iPhone Innovation and the Right to a Just Reward

I am constantly amazed by the people that do not believe that someone has the right to create a product or service, and take it to market as they see fit, and then be rewarded for their success. The latest news on this front is a group seeking class action status for a suit claiming that by Apple's offering its iPhone exclusively through AT&T an illegal monopoly has been created. I might expect this in a pre-Sarkozy France, but not in America.

France attacked the iPod/iTunes product/service earlier this year along similar lines, threatening to force iTunes to be playable on any portable music device. Right now, music downloaded form iTunes can only be played on an Apple product such as an iPod or iPhone. This is exactly why so much technology innovation continues to be centered in the United States.

Individuals and companies only will take risks if they are able to reap the reward achieved through successful innovation and exection. Think about all the disruptive technologies that have been launched in the last 10 years: Google, Apple (let's call it a relaunch), VM Ware, Yahoo, Expedia, MySpace, etc.

The fact that people can take risks, create innovative and disruptive technologies, and monetize the success, is the reason these companies exist. Creating a defensible franchise by offering disruptive technologies is a big part of what free enterprise is all about. Why would anyone create a product or service if the government simply steps in and drains the moat - taking away your the ability to maximize success?

A great deal of the success in our country is due to the fact that intellectual property is respected and rewarded. Apple has chosen to market a bundled offering combining the iPod with iTunes. If the government can step in, wave its hand, and demand that the product and service be decoupled why would Apple continue to offer the product and services in France? There are plenty of digital music players and lots of ways to acquire and manage music for those players - its not like Apple has a monopoly, just a better product and service.

Similarly, how can it possibly be argued that by offering its iPhones exclusively through AT&T that an illegal monopoly exists. Apple has the right to bundle its products through whatever service providers it sees fit. Verizon, AT&T, Vodaphone all contract with the big cell phone designers and manufacturers for products that are available exclusively through their networks. The iPhone is no different.

India demanded from The Coca-Cola Company (KO) that they disclose its secret formula as a condition to manufacturing and selling its products in India. Rather than compromise its defensible franchise (moat) KO stopped doing business in India.

Rewarding innovation and the right to bundle and market those products and services in a bundled fashion creates wealth, creates jobs, and stimulates further innovation.

Disclosure: at the time of this posting the author was long Apple.