Telecom Firms To Compete With Apple App Store

The Apple (AAPL) Apps store has downloaded more than three billion software applications to iPhone and iPod touch devices. Programmers have created more than 150,000 products for the e-commerce operation. The App store is considered critical to customer loyalty for the iPhone. It allows subscribers to set up an almost infinite set of individualized mix of software for their handsets.

Telecom companies naturally resent the Apps store because it creates loyalty for the handset and not the carrier. To combat this twenty-four wireless operations will create an open platform to deliver software applications to a large spectrum of phones. According to Reuters, LG, Samsung, and Sony Ericsson are behind the move. Each is among the six largest handset companies by global market share.

A number of large carriers including AT&T (T), Vodafone (VOD), NTT Docomo, and China Mobile (CHL) will support the program.

The move is bound to create substantial friction between Apple and some  of its carriers partners, particularly AT&T which has the exclusive rights to sell the iPhone in the US. But, carriers believe that they will lose the loyalty of their customers as subscribers develop an affinity for the Apple handset that trumps their relationship to cellular service providers. This problem is likely to be exacerbated by the introduction of the iPad which also runs on 3G networks.

The move by carriers may work. Handset firms like LG and Samsung do not have stores with large numbers of applications that they customers can download. People who buy their phones may well be attracted to the opportunity to customize their cell phones.

The most signficant problems the carriers face is whether programmers will do the work necessary to create applications for the new”store” created by the twenty-four carriers. Software developers know that they have a ready customer base with the Apple App store. That is far from certain with the new initiative.

Douglas A. McIntyre