Open and free tends to prevail, says analyst

Although Android-based phones are only a modest threat right to the Apple and the iPhone right now, the competition should become much more serious in a few years, says Bernstein Research's Toni Sacconaghi. The analyst points out that Android phones are already trumping the iPhone on a daily sales basis, moving about 160,000 units versus the iPhone's 95,000. Around 120,000 of RIM's BlackBerries are being sold each day.

The clash between Apple and Google is being delayed, Sacconaghi suggests, because the smartphone industry is expected to grow 20 percent or more each year for the next five years. If Android and the iPhone each grow 50 percent faster than the rest of the market, they should have a combined share of 60 percent in just three years. In the short-term, only RIM and Nokia are expected to suffer.

Google is thought to have an edge for several reasons. Apple has yet to produce a CDMA version of the iPhone for example, whereas Android phones exist on both GSM and CDMA networks, including major US force Verizon Wireless. Sacconaghi also remarks that open and free platforms tend to succeed in the long run; he cites examples such as Linux, and the web versus AOL. Affordability results in a better deal for carriers, which are estimated to be paying about $100 to $150 less for each Android device than the roughly $600 an iPhone may cost.

The cost gap may become critical when data plans finally become cheaper and create less profit, Sacconaghi warns. "Apple’s extraordinary acceptance and pull from consumers has been powerful enough for carriers to be willing to pay up for the product...this may diminish over time, particularly if Android momentum persists or Apple's product does not innovate at the same rate," the analyst comments.

Apple is argued to have two potential solutions. The first is to find new carriers for the iPhone, even if this requires accepting lower prices. The company could also (or alternately) produce new, cheaper models, made possible by stripping away data plans and some other features.

By Electronista Staff