On January 19, 1999, RIM launched the 850, the first device that would carry the name BlackBerry.15 It was also the first mobile device that synced completely with email systems, so sending and receiving an email on the go was as seamless as communicating from your computer. If you sent an email from your BlackBerry, it showed up in your Sent folder when you got back to your desk. Messages read on the BlackBerry were marked as read on your computer, and vice versa. RIM also began integrating more PDA-like functionality into the BlackBerry and subsequent models, so that eventually they had all the functionality of a PalmPilot, but with comprehensive messaging capabilities.
The BlackBerry’s marketing tagline was “Always on. Always connected.” As the 1990s turned into the 2000s, among a class of professionals for whom never being “out of the loop” was of paramount importance, the BlackBerry took off like wildfire. “It very quickly became a status symbol,” recalled wireless research consultant Andy Seybold.16 BlackBerry proved popular on Wall Street, among lawyers, in Hollywood. When you watch old video of the AOL/Time Warner merger announcement, you can see Jerry Levin and Steve Case checking their BlackBerrys to see how the news was affecting the stock price of their respective companies. In the disputed election of 2000, the Gore campaign managed its response to the “hanging chad” situation, minute-by-minute, over their BlackBerrys. During the terrorist attacks of 9/11, most cell service went down, but BlackBerry users could still get their messages out. Congress subsequently bought BlackBerrys for every senator, representative and thousands of Capital Hill staffers, such was BlackBerry’s reputation for keeping people in the know.17 When Oprah Winfrey broadcast one of her annual “Oprah’s Favorite Things” specials, she gushed: “I cannot live without this. It’s with me everywhere I go. It’s called a BlackBerry. It’s literally changed my life.”18
What so entranced these early adopters of the BlackBerry was just that ability to always be connected to information. It’s the reality we’re all familiar with today: the phenomenon of never being out of touch. But in the early 2000s, this was a new experience. For BlackBerry users, there was never a moment when they couldn’t be reached, when their device didn’t beckon to them with a new alert of someone trying to reach them or some new piece of information to digest right away. BlackBerry users were the first people to confront the social etiquette implications of conversations and person-to-person interactions being interrupted by digital notifications. And they were the first to wrestle with the uniquely obsessive mindset that an always-on information device can engender. This pull of the “now” only got worse as BlackBerrys eventually gained web-browsing functionality and new applications such as the BlackBerry Messenger instant messaging service. The devices earned the sobriquet “CrackBerry” because users seemingly couldn’t tear themselves away.
“It should be reported to the DEA,” Intel chairman Andy Grove told USA Today.
“It is the heroin of mobile computing,” Marc Benioff, CEO of Salesforce, said in the same article. “I am serious. I had to stop. I’m now in BA: BlackBerry Anonymous.”19 Communication, as it so often did over the course of the Internet Era, proved to be the killer application for mobile computing. But then, heroin is a “killer” application as well.
Palm eventually released handsets with radios that mimicked the BlackBerry and enabled messaging, especially the popular Palm VII in 1999, which added email to Palm’s traditional organizer applications. But by 2005, RIM had replaced Palm as the largest seller of pocketable computers.20 And at that point, the handheld computing market that both Palm and RIM were chasing was careening headlong toward something even greater than any of the mobile computing pioneers could ever have imagined.
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PDAS, PAGERS, EVEN MP3 PLAYERS, were the hot consumer electronics products in the early 2000s. But in this burgeoning world of electronic devices that were competing for room in your pocket, there was only one undisputed king: the cell phone. Other devices might be able to capture the imagination of certain market segments, but cell phones were seemingly for everyone. There were 100 million cell phone users worldwide as early as 1995. By 2001, that number surpassed 1 billion. And midway through the decade, nearly a billion handsets were being sold every single year.21 Because phones were clearly the most popular pocket devices on the planet, it made sense that the features that were turning handheld gadgets into must-have objects of envy began to be subsumed into phones as well.
The very first smartphone was the Simon Personal Communicator, which was developed by IBM back in 1992. On sale to consumers for just six months, from 1994 to 1995, retailing for $895, the Simon had almost all the components that we would recognize in a modern smartphone. It could send and receive cellular calls, of course, and it could also send and receive pages wirelessly. It could do email and fax, but those required the user to dial in via a landline. It could sync via an adapter cable to a computer, and could therefore store and work with data files. The majority of the device consisted of a touchscreen, where a row of icons could be found that summoned up an array of apps, including an address book, a calendar, an appointment scheduler, a calculator, a world clock and an electronic notepad. The Simon weighed slightly more than a pound, but at 8 inches long by 2.5 inches wide by 1.5 inches thick, it was more of a brick than a pocketable device. It had a rechargeable battery, and even an expansion slot for adding more memory. The plan was to eventually add additional hardware and software features like maps, a GPS module, real-time stock quotes and more.
Unfortunately, the Simon never got there. IBM sold only 50,000 Simons before discontinuing the product. “It’s all about time frames,” says Frank Canova Jr., who led the device’s development at IBM.22 “The Simon was ahead of its time in so many different ways.”23 All the features of a modern, communicating, mobile computer were already there, but the world just wasn’t ready for it.
Too soon.
But as Palm and RIM found success with PDAs and pagers, the broader cell phone industry had second thoughts about pocket computing. The 800-pound gorilla of the cell phone industry in the late 1990s and early 2000s was Finland’s Nokia. In 1996, it released the 9000, the first of its Communicator series of phones. The Nokia 9000 opened up, clamshell-style, to reveal a full QWERTY keyboard. It had a web browser as well as digital camera connectivity. It could make calls, of course, and send messages, and had the now-usual suite of contacts, notes, calendar and calculator apps. But since cellular data plans were rare and expensive, the Communicator series was not a mainstream success.
Too soon.
The first cell phone to be explicitly called a “smartphone” was the Ericsson R380, released in 2000. Its lid flipped open to reveal a full touchscreen for web browsing, email, apps and games. Other manufacturers soon followed Nokia and Ericsson’s lead, releasing a wide range of devices, all of which married PDA and messaging function to phones, some going the Palm route, with touchscreens, and some the BlackBerry route, with thumb-friendly keyboards. And the handheld pioneers themselves also joined the fray, with the Palm Treo line of smartphones beginning in 2002, and the BlackBerry Quark that Oprah called one of her favorite things targeted toward mainstream consumers beginning in 2003.
Then, a whole slew of manufacturers jumped into the smartphone game. In order to stand out from the crowd, every imaginable feature started getting crammed into phone handsets. The first phone with integrated GPS was released in 1999. Japanese consumers were buying phones with integrated digital cameras as early as 2000. Many phones began to offer rudimentary web browsers and even streaming video by the middle of the decade.
Too soon.
All through the first half of the 2000s, mainstream consumers collectively yawned at the explosion of smartphone and mobile computing features. By 2005, there were only 3.5 million smartphone subscribers in the United States.24 As late as 2006, only around 6% of the 150 million phones shipped in North America were “smart.”25 Even though it was used by 85% of Fortune 500 companies, RIM didn’t reach a mill
ion subscribers until 2004.26 Palm’s sales actually began declining, beginning in 2000.
The entire computer, electronics and technology industry was converging on one singular device, one transcendent product that would seemingly be everything to everybody. And yet, few people seemed to care. All of these new features, all of these new technologies and computing innovations were converging inside the cell phone, pointing to a world of always-on, always-connected, always-updating information, but aside from those CrackBerry addicts and hard-charging professionals, most people didn’t see the point.
Back in 1998, Steve Jobs famously told a Businessweek reporter that “a lot of times, people don’t know what they want until you show it to them.”27 In the case of the smartphone, in the case of the technology that would soon bend the entire arc of modern life toward the ubiquity of mobile computing, that would certainly prove to be true.
17
ONE MORE THING
The iPhone
The logic that was driving device manufacturers to cram a kitchen sink’s worth of technology into the singular form factor of the smartphone was simple. Why carry multiple devices around when you could just carry one? Why would you want a PDA and a messenger? You wouldn’t. So, Palms gained messaging capabilities. Why would you want to carry a messenger and a cell phone? So, BlackBerrys gained the ability to make phone calls.
But what about that other device that, for about half a decade, was also taking up space in everyone’s pockets? Clearly, if you could store music on your cell phone, you wouldn’t need to carry around an MP3 player. And nobody was more aware of the cold logic of this than Apple.
“The iPod was selling. It was selling better and better. It was probably 50% of our sales [by the mid 2000s],” says Scott Forstall, a senior Apple executive at the time. “And so, we kept asking ourselves, ‘What concerns do we have about the iPod’s success, long-term? What will cannibalize iPod sales?’ And, one of the biggest concerns was cell phones.”1
Apple had a vested interest in preventing cell phones from eating its iPod/iTunes lunch. And, as the example of the iPod Nano supplanting the iPod Mini illustrated, Apple could be ruthless when it came to killing its darlings. At the same time, it can’t be underestimated how much the success of the iPod changed Apple, altering not only what the company thought of itself, but also changing the very notion of the type of business it could be.
Another Apple executive, Phil Schiller, said that the iPod completely changed Apple’s opinion about its own raison d’être. “People started asking, ‘Well, if you can have a big hit with the iPod, what else can you do?’ And people were suggesting every idea—make a camera, make a car—crazy stuff.”2
So, an iCamera? Maybe an iTelevision? Like MP3 players, these were standard, stand-alone consumer electronics products. You didn’t need anyone’s permission to sell devices like these to the masses. Apple could probably gin up the best damned camera anyone had made since George Eastman and potentially blow a whole new industry completely out of the water.
But a cell phone was an entirely different proposition, because it required working with the carriers that controlled the cellular networks in order to make a phone. The carriers decided which devices would be allowed on their networks. They decided the technology those devices could use. They even decided what type of features those devices could have. In short, the cell carriers dictated to the device manufacturers, with the end result being that, in spite of the explosion of features brought on by the smartphone revolution, innovation in the cell-phone space was actually incremental and bureaucratic.
Apple was not a company that liked bureaucracy. Furthermore, Steve Jobs had only recently dragged the music industry kicking and screaming into the twenty-first century. He didn’t relish the prospect of having to cajole and educate another recalcitrant group of backward-thinking companies. At the All Things D conference in 2004, the venture capitalist Stewart Alsop Jr. virtually begged Apple to make a phone. Jobs demurred. “We’ve visited with the handset manufacturers and we’ve talked to the Treo guys [Palm],” Jobs said. “They tell us horror stories.”3 At the same conference the following year, Jobs outlined the problem, as he saw it. “The carriers now have gained the upper hand in terms of the power of the relationship with the handset manufacturers,” Jobs said. He described how manufacturers would get thick books of product and network specs from the carriers, which essentially dictated everything a cell phone could be, down to the last screw and wire. That wasn’t Apple’s MO. “The problem with a phone is that we’re not very good going through orifices [like the carriers] to get to the end users,”4 Jobs said.
Still, the momentum of technologies converging into the singular device of the smartphone was hard to miss. And the poor state of the art when it came to cell phones was something of an irresistible challenge to a company that was feeling its oats and eager to solve big problems. “We looked around,” said Forstall, “And we noticed that almost everyone around us had phones. And everyone was complaining about their phones. And we thought, ‘Could we build something better?’ ”5
Wary of working with the carriers directly, but looking to protect the iPod/iTunes franchise, Apple dipped its toe into the cellular waters by partnering with one of the existing handset makers, Motorola, in early 2004. Apple would merely license the iTunes software, while Motorola would design the hardware, and—most important—deal with the carriers. “We thought that if consumers chose to get a music phone instead of an iPod,” remembered Tony Fadell, Apple’s executive in charge of the iPod franchise, “at least they would be using iTunes.”6 Apple settled on working with Motorola because it dominated the handset business with its recent release, the RAZR flip phone. The RAZR was a “dumb” phone, not a smartphone, but it was thin, sexy, well designed. In short, it was the sort of product Apple was willing to associate itself with. The RAZR was a huge hit, selling 50 million units in just two years.7 So, for its first, experimental foray into cell phones, Apple thought it would be injecting its software magic into one of the hottest devices around.
But instead of producing a music-enabled RAZR, Motorola ended up delivering the clunky ROKR. Motorola took eighteen months to deliver this candy bar–style device and it was fatally, almost ridiculously, flawed. It reeked of a handset that was designed by committee, something antithetical to everything Apple stood for. It could hold only one hundred songs, making it the most limited MP3 player Apple had a hand in producing. Within a month of going on sale, customers were returning the ROKR at six times the industry average for a cell phone.8 Wired magazine asked of the ROKR, “You Call This the Phone of the Future?”9
“This is not gonna fly,” Jobs told the iPod guru Fadell. “I’m sick and tired of dealing with bozo handset guys.”10
The star-crossed ROKR had been developed in partnership with the wireless carrier Cingular (soon to become AT&T after a series of mergers). At the time, Cingular was struggling to compete with industry leader Verizon. While the ROKR was being developed, Cingular executives began to try to convince Steve Jobs to create an Apple phone exclusively for their network. At first, Jobs refused even to listen to Cingular’s entreaties, instead toying with the idea of launching a stand-alone, Apple-branded cellular network. “Jobs hated the idea of a deal with us at first,” Cingular executive Jim Ryan said. “Hated it.”11 But Ryan stressed to Jobs the headaches involved in becoming a carrier, not just a hardware maker. Indeed, the customer service, logistical, technical and reliability issues of operating a nationwide cellular network were something Apple had zero experience with. “Funny as it sounds, that was one of our big selling points to [Apple],” Ryan recounted. “Every time the phone drops a call, you blame the carrier. Every time something good happens, you thank Apple.”12
At the same time Cingular was trying to sell Jobs on the idea of making an Apple phone, a handful of Apple execs, especially Mike Bell and Steve Sakoman, were making the argument for an “iPhone” as well. Bell sent Jobs a long, thoughtful email on Novembe
r 7, 2004, outlining all his arguments. “I said, ‘Steve, I know you don’t want to do a phone, but here’s why we should do it.” Jony Ive had some great iPod designs in the pipeline, Bell reported. All they had to do was pick one, throw some patented Apple software in it, add a cellular radio, and make their own phone. “He calls me back about an hour later and we talk for two hours, and he finally says, ‘Okay, I think we should just do it.’ ”13
The deal Apple would cut with Cingular/AT&T would take a year to finalize, but it alleviated almost all of Jobs’s concerns. In exchange for an exclusive right to an Apple phone on its network, AT&T would grant Jobs carte blanche to design the phone as Apple saw fit. It would be completely Apple-branded and AT&T would have no say in the features or services the phone offered. As icing on the cake, Apple would get a share of the monthly cellular data payments users would have to cough up to use the device.
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BY EARLY 2005, an iPhone was in development. In Cingular, Apple had a partner that would allow it to design a phone as Steve Jobs felt it should be done. But Apple still had zero experience designing a phone, so how the device would turn out in the end was entirely up in the air.
As Mike Bell suggested, the most logical thing to do was to simply add radios to existing iPods. iPods were beloved. Apple was already manufacturing them by the tens of millions. How hard could it be? In a high-level meeting, Jobs signed off on the plan, saying, “We’re going to do this iPod-based thing, make that into a phone because that’s a much more doable project. More predictable.”14
How the Internet Happened Page 34