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Published on January 18th, 2009 | by Babar Bhatti


Battle For The Smart Phone's Soul

A recently published article in economist about the competition in smart phone market. This is a good summary of smart phone trends for non-technical readers. A relevant conclusion from this article is that smart applications are what it is all about and that is why it is so important to understand the technology and the new distribution channels (such as iPhone app store). As always, you will get the best telecom stories from the leading media of the world here!

The mobile-phone industry is going through two important shifts that promise to generate much growth and profit in the years to come. First, even though overall sales may fall in 2009, sales of “smart” phones—those that allow you to surf the internet, download music and use other data services, as well as make calls and send text messages—are booming. According to Informa, a market-research firm, the market for smart-phones will grow from $39 billion in 2007 to $95 billion in 2013, by which time they will make up nearly half of the handset market by value (though only 34% by volume).

Second, and more important, as handsets get smarter the nature of the industry will change. It will be less about hardware and more about software, services and content. In fact, for the first time, more will be spent this year on such intangibles than on the handsets themselves (see chart). And this is why, also for the first time, a fierce battle between operating systems for handsets has broken out.

Mobile phones had operating systems before, of course. Just like personal computers (PCs), they always needed such software to enable the hardware to function and to allow add-on programs to run. But most mobile operating-systems were proprietary, meaning that handset-makers had developed them specifically for their own devices. Only at the top of the handset market was there any rivalry between operating systems, with a struggle mainly between Research in Motion (RIM) with its BlackBerry; Symbian, controlled by Nokia; and Windows Mobile, a cut-down version of Microsoft’s operating system for PCs.

This set-up was fine as long as mobile phones were relatively dumb, wireless-data connections were slow and users were happy just to make calls and send text messages. But in recent years it became the main impediment to the take-off of the mobile internet. On their own, handset-makers did not all have the necessary resources, expertise and culture to develop top-notch operating systems with intuitive user interfaces. Add-ons such as games had to be laboriously tweaked to run on multiple platforms, which often existed in multiple versions.

All this amounted to a tax on mobile phones: on average, 20% of the cost of a handset goes on software. It did not help that mobile operators, keen to keep control of their customers, decided which applications would run on a handset and which services it could access. They also confused customers with complicated pricing schemes for wireless data.

It has taken two outsiders to shake things up. One is Apple, with its iPhone. The other disrupter is Google, with its Android platform.

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