A New Podcast Discusses Apple's Place In The Ongoing Telecom Industry Shake-Up

In his latest 5by5 Studios production, Dan Benjamin of Hivelogic is co-hosting the new podcast serial The Critical Path with asymco founder and Apple expert Horace Dediu. While the biweekly show is only two episodes old, it already has a large and devoted iTunes following -- and for good reason: It matters! As Benjamin says on introducing each episode, The Critical Path is

a talk show contemplating the causality and success -- and failure -- in mobile computing. Using Apple as a lens to look at both telecom and traditional computing markets, we try to understand what it means to be great.

This second episode, hot on the heels of poor quarterly earnings for former wireless giants Nokia and RIM, deals with the very pressing issue of the often accelerated declines befalling brands in the technical consumer space. Dediu starts with a discussion of the aforementioned stricken pair and asserts his conclusion that, in these cases, management is not the end-all root of corporate failure. Rather, he ascribes their combined degradation to a set of factors most easily explained as industry-wide philosophical dismissal of challenged paradigms (and those challengers changing them). It is true that much of a company's aim is established and enforced by the suits upstairs, but directing change in a timely manner is often impossible when faced with unpredictable, massive departures from traditional business ideals. Before Apple's 2007 iPhone launch started the Cupertino company's assault on the industry's Old Guard, the operative models endorsed by most global handset manufacturers were quite the opposite of where we find them today. Back then, your phone of choice was usually determined by carriers alone. Oftentimes, users didn't care about (or weren't even aware of) what model of handset they purchased. To the consumer, quality was largely associated with the various carriers' reputations. Additionally, manufacturers were discouraged to build mobile "computers" with (perceived) secondary voice functionality. Rather, hardware companies were given to believe the market would remain voice-centric instead of suite-centric (or, as we call it today, "app-centric"). Then, when Apple finally entered the fray with such a conceptual "no-no" as the iPhone, they simply were not perceived as a threat in the telecom industry, and most competing brand managers dismissed the iPhone with little additional thought. Steve Ballmer even famously said (or, more likely, screamed),

"There's no chance that the iPhone is going to get any significant market share. No chance... I'd prefer to have our software in 60% or 70% or 80% of them, than I would to have 2% or 3%, which is what Apple might get."

In retrospect, this line of shared reasoning turned out to be exceedingly incorrect, and many companies are now struggling to address and accommodate the market change Apple has (and continues to) promote. In essence, Apple radically redefined the evolutionary direction that mobile telecommunications appeared to be taking in the mid-2000s. Manufacturer branding became important to the mainstream marketplace, says Dediu, moving the money "higher up in the value chain." Now, though, branding is fading in importance, taking a backseat to included and advertised operating systems. Obviously, iOS and Android are the major players here, but the ladder appears to go higher still. The next step, Dediu says, is tapping the astronomic financial potential of services offered within these operating systems. That means apps. And that means the app providers -- those agencies and companies working the servers to bring fancy app functionality to your handset of choice -- have the best chance to successfully burst onto the mobile scene. In this light, it's easy to see why Facebook is purportedly going the content-heavy HTML5 route as it gears up for a future that further shifts mobility's meaning. Overall, Dediu's analysis seems quite on the ball, and I agree with most of what he puts forth. However, Apple remains a special case, and its place on the value chain as a money-making hardware manufacturer will remain one of considerable income as other companies attempt bringing the mobile business server-side. Of course, Apple has been playing that game for a good while, too; and all indications are -- with iCloud launching and app functions and storage moving off-device -- Apple is going to reap financial rewards on every post-carrier rung the high-climbing ladder includes. And, as is Steve Jobs' wont, Apple is doing it all by being meticulously disruptive and elegantly radical in the face of the industrial status quo. As Dediu puts it, this "disruption theory" is the key to growth in any modern monetary environment, and the "disruptor" usually outpaces the "disruptee." Apple, after all, aimed high, risking tremendous resources (and its entire new-found mobile reputation) in its lofty ambition to rock the telecom world. And as there are winners, there must also be losers. Asks Benjamin, "Are we seeing the end of Nokia and RIM?" Dediu's answer? "History would indicate that." For more insight from this knowledgeable pair, subscribe to The Critical Path podcast free on iTunes.

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