Windows Phone 7 presents a big gamble, for Microsoft and consumers

Rob Pegoraro
Friday, October 15, 2010; 11:33 AM

When Microsoft introduced its Windows Phone 7 operating system on Monday, it couldn't make its traditional sales pitch to consumers: We're Microsoft, this product has "Windows" in its name, get on board now!

Instead, it had to ask something different: Trust us to build this platform.

You've heard that before from other companies. Smartphones might be the most interesting product of the electronics industry, but the flip side of that excitement is uncertainty.

Buying into a new phone platform amounts to placing an expensive bet. The cost of the phone is the last of it; you also have to add in the cost of a required service plan you might not have otherwise bought, the cost of any apps you buy and - most important - the opportunity cost of not being able to switch to a better phone for another two years without paying early-termination fees.

You have to think like a venture capitalist, but without the potential payoff of riches down the road.

Sometimes the bet pays off. Apple had never built a phone before launching the iPhone in 2007, but that venture has succeeded beyond any sane expectation. Google's Android operating system didn't reach the market until after the iPhone had secured an enormous head start, but it's on its way to passing Apple.

Sometimes a new phone venture sinks almost instantly. Microsoft axed its Kin line of smartphones less than two months after they arrived in Verizon Wireless stores. They still function fine as phones, but they'll never live up to their advance billing.

In other cases, it takes time for a platform to crumble - usually, after years of success tempt companies to slack off. Palm's defunct Palm OS and Microsoft's now-abandoned Windows Mobile come to mind. (When I unloaded an old Palm Treo on eBay, I was happy to make just enough money on the sale to recover the costs of the now-useless Palm programs I'd bought years ago.)

Prior to Windows Phone 7's launch, the most uncertain smartphone contender was Palm's webOS.

This sleek, multitasking operating system looked like a breakthrough when it debuted on Palm's Pre smartphone two summers ago. But less than a year later, without any significant hardware or software advances and with flagging support from third-party software developers, Palm's project appeared to be circling the drain.

Now that HP has bought the company, its prospects look brighter, but only if HP's financial backing helps it ship a reinvigorated lineup of phones with upgraded software that sell well enough to renew the interest of programmers.

Windows Phone 7 faces the same basic obstacles, although in some aspects Microsoft seems to be off to a better start than Palm. It has lined up the likes of Dell, HTC, LG and Samsung to build devices running this software, ensuring that one its success won't rely on the virtues of a single phone design. And with both AT&T and T-Mobile selling Windows Phone 7 models, it's not requiring that customers all like one carrier - although its failure to build in support for the CDMA wireless technology of Sprint and Verizon still sets this project back.

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