One of the topics I constantly talk (harp?) about is what I have termed The Complacency of The Dominant Incumbency.

No greater example of this exists than Microsoft’s Windows Mobile – the original, current, and hopefully, the future – mobile operating system.

Microsoft went from #1 in the smartphone space to zero, to, now, irrelevant.

Believe me, cautionary tomes will be written about this someday.

Especially if Microsoft doesn’t right the ship, and improve the fortunes of Windows Phone.

Last week, Apple Computer Inc, not only delivered the new iPhone 6s-series of phones, they also delivered what most are classing as a definitive blow in deprecating the rôle of mobile telcos in American cellular telecommunications.

While that is true, what hasn’t been touched on, is the scary portend for Apple that made them take the route of self-financing iPhone.

One thing Apple has been over the past decade, and acceleratingly – I invented the word – so, since the creation of iPhones.

However, this has been dependent of the largesse, if you will, of the mobile telcos.

They have largely underwritten Apple growth by financing the sales of iPhones while Apple has reaped both the financial, goodwill, and branding.

Not to talk about the incredible rise in AAPL, the stock.

Mobile telcos, on the other hand, have been rather mediocre.

Know your enemy. History is littered by those who didn’t heed these words. E.g., Montezuma.

Then came T-Mobile, and John Legere, CEO of T-Mobile.

Earlier this year, he started what has now become the SOP for the major US mobile telcos: the decoupling of [smartphone] hardware from the services the telcos provide.

At the time, it was quite obvious that the new trend had the potential to not just dampen Apple’s iPhone sales, but also to turn their trajectory into retrograde.

I tell you, I am impressed with Apple’s response.

Money is good. Lots of money, even better.

Knowing correctly that a great percentage of their business is from repeat sheeple, with most of the rest coming from folks completely fed up with those crappy Android devices and operating system, Apple’s creation of the iPhone financing scheme is, in a word, brilliant.

I bow down respectfully.

It builds on the bedrock that Apple has slowly been establishing to independence from any mobile telco.

Firstly, Apple took the authority for iPhone OS upgrades from the mobile telcos, and placed it squarely in the hands of the users.

Secondly, it basically took the telcos out of the –locked-to-a-specific-telco network business when the iPhone 6 was announced. You could walk into any Apple store, purchase a phone, and be rest assured that it would work with whatever telco you chose.

This was huge.

I availed myself of this when I bought iPhone for my family last Christmas. The ability to switch to any carrier I like was the icing on the cake that sold me on the deal. I was no longer beholden to any carrier’s whims.

I think the carriers themselves saw this.

Coming back…

Apple did something here that Microsoft, when it was the dominant incumbency in this space DIDN’T do: they are using their enormous financial pockets and brand goodwill to change the dynamics of the smartphone sales race, thereby assuring their company of life, and perhaps, more growth, in this industry going forward.

This step, a systematic dismantling of the power of their most power partners – overlords, actually – is a step many firms never either plan for, execute if planned for, or even if so, execute as brilliantly as Apple has.

This is a better use of Apple’s approximately $200 in cash and cash equivalents, as it almost assures the longevity of the primacy of the company, something that returning those funds to Wall Street would not do!

In Part II of this, I will delve into Microsoft, and smartphones.

John Obeto is CEO of Blackfriars Capital
© 2002 – 2015, John Obeto for Blackground Media Unlimited

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