By January 2011, Apple had sold almost one hundred million iPhones worldwide and consumers had downloaded ten billion applications from the App Store (see Figure 4).
Upon its introduction, optimism that the iPhone would be available “unlocked” (open to other networks) through gray market channels in the US was met from AT&T with a promise of retaliation against those who unlock the iPhone21. A week after the US release, hackers at the “iPhone Dev Wiki” managed to partially unlock the iPhone and released a program for others to do so as well. Other hackers subsequently managed to completely unlock the iPhone and within two months the original “iPhone Dev Wiki”
team released free software to facilitate this22. In response, Apple released software updates that disabled unlocked iPhones, starting the inevitable arms race: each software update was followed by a program to unlock the updated iPhone. Consumers did not just unlock the iPhone in order to use it on other networks other than Apple’s exclusive partners, they also started to “jailbreak” the devices to remove any limitations imposed upon the iPhone by Apple, such as the design and third party application limitations mentioned above.
(Hannan and Freeman, 1977, Hannan and Freeman, 1989), and is also used more specifically to describe mobile contexts (Basole, 2009; Schlagwein et al., 2010).
The complexity of the mobile ecosystem is increasing with the convergence of enabling technologies: new actors emerge, new relations are formed, and the traditional distribution of power has shifted (Basole, 2009). Companies from different industries are entering the mobile market offering integrated and complementary products and services.
This development has led to new forms of competition, as companies face changed consumer expectations, technological evolution, and regulatory influences, all on a local and global scale. Mobile usage patterns and purposes increasingly deviate from original intentions of use (e.g. Scheepers et al., 2006; Sørensen and Pica, 2005) as consumers construct new objectives and usage patterns. Furthermore, new players have entered the market, and new partnerships are being formed. Basole (2009, p.1) notes that previous research suggests that companies in complex networks “need to orchestrate inter-organizational relationships, maintain and develop core competencies and develop business models that take network position and network value creation and delivery into account”. These are some of the challenges that today’s players in the mobile ecosystem face.
Companies in central positions of such ecosystems are referred to as platform leaders (Gawer and Cusumano, 2002) or ecosystem orchestrators (Hinterhuber, 2002). Mobile ecosystem orchestrators strive to orchestrate the ecosystem to improve overall value creation. Traditionally, network operators have predominantly controlled the mobile ecosystem in most countries. However, at present mobile platform providers are gaining increased power. Figure 5 shows an overview of the Apple iPhone mobile ecosystem. On all levels, companies compete with peers in their respective markets.
Figure 5: iPhone Ecosystem
Mobile iPhone Ecosystem modified from Schlagwein (2010)
The mobile ecosystem surrounding the iPhone consists of five levels: the mobile device manufacturer, the mobile platform provider, the network operator, the third party application developer, and the mobile orchestrator. At the mobile device manufacturer level Apple, as the app phone manufacturer, produces and assembles the handset on which the mobile platform runs. As described in section 2.1: “Apple – The New Progressive Player”, Apple has established itself as being progressive in their product development, taking into account the whole user experience. While Apple is a relatively new player in the mobile market, the company has demonstrated that it is among the leading mobile device manufacturers, holding a 3.2% market share23. Figure 6 provides
23 http://www.gartner.com/it/page.jsp?id=1466313
an overview of the models of iPhone released along with specifications and enhancements.
Figure 6: Overview of iPhone Releases and Specifications
iPhone iPhone 3GS iPhone 4
Announced: January 2007 Relaeased: June 2007 Release in DK: June 2008 (3G)
Announced: June 2009 Relaeased: June 2009
Announced: June 2010 Relaeased: June 2010
Features Features Features
2G Network/3G from June 2008
Display
x480-by-320 resolution xTFT capacitive
touchscreen Battery life
(standby/talk/music):
x250/8/24 2 megapixel camera iTunes
App Store (500 Apps)
3G Network Display
x 480-by-320 resolution x TFT capacitive
touchscreen Battery life
(standby/talk/music):
x300/12/30 3 megapixel camera VGA video recording iTunes
App Store (50,000 Apps)
3G Network Display
x 960-by-640 resolution x TFT capacitive touchscreen Battery life
(standby/talk/music):
x 300/14/40 5 megapixel camera HD video recording FaceTime video calling iTunes
App Store (225,000 Apps)
Status: discontinued Status: available Status: available
Source: GSM Arena: http://www.gsmarena.com
The mobile platform provider level consists of two sub-levels: the mobile operating system level and the mobile application level. The operating system used on the iPhone was iPhone OS in the first three iPhone versions; iPhone, iPhone 3G, and iPhone 3GS;
and iOS in the latest version; the iPhone 4. iOS has become increasingly popular along with Apple’s mobile devices, including iPhone, iPod Touch, and iPad, and these iOS units now has a 16.7% market share24. At the mobile application level, Apple provides a number of standard applications on the iPhone, such as calling, text messaging, the Safari browser, iTunes, and others. Third party applications can be accessed via Apple’s App Store distribution platform, which is also a standard application on the iPhone. The App Store can be accessed on both Mac OS and iOS and allows users to browse and download applications that are developed with the iPhone software development kit (SDK) and are published through Apple. Depending on the application, apps are available either at no or some cost, and can be downloaded directly to the iPhone or other target devices, or onto a computer via iTunes. Apple controls the App Store and allows 70% of revenues to instantly go to the seller of the application, while Apple receives 30%. Furthermore, third party application developers can use the iOS development platform and the SDK supplied by Apple for application development purposes.
At the network operator level, AT&T and Telia, among others, provide access to communication networks. Although communication networks consist of several technological sub-elements, such as network and infrastructure, they are usually provided as an integrated package by the network operator. The network operators have joined in partnership with Apple to become sole initial suppliers of the iPhone as described in section 2.1: “ Apple – the New Progressive Player”.
The third party application development level consists of independent contributors who develop third party applications made available through the App store according to Apple’s rules and revenue sharing model. As such, it is evident that Apple is also the mobile ecosystem orchestrator, who organizes web services, applications, and business
24 http://www.gartner.com/it/page.jsp?id=1466313
processes and ties them together into a coherent workflow. The term “app phone” in this dissertation refers to the physical handset provided by the platform provider as well as the mobile operating system, applications, and services, but does not refer to infrastructure technologies.
As new app phones and new applications have become available, network providers have provided affordable access to avoid continued jailbreaking of the system. Historically, the mobile voice market has followed the lead of the fixed voice market, basing itself on a monopoly rather than on competitive price setting. Today, however, the mobile industry has adopted more competitive price models for their mobile data services, and price models are moving towards flat mobile data pricing, which effectively relegates mobile operators to being infrastructure rather than service players.