The network effect I'm talking about is the N-squared growth in value of a network of N nodes where each of the N nodes derives most of its value from the numbe

The network effect I'm talking about is the N-squared growth in value of a network of N nodes where each of the N nodes derives most of its value from the number (N-1) of other nodes. The phone system overall has this property, so does Skype, so does Facebook, but no carrier, handset maker, or OS does, because their users aren't limited to interacting with the other users of the same carrier/handset/OS. Instead, the existing players have a benefit resulting from their size that is more of a scale advantage, in that the N users tend to have access to more things if N is larger, but those "things" are not primarily the N-1 other users. There are more iPhone apps than Android, for example, yet Android sells more units and is growing faster. Scale matters, number of apps matters, but other factors are very significant, too. Apple, therefore, does not have to be the #1 phone maker to make the most money, nor would a new entrant have to have huge scale to have a profitable business. Unlike a network effect business, a new entrant would not have to appeal primarily on the basis of how many other users it already had but, instead, on what value it offered. And you mention that Amazon couldn't get you to switch from iOS because of the number of iOS apps as if the 2 billion phone users out there all care primarily about the number of apps they'll probably never use. Yet Android phones outsell iOS with fewer available apps, and the average Android user buys far fewer apps than the average iPhone user. A significant fraction seem to be satisfied with just the apps that come with the phone and never buy another. It's not unreasonable to assume that there may be many market segments that would be fine with a few thousand apps covering 99%+ of usage PLUS something else they value more highly than the long-tail iPhone apps. Phones and phone plans that specialize in offering something more valuable than Yet More Apps might appeal to many people. Shoppers might care more about Amazon Prime than than the one game app they have to give up if they switch. Parents might care more about a managed kid phone with kid features and a kid rate plan than about Apple's app store. Since the value of phones is not primarily the number of your maker's installed base squared but is based on so many possible things, I think there is room for new entrants as long as they offer something more significant to a market than the extra apps.