Apple's Hidden Disruptive Innovation

People often think that disruptive innovation happens overnight, but often it happens one step at a time. Before the iPod was an innovation, Apple had to not only launch the device, but also the iTunes Store for music, and the Microsft Windows version of iTunes. Apple also expanded the iTunes Store to include audiobooks, movies, and television, but by then it had already become a mass-adopted disruptive innovation that has changed the music industry forever.

Apple then launched the iPhone and changed the power paradigm in the mobile industry around mobile applications publishing – resulting in the App Store.

Apple is about to do it again, but nobody is writing about it.

In retrospect I believe we will look back and point to January 27, 2010 as the day that Apple changed the power paradigm of mobile data plans and subsidies in the mobile industry.

Up until now, the mobile postpaid market has been defined by mobile phones subsidized in exchange for two-year contracts (at least in the United States), and mobile data plans that also often require a two-year contract. Even when Google announced the Nexus One as an unlocked device, T-Mobile (or any other carrier) is still going to charge you the same monthly cost as someone who bought the subsidized phone. Meanwhile, The carrier partner announced for the iPad, AT&T, has two regular 3G data plans:

1. $35 per month (200MB limit)
2. $60 per month (5GB monthly limit)

AT&T sells two 3G data cards – free or $49 – both requiring a two-year contract. But Apple yesterday announced that AT&T will provide 3G service to iPad users WITHOUT a two-year contract (or any contract for that matter). Pay as you go data access that is actually CHEAPER than their regular 3G data plans:

1. $15 per month (250MB limit)
2. $30 per month (unlimited)

To my knowledge, this is the first time (at least in the United States) where a carrier has given a cheaper price for service to a customer bringing an unlocked, unsubsidized device onto their network. This is of course how it should be, but still this is a watershed moment. If other carriers adopt this model with the iPad, then eventually some carrier may start to do this with other devices, and it may open the door for a different subsidy to emerge.

If carriers finally start to acknowledge that people who bring unsubsidized devices onto their network should pay less, then it opens the door for someone like Google to start paying people to use their device. Google could leverage their ad-serving platform and Google Checkout to launch a phone that effectively gets cheaper the more and longer you use it, regardless of which carrier you use and whether you’re using pre-pay or postpaid (standard monthly service).

This is the innovation that I thought Google would launch with the Nexus One, but they didn’t. Can Google now lean on T-Mobile and others more now to offer differentiated pricing for owners of unsubsidized devices?

The data plans offered by AT&T for the Apple iPad may have not seemed very interesting on January 27, 2010. But, I think looking backwards we may very well see this as a defining moment for the mobile industry.

Thank you Apple.

To see what I think of the Apple iPad, please go here.

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Braden Kelley is the editor of Blogging Innovation and founder of Business Strategy Innovation, a consultancy focusing on innovation and marketing strategy. Braden is also @innovate on Twitter.