A similar phenomenon is happening with other devices. For example, the Amazon Kindle is by far the best selling e-book reader. But the Kindle hardware device is nothing to write home about, especially the first one, which was a piece of junk. What's great about the Kindle, and the thing that makes it "better" than the Sony Reader and even better than all the color "Kindle Killers" that have been demonstrated in the past year, is the Amazon Kindle Store. Hardware doesn't matter. Network is everything.

And look at the console gaming contest between Microsoft and Sony. The Sony Playstation hardware is vastly superior to Xbox 360. But Microsoft wins primarily because of the appeal of the Xbox Live network.

What's happening with these consumer electronics devices is that they're going through the same transitions as PCs did in the early days.

Back in the 1980s, people bought hardware, and the software was secondary. Over time, however, each PC hardware line increasingly resembled all the others, and what really mattered was software. Eventually, even Apple ended up moving over to Intel-based PC hardware. But nobody cared.

What really matters now is the Mac OS X or Windows or Linux, and all the software you can run on these platforms.

And just look at what's different about the iPhone 3G S. Like a new PC, the new phone is pretty much the same as the old phone, just faster. (The "S" stands for "speed.")

Why this matters

So what does it mean that cell phone software and networks are more important than the hardware?

In a nutshell, it predicts which non-cell phone devices are likely to succeed and fail in the months and years to come.

For example, we're almost certainly going to see new netbooks and tablets running cell phone operating systems real soon now. We'll be able to buy systems running the iPhone OS, WebOS, Windows Mobile and possibly others. These devices will hook into the respective app stores and take advantage of other services offered by the companies.

Because of the new primacy of software, I can safely predict even now, sight unseen, that Apple's offerings will probably dominate as thoroughly as the iPhone, and for the same reason: The App Store, iTunes and MobileMe.

The new importance of networks also raises an interesting set of questions. For example, who will create the first or best Xbox Live-like multiplayer gaming network for a cell phone platform? What if Microsoft rolled out a version for Sidekick users, and pushed Xbox gaming development in that direction? Or, alternatively, what if Apple built an Xbox Live-like gaming network?