Appliance Wars May Be Restarting!

Today’s market is rife with rumor about new mobile devices; the new model of the iPhone and the first true Amazon Kindle tablet.  The aficionados will revel over details like processor and resolution, but the big point here is that the future of mobile services is getting decided by mobile devices and not by mobile operators or infrastructure.

Apple’s new iPhone is likely to have the usual upgrades in speed and resolution and a bigger and better camera, but the big question is whether it will have the SIM-less design that some rumors have identified.  That would be important because it would suggest that Apple may be working to break away from the traditional way that mobile phones are sold—by operators in a subsidy relationship that demands early exclusivity.  Given the iPhone would be a new model and not a new device, there’s probably no risk of exclusivity pressure at this point, so a SIM-less model would likely indicate a proactive plan on Apple’s part, a wide-ranging move to become a truly independent mobile provider that might extend into becoming an MVNO.

Amazon’s Kindle tablet could be one reason why Apple would look at a new business model for its mobile devices.  Ebook players like Amazon can field low-ball-priced appliances because these gadgets can lock users to proprietary book formats and guarantee future sales to make up any loss-leader pricing on the device.  Barnes & Noble already has a Color Nook that’s a rather good and extremely cheap Android tablet, but B&N doesn’t have the marketing clout that Amazon has.  However, if Amazon does field a Kindle, then B&N will certainly ramp up its own Color Nook tablet support.  The company has about 300 apps now; there are tens of thousands available and the Color Nook is still a couple Android versions behind the market.

A battle for the subsidized reader-tablet market between Amazon and B&N would almost certainly force Apple to look at that same approach.  The problem is that while iTunes and the App Store could have been used as the revenue engine for a low-priced appliance, Apple didn’t work that way when the i-stuff was launched, and they’re probably reluctant to surrender the margins now unless they can get them back elsewhere.  That’s why I’ve been speculating that the iCloud we see is a shadow of the iCloud to come.  With some new service revenue stream, Apple could then offer lower-priced appliances and still keep the revenue line growing.

All of this demonstrates the issues that network operators face, of course.  The subsidy relationship between phones and services has been a way for them to influence the ever-more-powerful Apple and Google, and an independent subsidy model would trash that strategy.  More competition in the space, particularly competition on services and content, puts more pressure on operator service-layer plans, too.

In other news, all of the recent hacking has generated a rise in corporate tension on security, and in our spring survey of enterprises we’d already found security a hot-button issue.  Juniper has been working to promote its network-based security model in this atmosphere, something that we believe should be done aggressively given that enterprises believe that “only the network can secure the cloud”.  One partnership in the cloud space illustrates the potential for Juniper’s Pulse security client as a point-of-interaction security outpost, and I’m glad to see this kind of positioning emerging because it’s been under-played by Juniper up to this point.  Even now, I’d still like to see more aggressive positioning.


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