The other day, I typed a long article on why I believe FaceTime is the cornerstone of Apple’s strategy going and how it affects such things as the mythical “Apple Voice” and iTV projects.  Today’s reports about FaceTime further my insistence that this will be the thing that ties it all together.  

Apple announced that FaceTime, which they had previously said would be WiFi only for the first year, actually won’t use the cellular network other then for establishing the initial connection.  This is a BIG announcement, because it essentially means that Apple is now in the phone business (i.e. the business of connecting people on their phones). 

Now technology purists will point out that apps like Skype and Fring have allowed similar VOIP functionality for a while now, but the difference here is that FaceTime is a native Apple App.  That means Apple is sanctioning a way to speak to (and see) another person that doesn’t use AT&T’s network.  If that’s true, what’s stopping Apple from enabling other devices to use the same technology?  Nothing.

Some of this has been possible in the past with iChat, but the use case was never as exciting because not enough people used chat to actually talk.  Also, most chat clients rely on the idea of screen names and there are a lot compatibility issues between providers.  Now that similar functionality has made it to a device that is synonymous with actually talking, my guess is that Apple intends to deploy FaceTime to other devices (like your TV and your iPad).  That presents some exciting possibilities like sitting on your couch and getting a FaceTime call thru your TV.

The current broohahah between Apple and Google over Google Voice is only part of a larger and more interesting question that Apple has yet to answer: if they won’t allow Google Voice into the app store, what might they be building that similarly solves the problem Google Voice addresses in the market?

I’ll be honest, I think Google Voice is a superb service and fulfills a very real need.  It’s one of the most innovative ideas in telephony in a long time because it allows the consumer to manage his phone number just like an email address.  In short, it’s time has come.  Apple certainly knows this and they also know it would be foolish to assume that their long term disapproval of Google Voice won’t have consequences.  Already, the decision has caused some customers to abandon the platform in favor of Android (as Michael Arrington has), and more are likely to do so as Android continues to gain functionality and user experience parity.  Others will opt for Android from the get go for the same reasons.  Given that, I think we can view Apple’s resistance to Google Voice as a delaying tactic until it gets its own product ready, rather then a philosophical disagreement over the future of telephony.

As much as I love the iPhone, Apple’s ban on Google Voice (and the awesomeness of Gmail) just about convinced me to go Android.  I still might, if Android can get a better media player and a smarter way to sync content to the device.  Those improvements are coming, and when they do, Android will be a ferocious competitor to the iPhone.

So why do I think Apple is building a competing product?  Well, my confidence comes not from any hard evidence but rather a combination of reading between the lines, understanding the way these products could complement one another, and the realization that Google Voice represents the natural evolution of telephony and not even Apple will be able to stand in the way of that.

For the sake of argument, let’s call Apple’s competing product “Apple Voice.”  How might the service work?  

The first major question is where does the PC version of the service live?  Google Voice has a well designed web app that looks a lot like Gmail and allows users to modify settings and perform a host of other functions all from their computer.  Apple could go the Web App route and incorporate the service into MobileMe (which is in need of serious improvement anyway).  On the other hand, Apple could build Apple Voice into iTunes, or they could deploy an entirely new desktop application to handle it.

My bet is on the web app for a few reasons:

1. iTunes already has a LOT of functionality built into it.  Adding additional features would lead to confusion about a product that at one time was strictly about managing your music and now does a LOT more
2. MobileMe is in need of an upgrade anyway.  There is some nice functionality there, but it needs better user experience and easier synchronization between your computer and the cloud.
3. Apple recently shut down Lala and there are multiple rumors of iTunes imminently moving to the cloud.  It only makes sense in the long run as users continue acquiring content.
4. Functionally, you would want to be able to manage Apple Voice from any web enabled computer, not just the computer that happens to sync with your phone.

So what features might Apple Voice have?

• It will use your existing iPhone number.  No need to port anything.  It will just work.
• It will save all your text messages (the iPhone already does this, but you can only see so much of a chat history at a time, and only from your phone), and will save all your voicemail too
• It will allow you to call, text or email right from Apple Voice (or MobileMe)
• It will allow you to block callers
• It will incorporate FaceTime, Apple’s new video calling feature for iPhone 4 (more on that in moment)
• It will tie into the address book (again the rationale behind coupling the service with MobileMe)
• It will be dead simple to use

Most interestingly, I think Apple Voice will be aimed at the iPhone, the iPad, and the revamped iTV and all of it comes down to FaceTime.

FaceTime is a “cool as hell” app that appears to be superbly executed.  It represents a colossal leap forward because it solves the distribution problem that has up until now plagued video calling.  But there are two large limiting factors:  The first is the small screen size.  Even with the Retina display and the increased pixel density, the iPhone still has a small screen size.  Secondly, FaceTime is WiFi only (initially).  That means the use case is likely to be someone using it on their iPhone from their home or office, and not out on the go.  The user experience would be a heck a lot better to use FaceTime on a screen that can show more area, and that brings us to the iPad and maybe to iTV take 3.

iPad

We’ve seen in (alleged) spy shots of iPad casing that Apple considered including a forward facing camera but for some reason decided against it.  My hunch is that Steve nixed the idea as being too much functionality all at once.  Apple’s logic is always to educate the consumer over time, and introduce features slowly when they’re fully baked (e.g. cut/paste, multi-tasking, video, etc) and when the consumer is ready to embrace them.  Too much, too soon is not their M.O.

Considering the leaked images, and what we know about FaceTime for iPhone and that Apple plans to make it an open standard, the only logical conclusion is that FaceTime is coming to the iPad too.  If that’s true, the next logical conclusion must be that Apple has some plan for bringing telephony to the iPad because in order to use faceTime, someone has to be able to call you and/or you have to be able to call them.  Granted, Apple could deploy an iChat client to the iPad or give the iPad its own phone number, but both these ideas seem like messy solutions and Apple doesn’t do “messy solutions.”  

iTV Take 3

Apple is almost definitely working on a TV product.  Some will tell you it’s a set top box, but I disagree.  I think it’s the whole shebang: a full TV with iOS and the App store built right in sans cable box.  Here’s why: Apple doesn’t like to do products where it can’t control the entire user experience.  It also likes to shake up existing categories. Now that it has iAd, Apple has a monetization scheme for TV and for content producers to skip the networks and go directly to the App Store.  Boxee is already thinking this way with its App platform, and it makes sense given Apple’s dominance with the App store to leverage it onto another device.  Lastly, TV is so beyond ripe for innovation and despite Steve’s comments at the D8 conference, I think Apple has figured out the Go-to-market strategy for TV, and it all boils down to FaceTime.  

Despite nearly a decade of promises of one day talking to someone through your TV, no one has yet put all the pieces together.  The problem has always been that there aren’t enough people with a device who can see you, therefore the capability has always had limited appeal (same reason video phones never took off).  It’s similar to the first person who bought a fax machine… he was an idiot, who was he supposed to fax?  Apple is solving this problem by including FaceTime on a device people are going to buy in droves anyway (600k on the first day sounds like droves to me).  As the install base for FaceTime grows, it will make it feasible to build the functionality into TVs and in order to facilitate video calling from the TV, Apple will need some mechanism like Apple Voice for calling.  

Skype has been working on video calling from your TV as well, and the company has the install base to make it happen.  But Skype doesn’t have a hardware platform to stand on, and for that reason it’s access to the TV market has been hamstrung.  Apple doesn’t have any video calling install base, but that’s about to change as people scoop up millions of iPhone 4’s.  As they do, Apple will be able to build their own TV hardware and incorporate iOS and FaceTime.  These features will be huge differentiators against traditional commodity TV’s and will enable Apple to price iTV at a premium.  This fits exactly with Apple’s overall strategy of selling high margin products, and also dovetails with Steve’s comments at the end of D8 where he states “the only way that’s ever going to change is if you can go back to square one and tear up the set top box, and redesign it from scratch, and get it to the consumer in a way that they’re willing to pay for it… and right now there’s no way to do that.”  He goes on to state that “the TV is going to lose until there is a viable go-to-market strategy.”  With iOS, iAd, FaceTime, and Apple Voice, I think Apple has that viable go-to-market strategy and that consumers would be willing to pay for an aesthetically pleasing and differentiated all-in-one TV product.

Putting it all together

Apple didn’t want Google Voice on the iPhone because they had something better in the works.  Their vision is for the iPhone to be part of a family of products that all have voice and FaceTIme communication capabilities.  In order for that to happen, Apple needs a single number telephony system like Google Voice that isn’t device specific.  My hunch is they’ve got such a system in the works, as it’s simply too good of an idea to ignore.  What’s more, it provides a lot of stickiness as a system like Apple Voice would make it more painful for people to abandon the Mac platform, as it’s unlikely that other phone systems would be allowed to work with iOS.  That makes it a brilliant move to counter the steady gains Google is making with Android.  My bet is that Apple Voice will be launching with iPhone 5 in June 2011, and then we’ll see iTV take 3 in the Fall in time for the Holiday shopping season.

Merry Christmas indeed!

I’ll be frank… I really don’t think media companies charging for content is the way to go.  Let’s look at why:

One of the things that made iTunes and other music download services great is that they allowed people to purchase an individual song as opposed to an entire record.  People don’t mind paying for something they value, but they don’t like paying for other stuff they don’t value.  Up until that point, consumers had to “take the good with the bad” and so many either begrudgingly bought the album just for a single song, while others passed on the album even though they wanted a song on it.

Another thing that made iTunes a success was that Steve Jobs (correctly) estimated that the hassle factor of illegally downloading a song was more expensive then a song priced at $0.99.  And he was right.  The iTunes model has proven definitively that most people are willing to pay a small amount of money for something of value, even when free versions exist, if the paid version is more convenient/fun to own.  With news content, the free version is the norm not the exception, and the convenience/fun factor is missing from the ownership experience.  As such, it’s unlikely that people would be willing to pay for content since it’s likely available for free elsewhere without much hassle.

In order to change this reality, the news companies are going to have to develop differentiated content.  CBS’ 60 Minutes is a good example of this idea as their content and investigative journalism style is unique among news sources.  The more that news companies can differentiate themselves in similar fashion, the more they’ll have the ability to charge for content.  Barring that, I predict that most paid models will not ultimately succeed.