Carriers are notoriously adverse to giving handset makers any leeway in making truly revolutionary applications for phones.  They see handsets merely as a way to get people to sign multi-year service agreements.  So they’re willing to subsidize the price of the phone, because they’ll make all that money back and more through the monthly contracts.  That’s why you can get a phone for next to nothing, even smartphones.

Apple and AT&T took a risk.  Apple risked developing a phone on their own terms, hoping they’d find a carrier interested enough to partner in order to provide service (Verizon was approached first and declined a partnership with Apple).  AT&T took a risk on a phone that they hadn’t physically seen, just going off what Apple had told them.  In the end, this allowed Apple to make a phone on their terms, with no meddling from a carrier and no compromises.  The resulting success of the iPhone shows carriers and handset makers that handsets aren’t just pieces of machinery connecting users to the network.  The handset can be THE value-added asset, bringing increased usability and functionality to the consumer.  Instead of a handset merely connecting the user to the network, the product becomes the object of desire.  The power shifts and now the network merely becomes a conduit for the full usability of the phone.

Another game-changing prediction that I expect the iPhone and the SDK to bring about is a robust community, and even marketplace, for mobile-specific applications.  Apple’s forthcoming App Store, much like the current iTunes music store, will bring exciting and useful applications directly to the consumer in an easy-to-get interface.  This widespread accessibility will commodify the applications to the point where downloading a new app will be analogous to simply downloading a song.  These applications will also be able to open up new forms of mobile advertising, discussed below.  Eventually, applications will be served with cross-platform functionality, so applications in Apple’s App Store can also be downloaded to the Android Platform as well (okay, that last one is a bit of a stretch.)

Open application development signifies that the mobile platform as an internet access point is no longer an early adopter novelty.  It will no longer be acceptable to have a clunky interface to spew out a narrow selection of videos at astronomical rates.  Content providers will be responsible for bringing their content to the mobile platform.  No longer will it be the responsibility of the platform developer to bring all of the content onto their network.  This is the way it should be.

Mobile advertising will now have the software and hardware it needs to reach critical mass.  The iPhone will lay the groundwork, spurring rival competitors to bring more capable handsets to the market.  Increased screen space (all of which is fully interactive on the iPhone) will help because it will provide enough area to allow content and advertising to exist side by side.  Screen limitations will certainly still exist for mobile devices, and this should drive advertisers to be more innovative when it comes to developing advertising as content.  In addition, 3rd party developers will be driven to monetize their applications, and some of those developments will certainly push the envelope in terms of monetization through advertising.  I also expect significant development in regards to the blending of mobile search and local search, as mobile technology will allow for the geotargeting of users outside of the home.

Imagine this: you’re out on the town.  You and your friends are looking for a place to eat.  You pull up your mobile maps application and search “sushi.”  The application pinpoints various sushi locations in your proximity, then asks you if you would like to view available coupons for those same restaurants.  This is the kind of advertising that truly brings immediate value to both the user and the advertiser.

Mainstream mobile search, and thus mobile advertising, is still at least a year away.  But the groundwork has been established, and there’s no way this stuff is going away any time soon.