying a great Droid would mean more competition amongst handsets. But you can�t really choose a handset � you choose a handset-carrier pair. The real innovation inhibitor in the cellular world has been the power of the carriers to dictate what devices you can use and what apps go on those devices. Just ask an entrepreneur who tried to create handsets or cellular apps. They are completely beholden to the whims of the carriers.

Chris Dixon this morning. I grabbed the HTC Hero last week when it came out -- those of us in Sprint-land have been shut out of iPhone, and long ago I picked Palm/Handspring over Blackberry. But the Pre was just too much of a bother -- hated the keyboard, and I need something with memory I can set to 4 GB min, 8 GB preferred, so that I don't have to carry my Touch along with a phone. The Hero does that.

But it is odd that we allow this pairing to happen. Why? Dell tried to sell an iPhone killer but the idea was stillborn because the carriers panned it. I would love to have Skype on my phone so I could make it useful in places I couldn't get a carrier ... but carriers hate that. There was some thinking about this last week with Oliver Williamson's Nobel win (see Alex Tabarrok for example.) Since it appears each carrier gets its own flavor of phone that the arrangement reduces some scale economies for phone manufacturers. Why? I don't have a good answer here.

Now if someone could just figure out how to power the Hero for 24 hours on a single charge, I'd be the happiest guy on a mobile in America.