The dark side of Apple's dominance

Apple may become the Microsoft of mobile -- for better or for worse -- as Android sales drop and leave the mobile industry fewer dollars to divvy up

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But that "dumb pipe" phenomenon extends beyond the carriers. Device makers are in a similar pickle, and that's why they bet on Android, figuring its free licensing cost and ability to be customized would let them compete both with Apple's "do it our way or else" approach and each other. Instead, they used Android's customizable nature to create superficial differentiation, hindering developers and confusing users.

Their refusal to keep their devices updated only made things worse -- that's the "dumb pipe" approach of investing the bare minimum once a customer has been hooked, rather than take the Apple strategy of making the customer want to stay because things keep getting better. You know it's bad when a platform licensor finds it necessary to create and even sell its own products to show the licensees how to do it right: the Nexus One and Galaxy Nexus smartphones, and an in-development Android 4 "Ice Cream Sandwich" tablet expected later this year, in Google's case.

Microsoft took those lessons and came up with Window Phone 7, whose license puts severe restrictions on device makers' freedom to make changes. That's kept the platform nicely consistent and made updating devices much easier for all concerned. It's too bad Microsoft's approach to smartphones focused on just a trendy subset of usage: social networking.

What this all means is that Apple has achieved an environment where it is almost sure to keep gaining. It charges more for its devices but makes carriers eat the increase -- a customer pays the same for an iPhone as for an equivalent Android device, which helps encourage iPhone sales, while chipping at carrier profits. By the way, carriers have huge margins on their services, so I'm not shedding a tear over Apple's impact on their still-large profits, especially given that Apple does the innovation work and they don't. But I'm more sympatetic to retailers, who operate on small margins.

As more people buy iPhones, app developers and content creators will have to sell more of their wares through iTunes and the App Store, giving Apple a 30 percent cut each time -- again a higher percentage than they'd pay other stores but with the undeniable draw of a significant market. It's the old industry joke: You'll make it up on volume.

Let's be honest: Apple's amazing success is due as much to how well it executes on innovation and customer engagement as it is on how consistently its competition fails on those issues and basic product execution. Apple wouldn't be as strong as it is now if its competitors weren't so lame, so I have trouble criticizing Apple for taking advantage of that reality, despite my awareness of its less-than-savory impulses.

Maybe Apple will buck history and not fall into the devolution trap. An encouraging sign is its progressive approach to using environmentally positive manufacturing approaches, as well as its forthright approach to pushing for better labor standards in sweatshop nations such as China, showing it has a conscience and is willing to use its muscle to make things better -- within the bounds of profit-making capitalism and users' willingness to pay. Apple use the same exploitative Chinese labor as everyone else, but last I checked it was the only one to reveal those suppliers publicly so that activists could see if it was trying to improve workers' conditions.

And Apple's history of continual innovation is strong -- at the level of an IBM, an established innovator. When Apple traded innovation for short-term exploitation in the 1990s, it nearly died, creating a powerful object lesson at Apple that has not gone away. There's hope that Apple will continue to act that way even if it becomes the unmatched powerhouse of mobile technology and content distribution.

That's a hope, not a certainty. Today, the situation is that Apple wins. Users win (at least for now). And everyone else loses. Even though that's mainly their own fault, it's an uncomfortable direction.

This article, "The dark side of Apple's dominance," was originally published at Read more of Galen Gruman's Mobile Edge blog and follow the latest developments in mobile technology at Follow Galen's mobile musings on Twitter at MobileGalen. For the latest business technology news, follow on Twitter.

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