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Comment by lectrick | Hacker News Reader

“You lie awake at night worrying about what is that which will disrupt your business model,” he said. “Apple iMessage is a classic example. If you’re using iMessage, you’re not using one of our messaging services, right? That’s disruptive to our messaging revenue stream.”

Dude, go eat a bag of dicks. Seriously. You are, in 2012, STILL making $1,250 dollars per MEGABYTE of text message data. If there's anything that requires "disruption," it's the disgustingly gross excess of the text messaging business model. Long live capitalism and innovation.

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It's incredible that he worries about disruption, when if AT&T were to disrupt its own text message model, they'd be lauded for it by customers and technology advocates.

What do large companies gain by not being the first to disrupt their own markets, aside from obsolescence?

> What do large companies gain by not being the first to disrupt their own markets?

They can continue to extract massive profits from their existing market.

This is the key point of The Innovator's Dilemma. On the one hand, disrupting yourself means cannibalization and strategies that almost certainly seem unprofitable on paper. On the other hand, if you don't disrupt yourself someone will do it for you.

Considering Apple's success I'm inclined to say that disrupting yourself before anyone else has the chance to is the right long-term move, but I haven't studied the topic in enough detail to be sure.

The iPhone attacking the iPod before Android did so is IMO a great example of The Innovator's Dilemma. Many companies would have tried to charge more for iPod capability's on the first generation iPhone. Instead Apple realized cellphones would never be great MP3 players so even if they cannibalized some sales early on trying to maintain an artificial distinction would not be useful in the long run.

In some ways I think they even helped keep the iPod concept alive longer by giving the impression that using a phone for an MP3 player was a compromise not a replacement. Yea, your phone can do this, but why waste the battery life?

And we are watching Apple’s iPad dancing around the outskirts of the MacBook Air market. A more old-school market would be working very hard to force the markets to be completely segmented, strongly differentiating OS X from iOS and so on.

Instead, Apple is making OS X behave more like iOS, reducing the differentiation and creating opportunities for the iPad to steal MB Air sales.

> Instead Apple realized cellphones would never be great MP3 players so even if they cannibalized some sales early on trying to maintain an artificial distinction would not be useful in the long run.

I believe they came at it from another way: if someone is going to eat at your sales (iPod), it might as well be you (iPhone). That's been Apple's mantra for a while.

And although anecdotal, most people I know with an iPhone (or Android smartphone) don't buy new iPods. And if they do, it's a lesser model (i.e. for excercise); not to the same value as before.

Tim Wu wrote a book about this, The Master Switch; essentially the big conglomerates have a good thing going and would rather bury their new technology, since they already have a good thing going, than take a risk on new tech. Wu calls it "the Kronos effect"; essentially they try and kill their children for fear that their children will dominate them.

Excellent book. The telco's clearly have the incentive and power to suppress competition. In fact, they are actively doing it through their legislative influence (e.g. state bans on public broadband networks) and vertical integration with content providers (e.g. Comcast/NBCU).

The moment both Apple and Google embrace an interoperable messaging standard and include a native OS app, SMS will suffer a quick death. In the meantime, consumers will continue to be gouged. It's truly a shame that Stephenson's nightmares have not yet come true.

There is a lot of inertia in the systems, and if they should choose to try to disrupt the market in a way that doesn't work, then they will lose a whole lot.

It's not inertia, it's addiction.

Here's another question; what's the long-term effect of inspiring absolutely incandescent levels of loathing among "customers" who actually feel like severely exploited captives? Could that produce anything that might disrupt a business model? Maybe? Possibly?

Depends on the entry barrier of the business. For ISPs, media companies, telecom companies customer dissatisfaction means very little.

One could have said the same things about airlines before the emergence of Southwest and similar carriers. When dissatisfaction is so high, and you treat your customers with utter contempt, it leaves a gaping hole for someone to disrupt your business model. Eventually someone is going to figure out some sort of distributed wireless technology that routes around the FCC established monopoly the cell carriers currently have. At first it will look like a toy and they'll ignore it, but then it will get better and better until it's too late to stop the momentum.

Is the FCC likely to let a new entrant in to disrupt the oligopoly? Presumably that's part of their remit as a regulator.

Well I think it will happen in a way that circumvents their traditional oversight. It's not so much that the FCC will allow it, more that someone will find a way to operate largely outside the FCC. For example, cable TV successfully routed around equal time and content restrictions for broadcast networks in the US. The FCC was powerless to really control it because it was private. Also, wifi emerged as a standard because it operated in unregulated spectrum which gave companies a chance to innovate. Other than basic certification of devices, the FCC has little sway over what happens with wifi.

I'd be willing to bet they subsidize their data pricing with that text messaging revenue. How many of AT&T's iPhone activations come with a fat text-messaging plan? Data plans are low-margin; text messaging is high-margin.

AT&T, along with most other carriers, made a tremendous amount of capital investment in the last few years to improve the service they provide to smartphone owners. iMessage is a threat to their margin-stealing model.

If they made text-messaging free—or just counted its data use against your data plan—but raised the price of your data plan by $15/mo, how would you feel?

> If they made text-messaging free—or just counted its data use against your data plan—but raised the price of your data plan by $15/mo, how would you feel?

If it meant I could use my own system instead of being firewalled to their weird broken service? And everything acted like a dumb pipe? I'd feel pretty great actually.

If text messaging overages are required to subsidize data plans, then how can European carriers be profitable offering data at significantly lower prices?

One older, indirect reference I found: http://www.androidpit.com/en/android/blog/397226/Why-is-Data...

iMessage is a threat because iPhones are popular; the extent of the threat is directly proportional to iPhone market share.

Carriers made significant amounts of money because of the iPhone that arguably they would not have found any other way to make. Very few of their personal investments led to this success (except perhaps things like Cingular's agreement to invest in "visual voice mail" at Jobs' behest, before AT&T bought Cingular).

From my point of view the complaint from AT&T is a little like an investor trying to socialize his losses while keeping all his capital gains. AT&T enjoyed Apple's success when it benefited them, and now that it's working against them they're worried? Well, tough.

I wrote a blog article on this sometime back.

http://spoiledtechie.com/post/2008/05/07/The-Actual-Cost-of-...

I totally agree. This business model needs disruption badly.

This article makes no sense: just because the device has to be connected to the control channel does not mean that the control channel bandwidth is somehow free. The control channel is, as you say, the same channel used to keep track of devices, and it is a single channel that has to be shared among all of them (unlike voice calls and all non-GPRS data)... this is why in incredibly busy network regions (such as an after party at WWDC) it is difficult to even get text messages to go through: this is actually a limited resource that can easily be exhausted.

When the top executive at a huge technology conglomerate thinks this way, it just shows you how backward things still are.

A few years ago I was worried too many corporate CEO's don't read the brilliant Innovator's Dilemma book. Now I'm starting to worry they're reading it to find out how to fight against disruptions, rather than create them themselves.

I would bet the number of SMS messages he's sent in his lifetime is in the single digits.

And HE is wrong?

You should tell everyone that pays for sms that.

I refused to pay 15/mo for unlimited sms on my contacts. I rather not have it.

Now, you go eat that or cancel you sms plan. If i were him, I'd charge even more from you suckers. You just keep paying.

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