Over the last few years, Apple has solidified itself as the cool kid’s legitimate alternative to the Microsoft mainstream. They have excelled at packaging hardware and software together in sexy ways with usability that has put all the first-movers on defense, scrambling to catch up. The iPhone has been a smash hit and helped them expand their Mac market share substantially. But when you’re at the top of the cool mountain, it becomes increasingly difficult to keep your footing. There are storm clouds on the horizon, and there’s a revolution brewing.

The torches are being lit over in iPhone land. The iPhone has been a cult success in spite of itself in many ways. Other phones had better hardware and more features, and the iPhone was missing long standard features like MMS. But nothing matched the allure of the all touch screen form factor and the brilliant iPhone OS. When the App store was released, that made up for many of the (still persistent) feature deficiencies. But now that App Store is becoming a real problem for users and developers alike.

No soup for you!

The biggest issue is that the App Store is the only way to get your software on an iPhone without hacking it. Apple is the gatekeeper, and decides what goes in and what doesn’t. They claim it’s to maintain quality standards, and phone stability, which is a noble goal. The problem is that there are some gray areas as well. For example, applications that contain profanity are regularly rejected (including dictionaries). Ok, maybe we can overlook that. Then there are apps that are rejected because they might use too much of AT&T’s bandwidth, like the sling player. Other phones on AT&T have the sling player, but fine, maybe we can overlook that too. Then there are apps that “replicate existing iPhone functionality”, like competing browsers such as Opera, or most recently, Google’s Voice app. Now it’s getting harder to overlook.

Our phones are less appliances, and more specialized and miniaturized PCs.

Many people, especially techies like me, don’t really see much distinction between our phones and our computers. Our phones are less appliances, and more specialized and miniaturized PCs. My iPhone basically has the same hardware as the Pentium III PC I took to college a decade ago, only it doesn’t weigh 20lbs. It runs a proper operating system (a stripped down version of OS X in fact), and has much of the same software and applications that I use on my desktop. For all intents and purposes, it is a PC in an ultra mobile form factor (PC here being the general term for a ‘personal computer’, not necessarily a Windows computer).

So imagine if Microsoft said “you can create any app you want for Windows, but it has to go through us first for Quality Assurance.” And then imagine that MS rejected Firefox because it duplicated the built in functionality of IE, or it rejected violent games due to ‘morality standards’, or it rejected applications because they might use too much of your ‘unlimited’ DSL bandwidth, or in some cases, arbitrarily rejected your app for vague and unexplained reasons? It’s hard to imagine that going over well, but that’s exactly what Apple is doing with the iPhone App Store.

A lot of developers have poured a ton of money into development for the iPhone, and a lot of cool apps have been released (I’m raving about the USAA banking app today). But the recent decisions by Apple must be giving developers serious pause.

It’s one thing to invest a couple hundred thousand dollars into an app and then not have it sell well, it’s a whole other issues to invest that kind of money and not be able to sell it at all because Apple won’t allow it into the store.

Meanwhile, Google has built their own mobile OS, Android, on open source principals. Anyone can develop any app for it, no different from a desktop computer. Android runs on a variety of different devices, across multiple carriers, and compared to the iPhone is looking like a much more free environment.

Certainly AT&T is a big part of the problem – and is taking it’s fair share of heat as well. But Apple should be holding the cards here – their exclusivity contract is nearly up, and they don’t have to play by AT&T’s rules.

Solutions

Developers can then submit their apps for review to get into Tier 1, but know that they can always fall back to Tier 2 if there’s a problem.

I don’t like to be critical without a proposed solution, so here is what I would propose Apple do to calm the revolt. First, don’t renew the exclusivity contract with AT&T. If they’re influencing decisions here, give users the option to use a carrier who won’t. Second, create a tiered App Store. Tier 1 is what we have today – verified software by Apple, no adult content, low risk, with extra functionality like push notifications. Tier 2 is what is available on the black market of jailbroken iPhones today – lacking certification and quality assurance, but providing users and developers the freedom to connect as they should in the computing world, without a middleman. Enable parental controls so that parents can configure phones for their children that only access Tier 1, but we adults can assume the risks of Tier 2. Developers can then submit their apps for review to get into Tier 1, but know that they can always fall back to Tier 2 if there’s a problem.

Apple is exposing a soft underbelly here that you can bet Google and Microsoft will be aiming for. Google’s alliance with Apple is all but dissolved at this point, with Google going it alone with their own devices. Microsoft has some new things cooking with Windows Mobile 7 as well, and it’s getting harder to arbitrarily hate everything Microsoft. Apple needs to get it’s act together or they will find themselves as the anti-competitive villain they claimed to be fighting against.