Despite AT&T’s success and optimism for the future, Rinne also offered a warning. She pointed to the checkered history of AOL, which stood on top of the Internet world in the late 20th century but saw its subscriber base collapse after the advent of home broadband. The Internet industry witnessed a tipping point of its own, which foreordained the broadband revolution and the collapse of the walled garden. As AT&T rides the cusp of the mobile Internet revolution, it has to be cautious it doesn’t fall into the same traps as AOL, Rinne said. And that means being open to new and numerous applications and business models. Rinne pointed to AT&T’s growing portfolio of embedded emerging devices, smartphones and connected PCs as an example of how AT&T has discarded the notion of the walled garden — and how it’s clearly enjoying the spoils.
AT&T may have discarded the walled garden itself, but ironically the key driver to its mobile Internet success hasn’t. Apple’s (NASDAQ:AAPL) iPhone is probably the ultimate culmination of the walled garden approach in mobile — one implemented elegantly and artfully but a walled garden nonetheless, where a single entity controls the platform and access to applications. Rather than reject the walled garden, consumers are flocking to it, frolicking happily within its confines. The iPhone isn’t the only example. The success of the Amazon (NASDAQ:AMZN) Kindle was built behind high topiary walls. Every book, newspaper and magazine downloaded to the Kindle comes from the selections available offered at the Amazon store, which offers no access to hundreds of thousands of titles available across the Web from such sites as Google Books.
Rather than tearing down those walls, operators and application developers are erecting new ones. Android, Nokia (NYSE:NOK), Palm (NASDAQ:PALM) and Research In Motion (NASDAQ:RIMM) are launching centralized apps stores. What’s different is the number of variety of app stores out there. The industry is abuzz with this idea that an open and expansive mobile Internet is in our future. But today, consumers don’t want expanse; they want alcoves — nests of innovative content. Maybe as tastes evolve consumers will gravitate toward truly open devices and they’ll develop the sophistication to hunt down the content, applications and services on their own. But for now they seem content to hop between one walled garden to another, and the winners in such a world will likely be the companies that can lay out the best garden plans.
To me, it stands in contrast to this item by Tim Lee at TLF:
The typical life cycle of a technology goes something like this. Technologies are usually originated in the laboratory, where a small number of geeks invent it and explore its capacities. Once the time comes for commercialization, often proprietary versions are the first out of the chute because it’s easier to monetize closed platforms, and therefore to raise the capital necessary to deploy them quickly. So in the early years of any new technology’s growth, it often looks like the proprietary technology has a decisive advantage (think AOL in 1993). Then, as the technology begins to mature, the disadvantages of closed technologies become apparent. They can only grow and evolve as fast as their owners can manage them, and as their owners get larger and more bureaucratic (think AOL in 1998), these platforms begin to stagnate. Meanwhile, the open alternatives, which are not held back by centralized management, continues growing rapidly, equalling and then quickly surpassing the closed competitors. Finally, the open platform’s lead gets so large that the closed platform, facing a choice between interoperability or irrelevance, is forced to open itself up to the competition (think AOL in 2003).
And once an open platform has become firmly established, proprietary firms stop trying to dislodge it. Instead, they try to build new proprietary technologies atop the underlying open architecture. Mac OS X, for example, is a thin layer of proprietary software atop a big stack of open technologies. Similarly, Facebook is a thin layer of proprietary code atop a lot of open Internet technologies. But that means that even as a company is trying to establish the dominance of their new, proprietary platform, they’re reinforcing the primacy of the underlying open architecture. Which means that that open architecture remains available to be built on further by anyone who cares to do so. And that, in turn, ensures that the process I described in the previous paragraph can begin again at another layer of the software stack.
What happens, though, is that every time this process begins in a new sector of the economy—online access in the mid-1990s, e-commerce in the late 1990s, broadband access in the early 2000s, social networking today—folks on the left-hand side of the political spectrum begin wringing their hands about how this time is going to be different. Sure, open platforms have had a good run so far, but now the big, bad corporations are going to take over. And because the specific names and technologies are different each time, it’s always possible to come up with a theory about the specific developments that will bring about the triumph of the walled gardens. Their warnings invariably turn out to be overblown, but by the time it becomes clear that the last round of predictions were wrong—Lessig’s 1999 predictions about e-commerce destroying the Internet, say—there’s a new threat to obsess over.
This, incidentally, is why it annoys me so much when libertarians denigrate the value of open platforms. The triumph of open architectures over the last couple of decades has been a vindication of the Hayekian idea of spontaneous order. AOL tried to build a closed, centrally-planned network, and it got clobbered by the Internet for precisely the same reasons that the US economy outperformed the Soviet economy: central planners lack sufficient information to satisfy the needs of millions of users with diverse needs. What the answer to the Lessigs and Zittrains of the world isn’t that open systems are bad. It’s that precisely because open systems are good, they’re unlikely to be dislodged by closed systems in the marketplace. Even when the structure of the market is far from ideal, as it is, for example, in the broadband duopoly, the open architectures have turned out to be far more robust than anyone expected.
So, the "walled gardens" in the first article are indeed built upon a system of open standards -- WiFi, GSM/HSDPA, etc. Will we devolve to a battle of walled gardens? Or, is there some other business model that is waiting in the wings to clobber Apple, Amazon, etc?