It's official: Apple is the new Microsoft

Sticker shock

Another clue that a company has monopoly power is when you find yourself suffering sticker shock. How many times have you stood in line at the theater megaplex and marveled at the chutzpah required to charge US$4.50 for a soft drink, when the same beverage is one-third the price at the quickie mart 50 feet outside the theater doors? But -- so sorry! -- no outside food or beverages are allowed in the theater. The theater has a monopoly on soft drink sales, and you'll pay what they charge.

That same shock rippled through the iPhone enthusiast community yesterday when Jobs announced with a straight face that iPhone ringtones based on iTunes songs would cost the full price of the song, plus 99 cents extra. What? The full song costs 99 cents! How on Earth can Apple seriously charge the same amount again for the ability to hear just 30 seconds of the song -- the same length as the free iTunes "samples"?

Apple fully understands the power of monopoly pricing. The company has sold the 8GB iPhone for two prices in its short, three months of existence: US$599 and, now, US$399. When the iPhone was the only way to get the whole multitouch, big-screen, Wi-Fi iPod experience -- when the product had no alternatives -- the price was US$599. One analyst estimated Apple's cost to build an iPhone is US$245.83. I don't know if that's true but, if so, more than half the user cost was profit. That's theater soda pricing. But as soon as Apple introduced an alternative to the iPhone -- the iPod Touch -- Apple dropped the price by one-third.

Imagine if another company were allowed to compete in the OS X media player market. These players would all drop to below US$300. Don't hold your breath, though; it'll never happen. Apple has the power to exclude all others from software than runs on its media players. Microsoft could only dream of such power.

Apple the copycat

Ten years ago, Microsoft haters complained that Windows followed the Mac OS to market as a graphical user interface, copying the Mac's features such as folders, trash cans, resizable windows and other elements. That complaint was repeated with each new version of Windows -- Apple was the innovator in the operating system space, and got there first with a host of key features. Microsoft just came along later, duplicated features that Apple pioneered, and reaped the benefit because of its monopoly power.

But who's innovating now? The LG KE850 was winning awards for its full-screen, touch-screen, on-screen keyboard before Jobs even announced the iPhone.

The best thing about the iPhone and iPod Touch -- the warm-and-fuzzy multitouch UI with gestures -- wasn't new, either. Various labs have been demonstrating similar UIs for more than a decade, and even Microsoft demonstrated a fully realized 3G UI in May, well before Apple shipped the iPhone. Microsoft will ship its tabletop UI, called Microsoft Surface, in November, and Apple will likely enter this space with a 3G UI months or years after Microsoft does.

And Wi-Fi in a media player? Ha! Microsoft's funky Zune had that almost a year before Apple did and SanDisk's Sansa Connect with Wi-Fi was released last June. Apple even stole the name for its iPod Touch product, according to HTC, which sells a touch-screen smart phone called the HTC Touch.

Don't get me wrong. I think Apple's execution of these features is far better than its competitors'. And it would be horrible decision-making to not build the iPhone simply because others pioneered key features. But that's not what I'm talking about. I'm talking about Apple doing what Microsoft did: dominating the market with features other companies had first. If it was fair to slam Microsoft over Windows, it's fair to slam Apple over the iPhone and iPod Touch.