It’s not Google vs. Apple. It is Apple & Google vs. the old way

It has been a while since I mailed out my last Om Says. I have been busy playing around with a lot of new gadgets, doing some thinking. Nevertheless, over last few days these stories caught my eye and sparked some thoughts that I wanted to share with you.

  1. Apple sold 4 million iPhone 4S devices during the first weekend.
  2. Google has 190 million Android phones.
  3. Nokia is developing Meltemi OS for low end phones.

When it comes to the phone business, there is no doubt that Apple (s AAPL) vs Google (s GOOG) makes a great headline. After all, who doesn’t like the battle of pachyderms. But in reality it is Apple and Google versus the others. And by others I mean, those old fashioned phones, ones with the 12 key pads.

For nearly a century the phones have been a single function device. You used them to make phone calls. In the beginning, an operator connected us. Then came automation. We got the rotary dial and then the keypad. The design changed, the backend switching technology changed. Even the economics of the service changed. New features were added — voice mail, for example. What didn’t change: functionality. Phones just made phone calls. A century later we had a certain idea of a phone imprinted in our head.

Fast forward to July 2007. Apple launched the iPhone and in one swoop questioned the very notion of phones, how we use them and what we use them for. Google’s Android Phone efforts only made us rethink the idea of a phone and what is it good for. And they were very different than the 12-keypad phones.

Apple’s iOS and Google’s Android are operating systems designed to run on devices that have the Internet and the ability to run its myriad services as part of their core genetic make-up. The classic voice-oriented phone as we know it is one of the many services. Like Yelp or Pandora. Yeah, the phone companies still charge us a hefty fee, but you pay for the comfort of convention, more than anything. Skype, Nimbuzz and others can help you make phone calls if you want and you don’t need the phone numbers. Google Voice will even send and receive text messages. But we like the comfort of having “phone numbers” because it is easy.

Today’s Internet-centric communication device (for the lack of a better word) is in competition with the old way. Thanks to new chip technologies, cheap sensors and fast growing networks, the idea of what is a phone has changed. This is leading to behavior changes and new interactions. They are behaviors of a new connected life. These new behaviors will change many different parts of society and business.

At the launch of the iPhone 4S, Apple chief executive office Tim Cook said that Apple accounted for only 5 percent of the total (not smartphone) market, pointing to his company’s ambition and opportunity. Apple and Google-based devices are going to be eating away at the traditional phone. It is not a surprise to hear Google boast that it has 190 million devices activated already, or Apple announce that it sold four million iPhone 4s devices on the first weekend the phone became available. Their success will continue — not at expense of each other but at the expense of Nokia, LG and anyone else still trying to stay true to the old format.

Nokia’s New OS

A few days ago, it was revealed that Nokia was working on a new OS called Meltemi that was targeting the low-end phones that are the bread and butter for Nokia (s NOK). The idea behind the OS was that it would replace the aging S40 platform and it would be made for feature phones. I think even here, Nokia has missed the boat.

In the early days of iPhone, Nokia executives constantly dismissed it as a toy, even though I turned blue in the face talking about the change in consumer behavior and our expectations of the phone. That inward looking thinking cost them the leadership position (and profits) in the mobile business. One could almost forgive them for not noticing the iPhone – Nokia was after all happily selling a lot of low-end phones in the hundreds of millions of units. However, what is difficult to swallow is the fact that the Finnish giant didn’t prepare itself and predict the impact of touch-centric, Internet-enabled iPhones/Androids on the low-end of the market.

One of its biggest rival – Samsung did when it launched BadaOS and it is seeing the gains already.

The fact is that at the low end of the market, there is a certain expectation from buyers. And that expectation is of an iPhone-like device. “The very simple phone that does talking and texting and maybe you know, not much more, I do believe that over time that will become less and less and less of a market,” Dr. Paul Jacobs, CEO of Qualcomm (s qcom) told me earlier this year. Even at the lowest end of the market we will see “Internet-centric” phones become dominant players, he said. Android-based low-end sub-$100 phones are becoming commonplace in booming telecom markets such as India, China, Indonesia and Brazil. These are not from big brands but mostly from lesser manufacturers. For Nokia and those who believe in the company, this is not good news.

Anyway hope to be back with more later this week.