In iPhone's jump to other carriers, something's got to give

On Monday morning, Microsoft officially announced Windows Phone 7, a long-overdue reboot of the company’s smartphone OS that offers some compelling features to Office junkies, Xbox gamers, and anything-but-iPhone customers.

With Microsoft launching a full broadside—ten phones by a variety of manufacturers on dozens of carriers—it’s another example of Apple seeing stepped-up competition in the mobile arena. And Cupertino may be in a far less advantageous position than it was just a couple years ago, especially when it comes to dealing with the carriers, who now have no shortage of other smartphone platforms to turn to.

When Apple introduced the iPhone in 2007, smartphone design had grown largely stagnant. It was hard to argue with Apple CEO Steve Jobs’s proclamation that the iPhone was five years ahead of the competition—and this was before you could whip out the “there’s an app for that” card. The iPhone was both a line in the sand for good mobile phone design, and a battle cry for the little guy turning the tables on the carriers: It featured no AT&T branding, came preloaded with none of the usual carrier bloatware, and even got AT&T to change its network to handle new phone features like Visual Voicemail.

But it isn’t 2007 anymore. The iPhone revolution has been quickly mimicked by Android, yielding a seemingly unending barrage of new phones, available among all major U.S. carriers. Though it’s not actually the most popular mobile OS yet, there’s no denying that Android has some serious steam behind it. When you add in the likes of Windows Phone 7 and BlackBerry OS 6, the fight for the mobile space only becomes more contentious. Times have changed, and lots of smartphones have caught up to Apple—or, at the least, gotten close enough to tip the scales for millions of potential customers.

Steve Jobs said at the company’s September music event that Apple has sold 120 million iOS devices in four years, and the iPhone makes up the better half of that number. But Google announced that it was selling “about 100,000” Android devices a day in June; in August, that jumped to 200,000 a day—that’s a 100 percent increase in sales in just two months, and that was during the iPhone 4’s launch.

In order to keep its early lead, Apple could very well be the one forced to swerve. Talk is swirling once again of the iPhone leaping to another carrier in the U.S. However, when that happens—note that I didn’t say “if”something’s gotta give in this million-dollar game of chicken: either Apple will have to relinquish some of its control over the iPhone’s experience, or a massive carrier like Verizon or Sprint will have to make the same concessions that AT&T did in 2007.

Plus, the competition has been more than happy to bend to the carriers’ whims. Lots of Android phones feature carrier bloatware that cannot be uninstalled. During its Windows Phone 7 unveiling, Microsoft announced a game that will be exclusive to AT&T devices at launch. Until recently, Verizon had exclusive rights for the Skype app for Android phones. And many of these handsets feature carrier co-branding, often on the device itself, and sometimes in the OS or apps too.

All of this adds up to creating a less-than-desirable position for Apple at the bargaining table with the carriers. The iPhone is an undeniably hot item, but it becomes an issue of balancing how badly the carriers want to put up with Apple—forking over the power and control they have long been accustomed to—with how badly Apple needs an alternative carrier to AT&T.

With Android’s incredible growth rate, Microsoft’s shot at getting back in the game, and RIM building new software for phones and a new tablet, I wouldn’t be surprised if Apple conceded in order to break free from AT&T. As Jobs has stated in the past, working in the phone industry can be a challenge and require compromise. Maybe it’s time for Apple to do exactly that.

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