How the iPhone shaped the wireless industry — for better or worse

I’ve been covering the wireless industry for 12 years, and for seven of those years I was sort of an unofficial wireless consultant for my decidedly non-technical friends. Every few months, I’d get asked my opinion on what phone to buy, and I would go on about 2G versus 3G, Symbian and BlackBerry(s rimm) vs. Java(s orcl) and BREW(s qcom). Usually after a few minutes, my friends would cut me off and impatiently ask “which phone makes the best phone calls?”
I say “for seven of those years” because around five years ago those questions stopped. Sure, I would have conversations with friends about devices and the merits of different carriers, but my supposed expertise was no longer needed. Suddenly all these lawyers, teachers, cooks, writers and artists – and even some of their children — were no longer mystified by smartphone or mobile data services. They stopped asking questions about voice quality because the phone was no longer a mere telephony device.
What happened, of course, was the introduction of the iPhone(s aapl). It certainly wasn’t the first smartphone to emerge in the wireless industry, but it was the device that bridged the gap between the technical and the consumer classes. Through Apple’s innovations with the Safari mobile browser, the touch user interface and the App Store, the iPhone first demonstrated that more than just a rudimentary Internet and computing experience could be had on our handsets.
It may have had precursors, but it was the iPhone that kicked off the mobile data revolution. The astonishing thing is Apple succeeded where the rest of the wireless industry had failed. Carriers, network vendors, handset makers and OS developers had the same vision as Steve Jobs and Apple. They just couldn’t execute it.
The first 3G network went live in 2001 in Japan. What followed was six years of missed opportunities and dashed expectations. Palms(s hpq) and BlackBerrys and Symbian devices – as well as the hordes of feature phones — added some traffic to the network, but few people were signing up for data plans, and those that did were only willing to pay a handful of dollars a month.
In Europe, carriers began grumbling that they had far overpaid for their 3G spectrum. The biggest single source of mobile data revenue for operators was SMS – a 2G service. That cockamamie idea — the unlimited plan — was born, haunting operators to this day. At the time carriers’ 3G networks were still largely unused and no one could conceive of a smartphone consuming more than 100 MB a month. Why not open up the spigot?
Well, the wireless industry got what it wanted, and now it’s drowning in its own riches. The iPhone, followed by Android(s goog), has precipitated an explosion of traffic on their networks. But it was hardly a controlled reaction. The mobile apps and services that now abound aren’t the voice, SMS, ringtones and wallpapers that carriers could easily monetize in years past. Instead they’ve become dumb pipes, and though their networks are carrying far more data than voice traffic, they’re still largely dependent on old-school voice and text revenue for their profits.
What’s more, that explosion in traffic quickly filled up their 3G networks, forcing them to invest billions in 3G upgrades and accelerate their 4G plans. If mobile data, however, continues to grow at the pace that Cisco Systems(s csco), Ericsson(s eric) and independent analyst firms claim it will, then those investments will hardly be enough. Operators will need to radically change the fundamental designs of their networks – and grab as much spectrum as they can – to meet that demand.
Ironically, carriers once again find themselves dependent on Apple to keep the mobile data revolution going. The mobile data boom is now much bigger than the iPhone, but Apple’s devices are so pervasive that the choices it makes in radio technologies will have big repercussions throughout the industry. As I wrote in a recent GigaOM Pro analysis piece (subscription required), so long as Apple continues to make 3G iPhones, operators will be forced to continue investing in 3G networks.
I know some of you are going to accuse me of exaggeration here – that I’ve minimized the contributions of Palm, RIM and Nokia(s nok). I give those companies their due credit for some of the key innovations that led to the modern smartphone. But none of this produced a seismic shift in the mobile industry. The iPhone was the fault line, and ever since its first tremors issued forth in 2007, wireless has never been the same.
Please check out the rest of our stories on the fifth anniversary of the iPhone, collected here.