To me, the ultimate and unresolved questions are “What is the iPad?” and “What does it offer that is substantially better or different from its likely competitors?”

At dinner Tuesday night, I was discussing those points with a bunch of guys I consider to be very bright technologsts. One of the guys at the table argued the iPad isn’t meant to replace a laptop for business use, it is meant as a consumer device – a user friendly extension of yourself, I suppose. I agreed, explaining that the iPad is useless as a mobile office solution because it is limited in applications to what is web based, or what is available at the app store.

I like using Office, I really don’t like OpenOffice/GoogleDocs. I’ve tried them and found them incredibly wanting. Say what you will about Microsoft, they make a hell of an office product. (Don’t get me started on how inferior Entourage is to Outlook, though. That’s another post in itself.)

But here’s the problem, as I explained to them. The iPad isn’t really a good platform for personal use either.

What do you use a personal device for?

A personal device, especially one expected to become the standard for such devices, needs to have a lot of capability for personal media.

The iPad is clearly based on the assumption that everything is in the cloud. That’s not the case for most users, though. Most users still install applications, download mp3s, play DVDs, etc. With only 16GB on the low end device, the amount of space available for any of that media is minimal. Even at 64GB, the iPad is seriously underpowered for storage compared to a 160GB to 250GB netbook – especially at two or three times the price.

Assuming you want to get everything online, you still have the problem of actually achieving that. Since the iPad doesn’t do Flash, you’re going to have problems with a staggering number of websites, especially if they use it for video delivery. Flash is installed on the overwhelming majority of computers. There is rampant talk of HTML5 replacing it, and many big names are looking at implementations to replace Flash, but there are significant hurdles.

George Ou at Digital Society (of which I am a Director), looked at YouTube’s implementation of HTML5 and found it lacking. In addition, you have the issue of battling codecs that has made adoption by browsers inconsistent.

Assuming the iPad only allows Safari, and since Apple has significant concerns with the lack of patents on the Ogg Theora codec, it’s possible that some site video won’t work even with HTML5.

Absent a reliable streaming solution, and without enough storage space to handle stored media, the iPad falls short on the media front.

What is the iPad’s Value Proposition?

The other problem with the iPad is the fact that it is unlikely to function well as a standalone product. The lack of any type of drive prevents the direct install of applications and requires the iPad be connected to something else. So now you have to shell out the $500 to $700 for the iPad, and you still have to have the $300 netbook, or the $1,000 laptop to connect it to. The iPad was billed by Jobs as an intermediary device with the best features of a smartphone and a laptop. However, since it is far too large to hold up to your ear, and way to underpowered to replace the laptop, you have left neither of those behind, and instead spent $600 for a device that does little the other two don’t.

If you will still need a laptop/computer as well as a phone, there is a serious question as to what the iPad gives you that makes it a unique value.

When the iPod came along, most people were still listening to CDs. The value of the iPod was in a) the storage capacity to keep larger amounts of content with you at any time, b) a menu system that made accessing that content quick and easy. While other mp3 players were in the market, the iPod made digital music easily accessible. The best mp3 available offered significantly less as a value proposition.

Similarly, the iPhone put more power in the phone. The Blackberry was the smartest widely-deployed smartphone available at the time of the iPhone’s release. Yet the iPhone rose quickly to dominance because it gave you more power, more capability, and more storage at a similar price point, and in an easier to use package.

The iPad Has None Of That

A few years ago I helped organize an event at which Marc Andreessen spoke. He had requested a white board for an audience participation event. With almost 800 people in the room, that just wasn’t reasonable. So I arranged with a Dell sales rep the use of their first tablet. We connected it to a projector, and turned Andreessen loose.

Midway through his remarks, he started talking about convergence, and the tendency to take things that work perfectly well on their own, and jam them together. He commented that his first cellphone was a brick – big, bulky, heavy. But he had just gotten to a very small, very lightweight phone, and now here come smartphones to make us carry the brick again.

Then he held up the tablet and said, “A paper tablet is cheap, you can get it wet, you can use it in broad daylight… this thing has none of that!”

And that’s the problem with the iPad. It’s not robust enough to be either a business device or a consumer device. It relies on Apple’s closed architecture, has far too little capacity, and limits your ability to consume the media you want as you choose. Further, it has far greater limitations than a netbook, but at a substantially higher price point.

A netbook has similar battery life, but also allows you to add your own software. A netbook has a larger hard drive, and doesn’t require another more expensive computer to run. A netbook costs half, but does twice, as much. Are they perfect, no. Will they get much better over time, yes. But I would still pit even the worst one against the iPad.

The iPad simply doesn’t offer any value compared to what else is on the market. Cheaper, but more powerful netbooks, or slightly more expensive, but far more capable Macbooks offer much more. Even the iPod Touch and iPhone give you most of the same functionality, but with a smaller screen at half the price. There is simply nothing that differentiates this product. And that’s the fundamental problem with the iPad.

Apple has responded to the FCC’s inquiry into the “rejection” of Google Voice. As my friend and colleague Paul Rodriguez and I suggested yesterday, the reasons Google Voice has not been approved have nothing to do with AT&T. From Apple’s filing:

Question 2. Did Apple act alone, or in consultation with AT&T, in deciding to reject the Google Voice application and related applications? If the latter, please describe the communications between Apple and AT&T in connection with the decision to reject Google Voice. Are there any contractual conditions or non-contractual understandings with AT&T that affected Apple’s decision in this matter?
Apple is acting alone and has not consulted with AT&T about whether or not to approve the Google Voice application. No contractual conditions or non-contractual understandings with AT&T have been a factor in Apple’s decision-making process in this matter.

So why was Google Voice rejected? Well… It wasn’t.

Contrary to published reports, Apple has not rejected the Google Voice application, and continues to study it. The application has not been approved because, as submitted for review, it appears to alter the iPhone’s distinctive user experience by replacing the iPhone’s core mobile telephone functionality and Apple user interface with its own user interface for telephone calls, text messaging and voicemail. Apple spent a lot of time and effort developing this distinct and innovative way to seamlessly deliver core functionality of the iPhone. For example, on an iPhone, the “Phone” icon that is always shown at the bottom of the Home Screen launches Apple’s mobile telephone application, providing access to Favorites, Recents, Contacts, a Keypad, and Visual Voicemail. The Google Voice application replaces Apple’s Visual Voicemail by routing calls through a separate Google Voice telephone number that stores any voicemail, preventing voicemail from being stored on the iPhone, i.e., disabling Apple’s Visual Voicemail. Similarly, SMS text messages are managed through the Google hub—replacing the iPhone’s text messaging feature. In addition, the iPhone user’s entire Contacts database is transferred to Google’s servers, and we have yet to obtain any assurances from Google that this data will only be used in appropriate ways. These factors present several new issues and questions to us that we are still pondering at this time. (emphasis mine)

The statement in bold type above would be reason enough not to approve the application in my eyes. If they cannot obtain assurances from Google that the transfer of my contacts to Google servers won’t result in privacy violations, the application doesn’t deserve approval. Period.

There is an interesting discussion of some AT&T requirements that applications can be written to take advantage of wi-fi connections but not AT&T’s mobile network. For instance, AT&T does not allow TV signals to be routed over their 3G network in order to prevent congestion. For that reason, the reply states, Sling Media’s SlingPlayer Mobile was initially rejected and modified by Sling to work only on a wi-fi connection. The letter also states (though I have not verified this) that AT&T’s terms of service state these prohibitons.

So it appears that a) Andy Kessler is still as wrong, b) AT&T had nothing to do with the Google Voice "rejection", c) Google Voice has not actually been rejected, it just hasn’t been approved, and d) Google may have actually made their statement in an effort to bring public pressure to bear against Apple.

Andrew Kessler recently wrote a lengthy article laying the blame for Apple’s rejection of the Google Voice application squarely at the feet of AT&T. While Kessler’s arguments are mostly about wireless, and posts here have typically focused on wired broadband, the article makes some proposals for broader telecommunications reform that compel us to respond.

There is plenty of evidence that Kessler’s whole premise is wrong. For instance, Google Voice runs on Blackberries on the AT&T network. Apple allows other VoIP applications like Skype to run on the iPhone. There are reports that Apple is developing a product that would compete with Google Voice.

Even if you discount all of that, however, Kessler’s column is full of inaccuracies, faulty assumptions and outright misconceptions of the state of competition in the telecommunications space. These errors fall into four main areas:

• Misunderstanding and misapplication of technology concepts
• Business competition on features versus price
• Network investment and sunk costs
• Cable deregulation

We’ll break these down one by one.

Technology
Kessler’s suggestion for reform of wireless telecommunications is simple – “any device should work on any network.”

While that truly does sound like technology nirvana, unless we agree to one universal standard for every technology, it’s not likely to happen. Why? It’s due to the very thing Kessler claims to want – competition. As Victor Godinez points out in the Dallas Morning News:

Kessler’s insistence that “any device should work on any network” suggests that he doesn’t understand even the basics of cellphone technologies. T-Mobile’s and AT&T’s GSM networks are simply incompatible with Verizon’s and Sprint’s CDMA systems, no matter how much Kessler might think they are. That’s why, even when you unlock an iPhone, you can’t make it run on Verizon’s network.

Kessler makes a similar error when he suggests that “voice is data”. As The Social Telco blog points out:

While there’s a sense in which that’s true – all communication is ultimately “data” – it’s only true in the technical sense if it’s carried that way. Which it isn’t, on today’s cellular networks and most public telephone networks. Other than where voice over IP is used, voice is circuit-switched, which means it ties up an entire (virtual) circuit from end to end for the duration of a call, making it unavailable for other purposes. Data, on the other hand, is typically packet-switched, meaning that a data “connection” in fact only uses up network bandwidth when packets are actually being sent back and forth, otherwise freeing up that bandwidth for the use of others. As such, voice networks and voice calls use network capacity in a very different way from data, with different equipment required and different economics associated with them.

Wireless networks today are moving toward a new standard called LTE. The LTE standard will do two things. First, it will make Kessler’s assertion that “voice is data” more or les accurate as it does rely on IP for voice traffic. Second, it breaks down the barrier between CDMA and GSM networks. Verizon has suggested they’ll be using LTE by next year. These advances are being brought about by the very competition Kessler claims is thwarting them.

Kessler also suggests that connection speeds to our homes and phones should double every year, and suggests they have not. Here again, Kessler gets it wrong.

We explored exactly this topic on Cable’s blog after Robb Topolski made a similar assertion about broadband speeds and Moore‚Äôs Law. The fact is, since the inception of the 300 baud modem in 1978, broadband speed to the home has more than doubled every two years. We have not done a similar comparison for cellular technology since people have used wireless for data for a very short period of time.

Competing on Price or Features
While Kessler spends most of his space clamoring for competition in price, he ignores robust competition on features. It is a glaring omission given the economics of telecommunications.

Telecommunications is an expensive game. Cable companies have spent billions, as have the telephone companies, building out their networks. We have seen estimates that the per-home connection and acquisition cost for one FiOS customer is between $3,000 and $5,000. The same holds true for wireless when you factor in spectrum costs, towers, etc. It will take those companies a very long time to recuperate the sunk costs.

So, how do you compete to get that back if you focus only on competition on price? The answer is that you don’t. You compete on price, if at all, only to gain market share. Once you have a healthy share of the market, you stop competing on price and compete on features.

That competition on features is exactly what the iPhone represents. Ringtones, app stores, and other features are the core of competition when costs are roughly equivalent. Working in cable, we often hear arguments about price. They typically go like this:

Complaint: My cable (and/or broadband) bill is too high.

Reply: Well, then switch to Satelite/DSL

Customer: But they don’t offer (VOD, speed like cable, etc)

Reply: So what you’re really saying is you want all the features that cable offers, but you don’t want to pay for them?

In other words, the choice of which offering to choose comes down to features. There are, people will acknowledge, cheaper options. However, people don’t make decisions solely on price. They make them on perceived value and that includes features. I can get a phone that makes calls, and plays MP3s, and does other things, for less than I’d pay for an iPhone. But I want the perceived value of the iPhone. That’s the value of exclusivity. Do I have to use your network to get the phone I want, yes you do.

If you argue competition solely on price, though, Kessler suggests that AT&T Wireless margins are an “embarrassingly high” 25%. Does that point to a flaw in my argument? Not really. As Hance Haney at Tech Liberation Front points out:

Before we get to that, Kessler complains that margins in AT&T’s cellphone unit are an “embarrassingly” high 25%. He doesn’t point out that AT&T’s combined profit margin — taking into account all products and services — is only 9.66%.

AT&T is actually earning less now than it was legally entitled to earn when fully regulated — 9.66% versus 11.75%.

Haney also points out that those margins are required by government mandate, to subsidize landline service.

In a normal business, an unprofitable product or service would disappear. But telecom providers are still required by law to provide plain old telephone service to anyone who requests it. It’s called the “carrier of last resort” obligation. Believe it or not, providers are still required to provide copper-based, circuit switched phone service in many places, even though they could cut costs by deploying fixed wireless and VoIP to deliver basic phone service.

This service obligation imposes a tax on those of us who have cancelled our landline service in favor of our cellphones in the form of artificially high prices for wireless service.

Network Investment and Sunk Costs
Let us pretend for a moment that Kessler’s notions of reform made any kind of sense. He suggests the root evil lies in “own[ing] a pipe between you and your customers,” and thus we should take pipe ownership away. Except, those pipes are already built and paid for.

The mobile carriers already paid handsomely for the spectrum they use. If the government were to take ownership, then those companies would have to be compensated for the billions they spent. You may recall the “open access” argument from a decade ago that proposed that it would be bad to let companies own their pipes because they could have exclusivity over the data that flows through them. Since the cable industry has invested more than $145 billion over the past 13 years, how should they be compensated? What of AT&T and Verizon’s investment in their networks because they want to compete with cable? Should that all be taken away with no compensation? And if it’s taken away, who can do a better job?

Companies are investing in networks to compete with each other. Is the competition and investment happening fast enough? Arguably not. But it is happening, and that competition is being spurred by exactly the concerns Kessler raises – demand for services, demand for speed, and demand for features.

Cable Deregulation
As we said, most of Kessler’s piece concerns itself with wireless. We have our issues with his facts and arguments there. However, given our employment with the cable industry, where we truly take umbrage at his comments is Kessler’s claim that one of the key elements of a new national data policy would be to “End municipal exclusivity deals for cable companies.”

Fortunately for Kessler, his work has already been done, since this was covered in the 1992 Communications Act. To quote from the section on “Franchising and Regulation”:

“…a franchising authority may not grant an exclusive franchise and may not unreasonably refuse to grant an additional competitive franchise.”

Over the last few years, many states have taken that federal mandate a step further and passed laws that took franchise authority away from the cities and placed it at the state level. The FCC went a step further and made sweeping changes to section 621 of the Cable Act and granted a federal franchise authority to further streamline the process.

Conclusion
There’s plenty of irony in Kessler’s piece. He argues for competition, which already exists. He argues against exclusivity and pipe ownership and in favor of “new, feature-rich and productive applications.” But if you can’t own the pipe, who will pay for upgrades? If you can’t have an exclusive offering of a product or service, why invest the money to develop such offerings? How will we get the “faster and faster data connections” that Kessler wants? If you can take away the ownership of infrastructure that is already built, why should investors have any faith in supporting a business affected by such radically sweeping changes?

Focusing on a strong broadband infrastructure is a good thing. Focusing on a national data plan, especially as voice actually does become data, makes sense. However, Kessler’s arguments, based as they are on faulty technical, policy, and business assumptions simply don’t add up to much.

Having dinner last night, discussion turned to the iPhone and the new version set for release in June. Chatter around the table turned to whether to upgrade (or purchase, for the people at the table without the device already). It seems everyone’s waiting a month before contemplating the big purchase.

I’m not, and I’ll tell you why. One word… Android

T-Mobile is releasing Android based phones this fall. Enabling development of a huge array of applications for the phone has the potential to create the iPhone killer. T-Mobile is talking internally about their new G3 platform and the phones in development as unlike any phone/network you’ve ever seen.

Now, I have to admit, the fact that the iPhone is only available through AT&T is the main factor in me refusing to purchase. However, even if the announcement coming out of Apple in June is the end of that exclusivity and the wider distribution of iPhone to other platforms, I’m still not buying.

Take the Google-driven Android platform, and combine that with their new FriendConnect service to unite all of their properties and other social nets through a giant open-source and open access distribution network, and the “gee-whiz” aspect of iPhone allowing you to browse YouTube and Facebook suddenly seem like an antiquated concept.

You’ll be able to truly interact from the mobile device. Tie your mobile’s built in GPS to location based social networks and you’ve got capabilities for connection on your phone that Apple just doesn’t match with the iPhone.

Add the fact that T-Mobile has been playing up wi-fi roaming via their phones, and suddenly your T-Mobile Andriod phone has is a wide open playground for development. The possibilities of this are endless.

In a nutshell, that’s why you’re unlikely to see me schlepping an iPhone any time soon.

Ok, I bought my Mac. I have to admit, I’m enjoying it. The lack of a right click on the touchpad, the constant struggle to remember whether I have to hold CTRL or the Apple Key with the button, and the fact that you can’t close a program by closing the window are still kind of annoying, but overall, my Mac experience has been good. I’m no longer radically opposed to all that is Mac.

However, I have a major beef with Apple.

I was told when I bought the Mac that the new OS (OS X Leopard) would be out in October and give me the ability to dual boot Windows without having to buy additional software. While I didn’t buy the Mac to be a PC, there are a couple of games I have on my Win machine that I like to kill time with in airports. It would be nice to have the flexibility.

Well, Apple says that Leopard will be released in October. Here we are on the 15th with no release date publicly announced.

Correct me if I’m wrong, but isn’t one of the big knocks against MS the constantly moving release dates and failure to deliver on their promises?

C’mon, Steve! Where the hell is Leopard?