iPhone and the Techno/Business of Artificial Scarcity

There are a couple of weaknesses is Apple’s awesome new iPhone that have technological explanations accepted by the Conventional Wisdom. I’m not buying these stories, and I think there are bad-business factors driving the decisions for memory and third-party applications.

The iPhone comes with only 4 or 8 GB of storage, while the iPod has 30 or 80.

The conventional technology explanation is that the 80 GB iPod uses a hard disk, resulting in an iPod that ends up thicker and heavier than an entire iPhone. (The 30 GB iPod is about the same heft and girth as the iPhone.) By contrast, the iPhone uses flash memory, in the same strorage capacities as the iPod nano (which also uses flash rather than a hard disk). But I am not persuaded that Apple is merely waiting for higher capacity flash drive to become available. After all, we’re not still waiting for the large-capacity iPod, and I don’t think they would have been very far outside the normal smartphone weight and thickness if they used a hard drive.

I think the real reason is that Apple wants the devices to be the Network Computer redux, 10 years later. They want you download your music and video on demand, rather than storing or owning it yourself. I understand that you can’t yet use iTunes from the iPhone. My expectation is that they are rewriting iTunes to keep track of what you’ve bought for repeated downloads.

Another area of contention is why the iPhone doesn’t yet allow it’s owners to install additional software not created by Apple. After all, the box runs Apple’s fine general-purpose operating system.

The conventional technology explanation from Apple itself is that they are trying to work out how to allow applications to be safely installed without rendering the phone unusable. Jobs has announced to developers that they will do this by supporting some form of rich Web applications through the browser. But why couldn’t the same arguments be made for the Macintosh?

I think the answer lies in the pricing plans from Apple’s phone company partner, AT&T. All plans have unlimited data usage, in order to take advantage of rich applications from additional partners such as Google. But AT&T is a phone company, and there is no way in hell that they’re going to enter into a deal in which they stop charging the max for something that their customers are already conditioned to pay in-full for – phone service. The plans charge between $60 and $220 each month for talk minutes, with no plan offering unlimited minutes. I think opening the full power of the system to developers would result in VoIP plugins within 24 hours, and that would be the end of wireless phone carriers as we know them today.

I hope I’m wrong on both counts. I don’t like companies to base their business on deliberately keeping power from their customers. I could easily be proven wrong by having Apple produce a reasonably priced 80GB phone and let the buyers decide. And they could allow buyers to chose whether or not to install fully capable software. We’ll soon see.