I only browsed this thread, but I think everyone should be clear that the term "Network Effects" (or Network Externalities) is not directly related to Facebook or other social websites at all. Read the authors description again:

You can read a longer description here:

http://en.wikipedia.org/wiki/Network_effect

In the case of smartphone, network effects are huge, and the iPhone has worked to take advantage of this. The author goes on to speak about how you'll only be able to play multiplayer iPhone games with other iPhone users, and there's some merrit to this line of thought, but the network externalities are much more extensive then that: When I buy an iPhone, I'm executing an agreement between Apple and myself, but external to the two parties who have any say, iPhone developers get value in that their install base grows by one. This becomes a virtuous cycle: as the install base grows, more developers are attracted to the iPhone and develope more apps, which in turn attracts more users, etc. etc.

To expand then on the authors argument, Apple has been successful in inducing enough users and developers to get on the iPhone that the reaction has become self sustaining, and despite a new phone coming to the market with the best hardware and development environment along with a reasonable cost, it will not be able to break Apple's market domination because these network effects.

I don't know myself if Apple's reached that point, but it certainly has happened before. The most obvious example is Windows Vs. Mac (vs. Linux!) - Windows took off because it got all the apps, then everyone flocked to the system, and then developers spent the vast majority of their time working on Windows systems, lather, rinse, repeat. Apple vastly improved their OS with X, and made a dent by spending tons of money on advertising, but ultimately, they are still in second place.

An even better (although more obscure and less controversial) example would be alternate DNS systems. You can use one, but hardly anyone else does, so you just stick to ICANN. http://en.wikipedia.org/wiki/Alternative_DNS_root