Here’s my contribution to rampant speculation on the ”Product Transition I Can’t Get Into” referred to in Apple’s recent Earnings Call. Let’s see how good a pundit I am. Now, there are many things I’d like the transition to be but which are highly unlikely. I may publish the long-winded article I’ve written on the subject eventually, but I thought I’d keep this brief…

By November, every iPod — except possibly the Nano — will be an iPod Touch of some kind, running OS X. To achieve this, Apple will have to drop the basic iPod Touch price down to $149 or less. iPod Touches are kind of expensive to make, so this will hurt margins and cannibalize some higher margin products.

The upside: within 12-24 months, Apple will — arguably — have the dominant computing platform on the planet — the largest games platform except for the PS2, the largest mobile computing platform except for the OSes embedded in commodity cell phones, and the largest platform that, as a whole, can natively run apps compiled against a single OS toolbox API.

For bonus points, they can merge the AppleTV into the Mac Mini (and put AppleTV functionality into every Mac) or simply expose extra functionality in [new?] AppleTVs (such as the ability to run iPhone games apps).

Now, I’m not sure this is a Good Thing™. Apple has, historically, been a pretty arrogant company. (Look at its treatment of game developers from 1985-2000.) I’m not sure whether the world would be a better place with Apple in the driver’s seat, but this is, I think, the plan: OS X everywhere.

While we were in Denver visiting family we visited an Apple Store (it was the most crowded store in the Mall, of course) and, of course, started drooling at the prospect of replacing our aging Motorola Razr v3cs. “We’ll just wait until our Verizon contract expires,” we agreed, and continued wandering around. Then we stumbled across a Verizon store. “I’ll just go find out when our contract expires,” said my wife as she ran off, leaving me with the twins.

It turns out that our plans have already expired! “OK, let’s go to the Apple Store,” I said (loudly) at which point the Verizon reps (who outnumbered the customers in the store) tried to sell me on the virtues of the LG Dare which, they explained, is better rated by independent reviewers than the iPhone and is superior in most ways.

I won’t go into their sales pitch — I basically tried out the Dare’s web browser (which was an exercise in self-flagellation) and left the store — but I did check the LG Dare out online after I got home. (Of course, if I’d had an iPhone I could have checked it out on the spot.) Here’s the thing, the LG Dare does get better reviews than the iPhone from the likes of C|Net, but not from more critical reviewers such as Engadget. Indeed, MacWorld gave the iPhone 3G a four (out of five) mouse review.

It seems to me that this isn’t  because a lot of review sites are anti-Apple, or that people love to criticize the iPhone — although both things are true — but because when you use an iPhone you suddenly start comparing it to what you imagine it could be, versus what it actually is, whereas when you use most cell phones you compare them to other cell phones (say, your current cell phone). The iPhone isn’t a phone, it’s a touchscreen computer that happens to be a phone. As such, its connection is kind of slow, its screen is kind of small, its performance isn’t always stellar, the virtual keyboard is kind of lame, and so on. It’s easy to imagine a device that’s better in pretty much every way.

I like my Razr — I just wish it had a slightly bigger screen, a better menu system (which let me customize shortcuts to, say, the calendar), better battery life, and synced properly to my Mac. I don’t wish it let me use iWork applications, support pen drawing so I could use it as a sketchpad, and let me play Grand Theft Auto. I don’t mourn the lack of an SD card slot that would let me grab pictures from my D50, or videos from my TZ3. I don’t wonder when there’ll be a decent image editor for it.

The iPhone 3G doesn’t deserve better reviews. It just deserves its own category.

Anyway, we’ve decided: my wife will get an iPhone. I’ll get an ordinary cellphone (possibly a disposable, since I hardly call anyone ever) and an iPod Touch. And that way we’ll be able to test our apps on both the iPhone and Touch and pay AT&T as little money as possible. I wonder if Apple will release a Touch with GPS.

The main problem with the iPhone 3G launch appears to have been AT&T. AT&T didn’t ship enough phones to its stores, and wasn’t able to handle activations fast enough. If you look at the number one reason stopping would-be iPhone users from buying one, I’m pretty sure it’s AT&T.

Our last experience with AT&T was having our account padded with a bunch of services we didn’t ask for (in fact explicitly refused) but not noticing it because during the first two months on a contract it’s impossible to figure out your bill (it has all kinds of whacky one-off items) and then not being able to turn off the features we didn’t want and weren’t using when we discovered them for over six months, and then not being able to be refunded for them afterwards. When we switched to Verizon (whom we hate for different reasons) AT&T reps called us to ask if there was anything they could do to change our minds. Well, you could go back in a time machine and not rip us off.

Generally, a contractual agreement between business partners, such as Apple’s exclusivity deal with AT&T, has “out” clauses for such things as non-performance. Recently, for example, Paramount was sued by licensees of the Star Trek brand for producing lousy Star Trek series and destroying the value of the brand. If a famous athlete is discredited for taking steroids or sexually assaulting someone he/she will lose his/her endorsement contracts. Perhaps the most germane example I can think of is Apple’s iTunes licensing agreement with the big music studios which gives them an “out” if Apple fails to address any cracking of iTunes DRM within 30 days.

Just how badly can AT&T screw things up and not give Apple an early “out” from their exclusivity deal? It almost makes me wonder if Apple’s incredible efforts to put iPhones in their stores were an attempt to force AT&T to fail some benchmark. (It would also explain AT&T’s deliberate understocking.)