What I don’t mean to include in this new class of devices are netbooks running Microsoft Windows, which are just fine, but are really merely small, cheap laptops. Nor do I mean to include the tens of millions of older, less capable, phones labeled “smartphones,” which can be a slippery term.

These devices, like the Palm Treo, older Windows Mobile phones, or older-model BlackBerries, were breakthrough products in their day. But they use wimpier operating systems and less capable hardware than today’s new class of smartphones. They do run third-party apps, but these look primitive compared with, say, an iPhone app.

A battle is shaping up in the next few years to see who will dominate this new handheld platform–who will attract the most users and third-party apps?

So, here’s a quick snapshot of the strengths and weaknesses of the main combatants in the war for the handheld platform.

Apple

Strengths: Having defined this new class of handheld computers, Apple has a huge head start, with 30 million modern devices running a powerful and attractive operating system. That includes 17 million iPhones, plus Apple’s secret weapon: 13 million iPod Touches, which do almost all that an iPhone does, except connect to the cellphone networks. Apple (AAPL) also has an easy-to-use app store, which is now estimated to hold over 30,000 apps that have been downloaded over 900 million times in just about nine months. The iPhone also offers wireless synchronization via MobileMe and Microsoft Exchange, and has had terrific marketing. And rumors persist that Apple is working on a cheaper iPhone, and/or a larger iPod Touch, in a tablet format.

Weaknesses: Apple has three key vulnerabilities. First, there are millions of people who prefer a physical keyboard, which the iPhone and Touch lack. Second, at least in the U.S., the iPhone is tied to a single carrier, AT&T (T), whose 3G network is still lousy in some major areas. Finally, while the iPhone’s $199 price has been good enough to make it a hit, people in a deep recession might respond better to a lower price, even if it was for a stripped-down lesser model.

Research in Motion

Strengths: The BlackBerry is an icon, beloved by many, with a large installed base estimated at over 50 million. The company has made progress in migrating the BlackBerry to consumers from corporate IT departments. It understands the importance of software, and has launched its own Apple-like app store, with a decent initial selection. It has a robust marketing campaign and is available from multiple carriers. Most models have physical keyboards.

Weaknesses: The new BlackBerry app platform leaves out much of the installed base; it only works on BlackBerry models introduced after the fall of 2006. RIM (RIMM) stumbled with its first touchscreen BlackBerry, the Storm. And its app store, and the apps themselves in many cases, are clumsier and less polished than the iPhone’s. Most of all, the BlackBerry desperately needs a major user-interface overhaul. Email addicts who know lots of shortcuts love the UI, but it’s very dated for a world where the device must do more than email. There are way too many clicks, steps and menus, and the browser is still weak. RIM has just hired a new user interface guru who worked at Apple and Microsoft, so it apparently gets this problem.

Microsoft

Strengths: Windows Mobile has a large installed base, with many developers who created lots of apps for older versions of the software platform. Microsoft (MSFT) also plans an app store. The company has also launched a wireless synchronization service for consumers, called My Phone. Unlike Apple or RIM, Microsoft has a horizontal strategy, which places its platform on the hardware of numerous handset makers and carriers. The operating system can work with or without a physical keyboard.

Weaknesses: Windows Mobile is old. It is less powerful than the iPhone OS or Android, and has a user interface that needs a major redo. The company laughed off the iPhone phenomenon, and is now late in catching up. A minor new release is planned for this year, but Microsoft is racing to do a complete overhaul of Windows Mobile, called version 7. Unfortunately, that won’t be out till 2010. The new app store won’t work with current versions of Windows Mobile.

And, currently, Windows Mobile lacks a killer hardware device. The best Windows Mobile phones today are models from HTC that feature HTC’s own software, which works to hide as much of the hidebound Windows Mobile user interface as possible. It isn’t clear that apps built for the HTC user interface will work properly on regular Windows Mobile phones, and vice versa.

Google

Strengths: Android is modern and powerful–different from, but in the same class with, the iPhone OS. It has an app store, and excellent wireless synchronization with Google’s calendar and contacts. Like Windows Mobile, it’s a horizontal product, which can be used on numerous handsets and even tablets or netbooks, some of which are rumored to be in the works. It will be available on multiple carriers, and can work with or without a physical keyboard.

Weaknesses: The first Android phone, the T-Mobile G1, was clunky and didn’t set the world on fire. The Android app store has so far attracted surprisingly few apps compared to Apple’s at the same stage. Some users might balk at the tight tie-in with Google (GOOG). Handset makers can build Android phones that aren’t tied in to Google services, so it will be important to see how these variants fare. Another problem is that, as versions of Android diverge among handset makers and carriers, app developers may face a compatibility challenge.

Palm

Strengths: With a slug of venture capital money, and the leadership of an ex-Apple exec, Palm has reinvented both its software and hardware, after allowing them to grow stale. The new Palm Pre and its new webOS, which will launch this spring, have impressed those who’ve seen them, and appear to have a real shot at competing with the iPhone and BlackBerry. The new platform is built for wireless synchronization and third-party developers, and, unlike the iPhone, and some planned Android models, the Pre combines its touchscreen features with a  physical keyboard.

Weaknesses: Even if the phone and OS are hailed once reviewers test them, there are many business issues for Palm (PALM). The company is running on fumes, financially, and its launch carrier, Sprint (S), is hemorrhaging as well. That could make it tough to subsidize the Pre enough to compete on price with the iPhone and BlackBerry, especially if Apple does a cheaper iPhone. In addition, Palm will have to mount a costly marketing campaign to match the advertising machines of Apple, RIM and Microsoft. And it may need financial incentives to tempt developers to write apps for the Pre.

Nokia

Strengths: Nokia is the world-wide leader in cellphones, including smartphones (by the loose definition of that term.) It understands that software and cloud services are key, and has launched an online service called Ovi. There are many older apps already for the Symbian operating system that powers most Nokia models, and Nokia (NOK) is working on an app store. The company is good at hardware, and has huge brand loyalty, at least outside the U.S. And its best known smartphones have physical keyboards.

Weaknesses: Nokia’s software has been inferior to Apple’s and Google’s. To fix this, the company has handed off Symbian to an open-source consortium with a complicated structure. That could make Symbian, and thus Nokia, less nimble than Apple, RIM or Google. Some of Nokia’s competitors will also be using this new Symbian, attempting to differentiate their products with user interface and feature differences. Thus as in the case of Android, there’s a danger that, if variations of Symbian diverge too much, application compatibility could become  a problem. The company also has historically been only a minor player in the very important U.S. market.

I haven’t had time to do a full review of App World, but I tried it out for a couple of hours on a top-of-the-line BlackBerry Bold and a fast network connection. Here are my first impressions.

RIM’s store is clumsier to use than Apple’s (AAPL), but it works. The selection at launch is decent, but with some surprising omissions. The emphasis seems, at first glance, to be toward pricier apps. And, there are some limitations and oddities. Perhaps the biggest of these is that App World is only available for relatively recent BlackBerry models–the ones with trackballs instead of side wheels, starting with the Pearl, which came out in the fall of 2006. That means that millions of people with older models can’t use the app store.

App World has apps in all the major categories–Games, Productivity, Entertainment, News, Weather, Finance, Health, Social Networking, and so forth. The selection is broad. For instance, on the first day, it offers 166 games, 99 productivity and utility apps, and 69 reference and book apps. There are even a few of those fart apps that have proved so popular on the iPhone, something that seems so… unBlackBerry-like.

But there are some surprising omissions. There’s no dedicated Twitter client, at least none that either I or a RIM (RIMM) spokeswoman could find at this writing. There’s a Facebook app, but it’s the same rudimentary one RIM has offered for a long time. There’s no Google (GOOG) app, just a shortcut to a Google page in the BlackBerry’s browser. And there’s no app for shopping at Amazon (AMZN) or viewing Kindle books. No doubt these things will show up eventually, but given the competition and the time RIM has spent getting this ready, I was surprised they weren’t there at launch.

Still, I downloaded about a dozen apps and liked most of them, including the Bloomberg, Pandora, and Shazam apps. But a $2.99 Associated Press app didn’t work properly and looked crude compared with the free AP app on the iPhone. Shazam, which identifies songs playing nearby and gives you a chance to buy them, correctly identified several songs on the BlackBerry, but unlike on the iPhone, didn’t link to videos related to the songs.

The buying process is harder than on the iPhone. You have to download the store itself, then pay for any apps you want with PayPal, which requires going through a couple of screens each time. On several occasions, despite my fast, strong, steady network connection, app downloads stopped in midstream multiple times, And the least expensive apps are $2.99, about triple the cost of the cheapest typical paid apps on the iPhone. Indeed, I spotted a surprising number of $20, $30 and $40 apps on App World.

App World has other limitations and oddities. You can only save apps to the BlackBerry’s limited internal memory, not to a roomier flash memory card. RIM has made up for this by allowing you to also store your apps online, but that’s still a pain, especially when you’re not connected. And, oddly, the apps you obtain from App World aren’t located in the BlackBerry’s Applications folder, but in the Downloads folder. You can, of course, move them around, even placing them right on the home screen.

BlackBerry fans unfamiliar with the iPhone won’t care about some of these comparisons, of course. They will, and should, just be happy that their phones are now much richer and more versatile devices. And, in the end, that’s what counts. RIM is now truly in the platform game, which will make its products more attractive and could make its shareholders richer.

Now, suppose your new computer came with a particular Web browser or online music service, but you’d prefer a different one. You can just download and install the new software, and uninstall the old one. You can sign up for a new music service and cancel the old one. And, once again, you don’t need to even notify your Internet provider, let alone seek its permission.

Oh, and the developers of such computers, software and services can offer you their products directly, without going through the Internet provider, without getting the provider’s approval, and without giving the provider a penny. The Internet provider gets paid simply for its contribution to the mix: providing your Internet connection. But, for all practical purposes, it doesn’t control what is connected to the network, or carried over the network.

This is the way digital capitalism should work, and, in the case of the mass-market personal-computer industry, and the modern Internet, it has created one of the greatest technological revolutions in human history, as well as one of the greatest spurts of wealth creation and of consumer empowerment.

So, it’s intolerable that the same country that produced all this has trapped its citizens in a backward, stifling system when it comes to the next great technology platform, the cellphone.

A shortsighted and often just plain stupid federal government has allowed itself to be bullied and fooled by a handful of big wireless phone operators for decades now. And the result has been a mobile phone system that is the direct opposite of the PC model. It severely limits consumer choice, stifles innovation, crushes entrepreneurship, and has made the U.S. the laughingstock of the mobile-technology world, just as the cellphone is morphing into a powerful hand-held computer.

Whether you are a consumer, a hardware maker, a software developer or a provider of cool new services, it’s hard to make a move in the American cellphone world without the permission of the companies that own the pipes. While power in other technology sectors flows to consumers and nimble entrepreneurs, in the cellphone arena it remains squarely in the hands of the giant carriers.

The Soviet Ministry Model

That’s why I refer to the big cellphone carriers as the “Soviet ministries.” Like the old bureaucracies of communism, they sit athwart the market, breaking the link between the producers of goods and services and the people who use them.

To some extent, they try to replace the market system, and, like the real Soviet ministries, they are a lousy substitute. They decide what phones can be used on their networks and what software and services can be offered on those phones. They require the hardware and software makers to tailor their products to meet the carriers’ specifications, not just so they work properly on the network, but so they promote the carriers’ brands and their various add-on services.

Let me be clear: Any company that spends billions to build and maintain a wireless network deserves to be paid for its use, and deserves to make a profit and a return for its shareholders. Not only that, but companies like Verizon Wireless or AT&T Inc. should be free to build or sell phones or software or services.

What Is Needed

But, in my view, they shouldn’t be allowed to pick and choose what phones run on their networks, and what software and services run on those phones. We need a wireless mobile device ecosystem that mirrors the PC/Internet ecosystem, one where the consumers’ purchase of network capacity is separate from their purchase of the hardware and software they use on that network. It will take government action, or some disruptive technology or business innovation, to get us there.

To my knowledge, only one phone maker, Apple Inc., has been permitted to introduce a cellphone with the cooperation of a U.S. carrier without that carrier having any say in the hardware and software design of the product. And that one example, the iPhone, was a special case, because Apple is currently the hottest digital brand on earth, with its own multibillion-dollar online and physical retail network.

Even so, Apple had to make a deal with the devil to gain the freedom to offer an unimpaired product directly to users. It gave AT&T exclusive rights to be the iPhone’s U.S. network for an undisclosed period of years. It has locked and relocked the phone to make sure consumers can’t override that restriction. This arrangement reportedly brings Apple regular fees from AT&T, but penalizes people who live in areas with poor AT&T coverage.

Apple has also, so far, barred users from installing third-party programs on the iPhone, though the company announced last week it will open the phone to such programs early next year. (Web-based iPhone programs–those that run inside the Web browser–have been available from day one.)

These restrictions have rubbed some of the luster off the best-designed handheld computer ever made.

A few other “smart phones” sold primarily to businesses have been freer of carrier restrictions on third-party software and services than typical cellphones. But even these handsets, such as Palm Treos, Windows Mobile devices, and BlackBerrys, have been partly crippled by carriers in some cases.

As a technology reviewer, I have met with multiple small companies that had trouble getting their programs onto consumers’ phones without the permission of the carriers; getting that permission often requires paying the carriers. Sure, there are some clumsy workarounds that can evade the carrier barrier, but it’s nothing like the ability small software companies have had for decades to offer their products for installation on Windows or Macintosh computers.

We also need much greater portability of phone hardware. Because the federal government failed to set a standard for wireless phone technology years ago, we have two major, incompatible cellphone technologies in the U.S. Verizon Communications Inc. and Sprint Nextel Corp. use something called CDMA. AT&T and Deutsche Telekom AG’s T-Mobile use something called GSM. Except for a couple of oddball models, phones built for one of these technologies can’t work on the other. So that limits consumer choice and consumer power. If you want to switch from AT&T to Verizon, you have to swallow the cost of a new phone.

But the problem is even worse. The government didn’t require the CDMA companies to include a removable account-information chip, called a SIM card, in their phones. So, unlike people with GSM phones, Sprint and Verizon customers can’t keep their phones if they switch between the two carriers, even though they use the same basic technology. And, the government allows the GSM carriers to “lock” their phones, so a SIM card from a rival carrier won’t work in them, at least for a period of time. Techies can sometimes figure out how to get around this, but average folks can’t.

The carriers defend these restrictions partly by pointing out that they subsidize the cost of the phones in order to get you to use their networks. That’s also, they say, why they require contracts and charge early-termination fees. Without the subsidies, they say, that $99 phone might be $299, so it’s only fair to keep you from fleeing their networks, at least too quickly.

But this whole cellphone subsidy game is an archaic remnant of the days when mobile phones were costly novelties. Today, subsidies are a trap for consumers. If subsidies were removed, along with the restrictions that flow from them, the market would quickly produce cheap phones, just as it has produced cheap, unsubsidized versions of every other digital product, from $399 computers to $79 iPods.

The Federal Communications Commission is selling some new wireless spectrum that will supposedly lead to fewer restrictions for technology companies and consumers, but it’s far from certain that the carriers, with their legions of lobbyists and lawyers, will allow such a new day to dawn. Google Inc. is making noises about trying to bust open the cellphone prison, with new software and services, but that’s no sure bet either.

Remember Landlines?

We’ve been through this before in the U.S., though many younger readers may not recall it.

Up until the 1970s, when the federal government intervened, you weren’t allowed to buy your own landline phone, and companies weren’t able to innovate, on price or features, in making and selling phones to the public. All Americans were forced to rent clumsy phones made by a subsidiary of the monopoly phone company, AT&T, which claimed that, unless it controlled what was connected to its network, the network might suffer.

Well, the government pried that market open, and the wired phone network not only didn’t collapse, it became more useful and versatile, allowing, among other things, cheap connections to online data services.

I suspect that if the government, or some disruptive innovation, breaks the crippling power that the wireless carriers exert today, the free market will deliver a similar happy ending.

• Email me at mossberg@wsj.com.
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