Another day, another bunch of sour grapes about the sorry state of the Canadian wireless industry (check the comments for the real gold). The trouble is no longer that there is a lack of competition to the established players and although more competition never hurts, the problem is consumer expectations.

Bell, Telus and Rogers have a relatively simple business model: sell handsets at a substantial discount and lock customers into a three year contract. That’s done through a legal agreement and a software lock on the phone that will prevent that device from being used on a competitor’s wireless network. That substantial discount translates into hottest phones like the iPhone 3GS being sold for $99, at least $300 off its regular (ebay/craigslist) price. Bell/Telus/Rogers in turn make back their investment by knowing that you will be their customer and hence be paying them monthly fees. In other words, the full cost of the cool new phone is amortized by (a.k.a. buried in) your monthly costs. This prevents sticker shock and makes the newest phones accessible to people who may not otherwise be able to afford them.

Enter the new players like Wind and Mobilicity. These guys sound great: $25-$35 unlimited everything plans with no contracts. That is until you realize a couple of very important things:

• You pay the full cost of your phone. For example, a Blackberry Bold 9700 costs $450.
• You will have a lot of trouble buying phones online because these guys use non-standard frequencies
• Finally, your place is only “unlimited” as long as you stay in the area of coverage for your carrier. The minute you leave the area, you are roaming and you will pay through the nose for it. The coverage exists only in big cities. I live in London, Ontario and I am out of luck.

Considering the prices of the best phones, if they are even available on those networks, the Bell/Telus/Rogers 3 year contract starts to look pretty decent. Unfortunately, consumers cannot have it both ways and must pick between the discounted phone option that comes with a contract or expensive phone that comes with no contract. Incidentally, for about the price of an iPhone 3GS from Rogers you can get a candybar phone from some company called Huawei. That phone looks like it came from six years ago. If you just want to talk, text and don’t mind being tied to a big city, this is perfect. For many people, myself included, this is not a good solution.

And so Bell it is.

The other major problem faced by the new entrants into the wireless market is the cost of building a coast to coast network. Until they are able to do that, forcing their customers to pay roaming fees will be a huge setback to them. The issue is Bell, Telus and Rogers were able to build their cross-country networks because they were all at some point publicly subsidized. They are also very well established and are probably not going anywhere absent some very substantial changes in the regulations that govern them. Thus, they have access to a lot of capital that new entrants are not able to secure.

The new guys will have to somehow overcome that problem.

I have been noticing recently that there have been decisive steps taken against openness when it comes to new devices, and it bothers me. Before I go into this further, let me explain what I mean by “openness”.

Openness

In order for any device to be useful, it needs some kind of software. This is true of everything electronic,  from calculators, to TV’s, to telephones and to most obviously, computers. In the past few years, there has been an explosion in computer-like devices, that is hardware that has an operating system and which can run software other than what is preloaded.

To use an easy example, take a cell phone. Originally, all the cell phone is programmed to do is make phone calls. Then, someone said “why don’t we put games on it?”. Then, “why not a camera?”. Followed by “why don’t we connect it to the internet?”. Lo and behold, we have smartphones. We can now extend the capabilities of our phones and similar devices in ways that were not imagined by their original designers.

Original multi-purpose phones were relatively open. This was done mostly as a convenience to developers: they did not want to reinvent the wheel by writing a new operating system, so they used one that was time-tested: java. This meant that anything that was created using java mobile edition (J2ME) could probably run on a java-enabled cell phone.

Even the original smartphones were open (“smartphone” is a difficult concept. I’ll refer to anything that connects to the internet and allows user-installed programs as a “smartphone”). Windows Mobile (used to be called Windows CE) allowed developers basically unlimited flexibility in creating and distributing software for Windows Mobile devices. Installing software did not require any reverse-engineering, hacking or any type of security bypasses.

I use the term “openness” to refer to precisely this flexibility. Openness does not mean open source, does not mean free software, does not guarantee any freedoms to users. However, developers have a lot of freedom that they can choose to pass on to their users (or not). They can distribute their creations in any form, on any website, charge fees or not, etc.

Current State

Since the introduction of the iphone, there has been a trend in the opposite direction. To use the example of the iphone itself, the only (legal) way for software developers to distribute their wares is through a process that is controlled by Apple from end to end. Apple controls what applications can be distributed, it tracks each user that installs the application, and of course, takes a nice commission from the sale of each app. There are obvious problems with such end-to-end control, including this one.

The problem is that this is not limited to the iphone. Blackberry is doing something similar with App World, although I believe it’s still possible to install apps without appworld. Even the Android platform is jumping on the bandwagon with Android Market.

The only holdout thus far is Windows Mobile probably because the users of those phones are way too used to not having any restrictions on them. We will see what happens once Windows Mobile 7 comes out later this year. I would not be surprised if it has new limitations on the type of software that can be installed.

Of course this is not a problem that is limited to phones. For example, the PSP, a device that is theoretically capable of many computer-like features has been completely locked down and can only play games (that you have to buy and where Sony can take a cut). The Wii has bluetooth functionality that can only work with its own wiimote. Why not other bluetooth devices? This is not even considering upcoming hardware such as the Apple iPad that will mimic the iphone in every way in terms of dealing with third party software.

This is a shame

The main reason I don’t like this is that a lot of potential remains under lock and key. If you look at what the latest iPod Touch is, it’s a computer with 800MhZ, 256MB of RAM, and a 32 (or 64) GB hard disk. I had a computer with similar specs in 2002. My computer in 2002 could do a lot more than my iPod today, even though they are technologically similar. The reason has nothing to do with technology, but has everything to do with poor decisions that keep such devices locked down.

Solutions

Unfortunately, the current solutions to this problem are quasi-legal at best (downright illegal at worst). It involves a healthy dose of hacking and looking for exploits. This in turn can lead to serious breaches of security when the same hack that can be used to install an unauthorized program is used to distribute a virus (again, an iphone example).

The easiest way to prevent this is to avoid having as many people looking for these kinds of hacks. The overwhelming majority of hackers are not malicious people and would not be hacking if their phones were open to third party software. And even if they were hacking, there would not be a need for a wide dissemination of these hacks. This means that the efforts of people who mean well would not end up in the hands of the malicious.

The Business Case

I am well aware of the fact that companies that release locked down devices see a business opportunity in controlling the software that can be loaded onto them. Indeed taking a cut of every program sold online is a good revenue model. However, opening up these devices will inevitably increase their sales. This is pure common sense: the more a device can do, the more people it attracts.

By the way, I am not saying that hardware manufacturers have to stop selling software. Indeed it may continue to make a lot of sense to sell through a centralized place where users know and trust the source of the program. Opening up the device up to users “at their own risk” though needs to be done. Users need to have control over their devices.

Conclusion

The PC industry has realized a long time ago that openness is the way to go. It allows devices to what was never intended or imagined by the original designers of computers. Who would have through 40 years ago that computers would be used for live DJing or advanced image creation (Traktor and Photoshop, respectively)? The engineers that created modern computers 40 years ago were looking for advanced calculators and processing power. Openness and ingenious software developers did the rest.

It’s time for the same thing to happen to our phones, games, and other devices.

Cross-posted at LawIsCool.com