At the risk of coming off like comedian-turned-pundit Bill Maher, I'm going to propose a new rule: Apple (NASDAQ:AAPL) must do whatever is necessary to buy off AT&T (NYSE:T). Ma Bell is killing the iPhone.
Twice last week, the Mac's daddy debuted -- and then pulled -- a tethering application called NetShare from the digital shelves of its App Store. As of Monday, software developer Nullriver said that email problems on both ends led to the interruptions.
Really? I find that barely plausible at best. Apple has more than a few smart people on its staff. I assume the same of Nullriver. Why, then, would an exchange between automated email systems lead to NetShare being pulled from the App Store? It seems more likely to me that AT&T objected to what NetShare does.
The trouble with tethering
Tethering allows a cell phone's connections to the Web to be shared with other devices. NetShare would allow a MacBook to plug into AT&T's 3G network when Wi-Fi is unavailable. Alas, Ma Bell's iPhone usage terms prohibit exactly this sort of activity, according to trade magazine ComputerWorld.
I understand why: AT&T is subsidizing the cost of newer 3G iPhones in an effort to lock in subscribers who'll spend moola to access some of the built-in iGeekery. Why should Ma Bell let tethering be a free service when it can charge for it? You know the answer. It's the extras -- the texting, browsing, and gaming that increasingly lure in smartphone owners -- that AT&T, Verizon (NYSE:VZ), and Sprint Nextel count on for revenue.
Tethering is an extra to these operators. AT&T sells it for $15 a month to customers whose use Motorola (NYSE:MOT), Nokia (NYSE:NOK), and Research In Motion (NASDAQ:RIMM) handsets, but not to iPhone users like me.
Think about the consequences of that: Apple may have just blunted innovation on the iPhone for the sake of a partner that wants to sell more stuff. It'd be unthinkable if it weren't so logical. (AT&T has also twice hung up on on free Wi-Fi for iPhone owners.)
Ma Bell is obliged to protect its revenue stream, but doesn't Apple -- long considered one of the tech industry's great innovators -- owe iPhone owners its very best software? This, after all, is the device that legendary Silicon Valley venture capitalist John Doerr calls a "platform." His firm is investing $100 million to create a wellspring of software for the iPhone.
And if it's a platform ...
Recently, Apple has been blessed with resurgent interest in the Mac at the expense of lower-tier incumbents. The company's now threatening Dell and Hewlett-Packard (NYSE:HPQ) for an ever-greater slice of the computer market. Credit for the comeback is due, at least in part, to Apple's other innovations -- especially the iPod and, now, the iPhone. Weakness in Windows Vista may also play a part but, mostly, it's the halo effect radiating from CEO Steve Jobs and his array of shiny gadgets.
But if we agree that the iPhone is Apple's future, isn't it supremely dumb for the company to exert anything less than absolute control over the device? Especially when it insists on exactly that level of micromanagement for everything else? (To investors' delight, I might add.)
AT&T's motives aren't what trouble me. They are, in fact, perfectly pure and spot-on for Ma Bell's own investors. Yet I shudder at the possibility that Mr. Mac's necessary motive -- to create an unlimited fountain of innovation that leads to higher sales -- may conflict with Ma Bell's raison d'etre -- to only allow innovations it can charge for.
If so, then Apple should use whatever portion of its $20 billion war chest is necessary to buy off AT&T and escape from their exclusive iPhone deal. Only then will the iPhone grow to be the pervasive platform that the company and its investors desire.
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