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The once and future app store

Third-party applications are the future of the smartphone business, but there are varying--and valid--theories on how those applications should reach the world.

LAS VEGAS--It seems there are going to be as many ways to run a mobile application store as there are stores themselves.

RIM's BlackBerry App World is a model of how mobile OS vendors are trying to balance consumer needs and carrier needs. Maggie Reardon/CNET

One of the big topics this week at CTIA 2009 has been mobile applications, as Research in Motion unveiled BlackBerry App World and Microsoft talked about its forthcoming Windows Marketplace for Mobile. The dam has truly broken with mobile applications; for years, most consumers seemed indifferent to third-party applications, but now they are viewed as an essential part of any smartphone, just like they are on a PC or Mac.

Most of the credit for that trend has been prompted by the success of Apple's App Store, as both Apple's friends and enemies in the mobile world will readily admit. But few competitors are attempting to pull off Apple's my-way-or-the-highway approach, preferring to integrate the wireless carriers in a nod to the entrenched power those companies have in the mobile world.

Some might argue that's because they don't have devices with the consumer cachet of the iPhone. But it's clear after talking to several companies on the sidelines at CTIA that they think there's a way to make sure they offer quality software to their customers without cutting the carrier almost completely out of the equation, as Apple has done with AT&T.

Still, the burning question is whether the carriers and handset makers will permit software companies to do what they do best, or whether they will continue to try to put their stamp on mobile application development in order to avoid their possible fates as "dumb pipes" or widget makers.

"There's a big measure of trust there," said Morgan Gillis, executive director of the LiMo Foundation, which was created by a foundation of carriers and handset makers to develop software that provides a common underpinning for developers to write mobile applications. "We have to trust that the companies that build the devices and the operators that package this know what they are doing."

The idea of mobile application stores is not new, but the faster networks and more sophisticated devices available these days have created a way for users to download applications directly to their device, bypassing the PC altogether. There are various ways that mobile companies are approaching this new reality.

Apple's approach has been covered exhaustively. But Apple has a unique advantage compared with its competitors: its applications only have to support two devices that are essentially identical (the original iPhone and the iPhone 3G), and for the most part Apple works only with a single wireless carrier per country. Therefore, it can have a central application store and guarantee that those applications will work on any iPhone, and at the same time not have to worry as much about ensuring its carrier partners have unique ways to sell the same phone.

Billing strategies
But while RIM, for example, is launching BlackBerry App World with the money flowing outside of the carrier's control through an exclusive relationship with PayPal, co-CEO Jim Balsillie made it clear that he would find a way to make sure the carriers have a chance to participate in the billing for those applications. "Different carriers have different billing strategies, so it's quite frankly a bunch of work," he told The Wall Street Journal.

Microsoft is likewise steering a middle ground, with plans to let carriers offer their own "store within a store" inside Windows Marketplace for Mobile and giving users the option to choose how they want to be billed: directly via credit card or through their monthly wireless bill.

The idea that the carrier owns the billing relationship with the end user for almost all of the mobile experience is virtually sacrosanct for everyone but Apple and AT&T. But there is a concern among some in the mobile industry that carriers will extend that relationship to demand a role in creating software and services for end users marked with their own brand.

Verizon did nothing to assuage those fears by announcing plans to join the Joint Innovation Lab (JIL) this week, essentially signaling that it plans to make sure Verizon-stamped software appears on future handsets regardless of what operating system is running underneath the layer presented to a phone's user.

To be fair, there are valid reasons why carriers are so concerned about the types of applications that run on their networks. Modern wireless networks are more fragile than one might think, as demonstrated by the problems AT&T encountered when iPhone-bearing geeks descended on Austin, Texas, for SXSW 2009 and brought local AT&T data service to a crawl.

Still, Aaron Woodman, a director in Microsoft's mobile communications business, thinks carriers fundamentally understand the shift that has taken place in the mobile industry over the last several years.

Form vs. functionality
For years, the business of selling mobile phones was about making sure you had phones that looked good and ensuring distribution ran like a clock, Woodman said. But over the last decade, business phone users started to demand features in addition to style, and that trend has exploded with the consumer demand sparked by the iPhone.

"People all of the sudden were walking in and asking for core level of functionality, and that started to change the conversation from about sourcing devices to functionality," Woodman said. "That functionality is going to be very difficult for operators to provide with significant help from others. Expertise and experience (in one area) doesn't yield expertise and experience in another area."

Organizations like Symbian, which controls the world's leading smartphone operating system, believe the balanced answer is to create an "app mall" rather than an "app store," according to David Wood, executive vice president for research at the Symbian Foundation.

For example, Symbian will do the dirty work of processing, certifying, and hosting the applications, but will give its various partners their own storefronts within that mall to sell Symbian-certified applications as they see fit. Microsoft's approach is somewhat similar. This way, carriers can feel they still have the opportunity to sell their software and services to end users without operating system vendors having to cede control of the user experience on a modern smartphone.

As has been often stated, the beauty of the modern mobile computing market is that established business models and philosophies from the PC market or older cellular phone market aren't necessarily relevant: several executives will (privately) admit they are essentially making this up as they go along.

There's little doubt that Apple's iPhone has shaken up this market the way Apple's Macintosh shook up the personal computing market 25 years ago. But unlike the past, several companies--not just two--are going to dictate the future of the truly personal computer.

And since different people want different things from their mobile phones, there's room for more than one approach to selling smartphones and mobile applications. There is not, however, room for seven approaches, which means operating system vendors, handset makers, and carriers will have to be extremely vigilant about evolving customer perferences in a world where consumer tastes can change virtually overnight.