Why Apple should license the iPhone platform

February 27, 2007, 6:54 AM UTC
Fortune

Applejobs_2Every couple of years when I get a new cell phone, I like to play a little mental game. I imagine presenting the 10-year-old version of myself with the gadget, and wonder if he would have had any clue that the thing in my hand is a telephone.

I tend to think the 10-year-old me would be baffled. My cell phone now, a Palm (PALM) Treo, certainly looks nothing like the communication devices I had growing up. There’s no rotary dial, no dial tone, and even the relatively beefy Treo is tiny compared to the phones we placed around the house a generation ago. The one unifying characteristic between the phones of yesterday and today is that thing that remains on almost every one of them:

The number pad.

And that’s what brings us to the problem with today’s cell phones as they prepare to move full-force into the age of the wireless Internet. The number pad. It’s still the only common input feature (besides a microphone) in every phone. And while the number pad has served us well thus far for dialing phone numbers and plodding through voicemail, it’s a horrible Internet navigation device. Can you imagine how frustrating it would be to use a PC if all we had to work with was a keyboard and a number pad – no mouse? We’d never go online at all.

So what’s to be done? Apple (AAPL) seems to have the most inspired answer yet, with the touch-sensitive iPhone, due in June. The screen can act not only as a number pad and keyboard, but also as a mouse-like interface for flipping through various applications, zooming in and out of environments, and completing tasks on different parts of the screen. It’s brilliant, and if every cell phone maker could license it, it could become the basis for a new breed of phone-based computing device. Just as the typewriter paved the way for the first PCs, the iPhone could become the ancestor to the phone of the future.

But that will only happen if Apple will license the touch navigation technology to other companies. And I wouldn’t bet on Apple doing that.

Sure, there are arguments against the idea of Apple licensing the iPhone interface. The primary reason is that people see Apple as being in the hardware business, and if others were making competing hardware, Apple’s own iPhone sales would suffer. Apple’s done just fine, thank you, without licensing the Mac operating system or the iPod clickwheel. Plus, the idea is an Apple invention. Shouldn’t Apple reap the benefits from it before sharing it with other companies?

I will argue, however, that the iPhone is different. It’s entering a high-end handset market against strong, global competitors that are determined to make Internet-connected phones. Apple is also up against strong global carriers that are eager to offer wireless Internet services. (Because Apple is doing deals with a favored carrier in each market, every other carrier immediately becomes an enemy.) If Apple really wants to own the high-end handset market, or even achieve its goal of 1 percent share, it should create a platform that everyone else can build upon. Apple’s far more than a hardware company. It’s an innovator.

If Apple doesn’t do it, a rival company will build that next-generation phone platform, and we’ll all wonder what could have been.

I predict Apple has three years to decide whether to license the iPhone platform and be a market leader in Internet-connected phones or keep it and be a niche player. Five at the most.

The smartphone market is a mess

When Apple CEO Steve Jobs presented the iPhone at Macworld in January, he pointed out how bad other “smartphones” are. He was right. The tiny keyboards and buttons are no way to navigate the Internet, a place full of two- and three-dimensional information landscapes. Before we’ll get a good online experience on a phone, some things will have to change.

And they will. Cell phone makers like Nokia (NOK), Motorola (MOT), Samsung, Sony (SNE) and recently Hewlett-Packard (HPQ) may be slower than Apple at crafting digital experiences, but they’re not stupid. They’re working on new interfaces for navigating the mobile Web. Even Microsoft might figure things out – most likely by purchasing some brilliant startup with the seeds of a good technology.

I predict the company that will dominate the smartphone market will be the one that invents and licenses a standard interface for Internet-connected phones. Software developers and service providers need to know rules of the road – things like the size of the standard smartphone screen, the number of colors it displays, and the common data input method. Once that universal set of rules emerges, we’ll get deeper, more valuable mobile experiences.

Apple could be the company to bring us that interface – and grow revenues in the process. But as we learned in the days when the PC’s graphical user interface emerged, if Apple doesn’t license its technology, someone else will.

Do you agree? Think I’m an idiot? Discuss.