The Triumph of Good Enough
By Kevin Werbach, Tue Nov 18 07:45:00 GMT 2003

Little changes can make a big difference. Especially for things that are already little to begin with.

Last month, I bought a Treo 600, the new PalmOS smartphone. I'm still marveling over one aspect: its size. When I took the Treo out of the box, it looked half as big as its predecessor, the Treo 300. The first comment of most people who see it is, "Wow, that's tiny for a smartphone!" When I actually put the current and prior Treo models side-by-side, however, I was in for a shock. The Treo 600 is slightly narrower, but it's also taller, thicker, and heavier. In other words, essentially the same size. The many small industrial design changes make a world of subjective difference.

I use this example not because I'm enthralled with my new toy (though I admit I am), but because of what it suggests for the mobile world. Subtle improvements can have huge consequences. The same is true when it comes to functionality. A torrent of incremental advances are now producing converged devices that are "good enough" at each of their primary functions. This will have significant consequences for both device manufacturers and operators.

Why I Was Wrong

Almost three years ago, I wrote an article for The Feature arguing that converged mobile devices wouldn't ever dominate the market. A device that is both a phone and a PDA, let alone a music player or a gaming console, will never be as good at any of those functions as a dedicated piece of equipment. I was convinced that most users would carry multiple devices with different form factors, especially since Bluetooth wireless links would easily tie them together.

I've changed my mind. One reason is that the Bluetooth community missed its window. Sure, early compatibility issues have been resolved, and more than one million Bluetooth devices are now shipping every week. It's just too late. WiFi occupies part of Bluetooth's natural market, and a chunk of the rest is disappearing as functionality merges into multipurpose devices. Bluetooth still has value for wireless headsets and as a way to get documents, images, and music out of mobile devices and into fixed ones such as printers and PC hard drives, but that's much less than it could have been.

The most important developments, however, are the technical advances in devices themselves. Smaller form factors, better performance, lower prices, and miniaturization of components all play a role. My Treo 600 will never be as good a wireless email device as the single-function Blackberry, nor will it compare to an iPod as a music player. Yet, with a 512 megabyte SD expansion card for those MP3 files, it's quite serviceable for both functions. The same goes for its prowess as an organizer, camera, and Web browser. Moreover, because the Treo runs a real operating system with storage and downloading capabilities, it's more adaptable than the single-function devices will ever be. Shortly after buying the Treo, I added an application to read RSS syndication feeds from my favorite Weblogs, and an MP3 player than can pull in live streaming audio from the Web-based Shoutcast service. Try that on an iPod!

My point isn't tied to the particular product. Sony Ericsson's P900, Nokia's Communicator line, Danger's HipTop, and PocketPC phones from vendors such as Samsung and Hitachi are also closing in on converged nirvana. User preferences for certain applications, form factors, price points, and interface mechanisms will still produce a wide range of converged devices. What will be missing are the devices that do just one thing, except for niche markets that have extreme needs of one sort or another.

Device Economics

The reason is simple economics. Just look at the PC industry. You'd have a hard time buying a desktop computer without an Ethernet port, a modem, or a CD-ROM drive, even though those were once expensive add-ons for specialized uses. The components add negligible costs for the PC manufacturers, and they provide a reason to upgrade your previous machine for a new model.

In the mobile handset world, we're already at the point where a camera is a standard element of new phones. Analysts predict 100 million cameraphones will be sold next year. Unless privacy fears create a market for camera-less phones, handsets without that functionality will soon become anachronisms. Meanwhile, Motorola's latest fully integrated phone module for hardware manufacturers measures 16 by 20 by 1.4 millimeters. That's about the size of a US nickel. We'll see phone functionality popping up in handheld gaming devices, portable music players, and other places that used to be completely different markets. When converged devices were either hulkingly large or pitifully incompetent at some of their functions, they were the domain of gadget freaks and early adopters. As the "good enough" threshold is passed, they will become the baseline standard.

The rise of converged devices will have a huge impact on operators. More functionality in devices at the edge of the network makes it harder to monetize the network in the middle. My Treo is technically a SprintPCS phone, but I don't view it that way any more than I think my laptop belongs to Comcast, my home broadband provider. With voice-over-IP, WiFi, number portability and the inevitable unbundling of phones and wireless networks, operators will get retain even less control. Multi-year contracts and SIM locks will only hold back the tide so long.

Where the Money Will Be

In the new world, the money will be in applications on the edge devices, hardware sales, and of all things, dumb connectivity. The first wireless operator to execute the Dell/Wal-Mart model -- being the efficient commodity provider, with a great brand -- will make a killing. (Partly because they will kill their competitors.) Not that this is an easy task. Legacy billing systems and legacy culture are huge hurdles to overcome, and the ideas of "owning the customer" and "delivering value-added services" are deeply embedded in operator DNA.

The hard truth is that devices are evolving faster than networks. Wide-area wireless connectivity will be just another function that a "good enough" converged mobile device provides, albeit an important one. Put together a series of little things, and that's the inevitable result.