In the meantime, truly interesting things continue to happen, not exactly unnoticed, but certainly a little lost in the confusion. Microsoft today announced that they are buying Danger, a company you might be familiar with because of a little product called the Sidekick, pushed by T-Mobile. Now THAT is interesting. First, it represents Microsoft making yet another leap into the hardware business. Some interesting differences though. MS has a reputation for Not invented Here Syndrome, and as a result the hardware offerings before have, shall we say, taken a while to mature. This is a purchase of one of the hottest products in the space, and a company with a very different culture and different business model. What will MS do with the Sidekick? Probably a good guess it will run windows mobile in short order, but will they kill the home grown OS? If they do, will the kids still love it while the corporates warm up to it? I’m not so sure.

Another reason this is interesting is because of what it represents in terms of Microsoft’s obsession with Google. MS doesn’t seem to know if they are competing with Google as an advertising company, a software company, or an embedded OS company. They are clearly not comfortable that they can compete as a telephone OS supplier to third parties. I suppose that is fair given how they have watched Apple blow past them in 7 months on the strength of a SINGLE handset on a SINGLE carrier (who everyone says sucks)! My guess is Android will ultimately dwarf the Apple OS just on the basis of so many manufacturers. So is MS guaranteeing the viability of Windows Mobile and some yet-to-be-determined mobile advertising platform against Android? Or are they really interested in selling handsets and getting a cut of the subscription like Apple? Time will tell.

Professor Wu’s outlines four areas that warrant attention:

1. Network Attachments – Carriers exercise excessive control over the devices that may be used on the networks
2. Feature crippling – Carriers disable features of phones to direct users to services desired by the carrier, not in the interest of the consumer.
3. Discriminatory broadband services – limits and restrictions are not fully disclosed
4. Application stall – developers are discouraged by excessive burdens and conditions

I believe some of his most compelling arguments relate to the carriers handset lock-in. He makes numerous comparisons to wired networks and the landmark “Carterfone” ruling against AT&T in 1968 which opened the door to allow any device to be connected to the line. In contrast he says that

“…today it is de facto necessary to obtain the permission of the carrier to market a wireless device in the United States. That fact creates an important bottleneck on innovation and product diversity.”

I could not agree more with these comments Anyone with the slightest bit of geek in them has probably salivated over some of the phone choices available to the rest of the world and we all know that these are not technical limitations. It is estimated that 90 to 95 percent of all handsets in the US are sold by the carriers, compared to 80% being independently sold in Asia for example. Are the carriers in the network business or the handset retail business? You couldn’t tell from your phone bill, which somehow avoids disclosing the monthly payment that you make for your handset. You didn’t really think that Razr was free, did you?

Professor Wu also makes strong arguments for his other main points, and no one will question the nearly criminal practices of US carriers as it related to data usage.

How to fix it? Wu outlines four recommendations:

1. A cellular equivalent “Carterfone” rule
2. Basic network neutrality rules
3. Full disclosure of limitations, pricing, subsidies, etc
4. Standardized application platforms

I agree with him on these points, but I think it is too late. Professor Wu eludes to the competitive threat of wi-fi, but he never comes out and says it. The carriers are quickly being put in a difficult position where wi-fi will become a practical alternative to cellular. Not today, not tomorrow, but soon. Wi-Fi providers know what they are, network providers. nothing more, nothing less. Sure, some are in the content arena as well and neutrality concerns can come into play there as well, but they are much more of a pure play. Basically, if they get paid for the bits they deliver, they probably don’t care (within legal limits) what they are delivering.