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Nokia and Apple

by Andrew Watson on 25 October 2009

I noticed that Nokia has lost patience with Apple and decided to bring licensing discussions to a head by issuing proceedings. Poor Apple, like RIM, was late into the 2 and 3G Standards game and the incumbents (Nokia, Ericsson and Qualcomm for 3G) are so embedded in the setting of Standards (and by the way do not intend to let go of that position) that the successful non Nokia handsets find themselves paying a tax to the incumbents on every handset. At least Apple has the competitive advantage of being able to sell a product that has a premium price with its design features and brand premium. RIM and others will find themselves increasingly squeezed by having a tax to pay on each handset where the brand premium is not so obvious.

The way that Nokia and Qualcomm play the Standards game really needs stronger regulation than it gets. I’m not for a second saying it is abusive (I do agree that Nokia deserve, fully deserve, to be compensated for their technology contribution) but they know as does everyone on the inside that Standards are set less by the “essentiality” of the technology, and far more on the influence able to be exerted by them on the Standards bodies.

The double whammy that is often not seen is how they make absolutely sure that others in new and emerging Standards areas are not able to charge a similar tax as they do in 2 and 3G. They know (perfectly) how to play the Standards game, and stop others playing the same way.

FRAND has become a truly meaningless term. The FRAND tax in Europe is way higher than that in Asia for the simple reason that tax is harder to collect in Asia so any tax collected is a bonus. The whole system needs review by a truly objective third party, in my humble humble opinion.

Expect by the way that the two companies have been talking license terms for months if not years.

Apple say “but that’s just a tax, and its twice what you’re charging in Asia, why do we have to accept you giving us a competitive disadvantage (including to you-subplot)”.

Nokia reply “you’re using the standard, and that means the tax, sorry FRAND rate, is payable (and, subplot, “your phones are way cooler than ours and pinching our market share, how do you do that flip thing, wish we’d thought of that”). And, subplot “if you don’t pay up we’ll litigate, and that will hurt your share price, and then you’ll talk to us”.

The whole thing just really lacks imagination doesn’t it. 60% (estimated) of the World is unlicensed under the 2G standard for the simple reason that the tax is too hard to collect. Wouldn’t it be way more efficient for all the big guys to get together with a proper regulator and work out an objective way of rewarding all contributions? Is that really so hard?

If Nokia really wants or needs a motivation to get involved in this initiative it is getting it in the IP-com GmbH (not to be confused with litigation in Germany where little troll (backed by big hedge fund Fortress) is suing Nokia for €18bn. And the irony being that the lawsuit is for…..FRAND tax. Step carefully Nokia or watch out for the day, and you know it is coming, when Intellectual Ventures buy some essential patents.

And, ps, take the whole thing out of the hands of lawyers!!!!

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iPhone strategy? Build a product ecosystem.

by Andrew Watson on 14 July 2009

With the release of the iPhone 3GS, it’s got me thinking more about Apple and IP again, especially as my neighbour down the hall at ipVA towers just acquired a new iPhone and I helped him get it set up. As you’ve no doubt figured out, I’m a big Apple and iPhone fan, which is why I often use Apple as an example when discussing IP / business strategies. This article awhile back from InfoWorld “Why BlackBerry still beats iPhone for business users” sums up the iPhone strategy nicely:

The reason the iPhone has been a success is as much about it being part of a computing environment and ecosystem as it is the phone itself. There are things that make the iPhone so difficult to compete with.

IP plays a significant role in putting together and protecting Apple’s role within the iPhone product ecosystem. Consider:

  • The iPhone requires users download and install iTunes – Apple’s copyrighted software – to manage the device;
  • iTunes has its own store and numerous content deals (based on copyright) that allow for iPhone users to access the movies, TV shows, and music in the store on the device;
  • Users are restricted by carrier unless they pay full price for the device and unlock it to work with other systems;
  • New apps (unless your phone is “jailbroken”) come via the iTunes store, and Apple controls what goes into the store through its agreements with developers;
  • Technological measures make it hard for you to unlock or jailbreak your phone to get apps from other than the iTunes store. These technological measures not only are digital locks that can be difficult as a practical matter to go around, but can also be protected through civil and criminal law; and
  • Certain features only (AFAIK) work only with other Apple products, such as the “locate my phone” feature which can tell you where your phone is if lost or stolen but requires you to have a MobileMe account.

Apple exudes a sort of paternalism over their ecosystem as well – as in they say things like “we make sure bad apps that do bad things with your data don’t get through”. It reminds me a bit of AOL in the early days – it had no spam problem because all communication on AOL was between AOL users. AOL policed their walled garden well, but eventually had to open it up to the rest of the world and engage in the same kind of anti-spam tactics as everyone else. Building this kind of ecosystem seems pretty linked to providing some other kind of advantage to the user as well (rather than just locking them in), which in the iPhone case is sold as security, reliability, and better integration with other products.

I wonder if in the face of other OS systems such as Android, how long the full iPhone ecosystem can last. But certainly they’ve made a very formidable ring fence around the iPhone by building such a robust ecosystem.