Carriers

The iPhone 3Gs' Weekend 'Box Office'

So how did the new iPhone do over the weekend? According to this report (based on Piper Jaffray estimates), it sold 750K units. For context, the iPhone 3G apparently sold 1 million units during its first weekend. Here are some other estimates and figures from Piper Jaffray's in-store survey:

  • Among the 256 customers surveyed, 28% were switching carriers to AT&T, down from 38% last year and 52% in 2007.
  • 56% were upgrading from an old iPhone, up from 38% last year.
  • Among customers buying their first iPhone, 12% were switching from a Research in Motion BlackBerry, up from 6% last year.

This is a solid performance. But the smaller number of people switching to AT&T to get access to the phone may mean:

  • Other competitive phones are holding people back
  • The would-be switchers are diminishing out there, which points to Apple's need to get the device to other carriers in the US to continue growth

In a related bit of news, the iPhone 3.0 software upgrade appears to have broken Google's voice search's elegant hold to your ear capability:

We're aware that the current version of Google Mobile App does not fully support Apple OS 3.0. It is still functional, but some users may experience difficulties using voice search when lifting the phone to their ear (like you reported) or have blank rows appear in their search history. If you want to conduct a voice search, just tap the microphone icon instead of lifting the phone to your ear.

Apparently they're working on the fix.

___

Update: Apple put out a press release that says it sold more than 1 million 3Gs iPhones:

Apple today announced that it has sold over one million iPhone 3GS models through Sunday, June 21, the third day after its launch. In addition, six million customers have downloaded the new iPhone 3.0 software in the first five days since its release. 

Senate Call for FTC Look at AT&T-iPhone Deal Unlike to Go Anywhere

Four US Senators, led by John Kerry, called on the FTC to investigate whether exclusive deals such as the iPhone-AT&T deal were harming competition and stifling consumer choice in the wireless market. From Senator Kerry's letter:

We ask that you examine this issue carefully and act expeditiously should you find that exclusivity agreements unfairly restrict consumer choice or adversely impact competition in the commercial wireless marketplace. We ask that you consider the following factors in making this determination . . .

Whether exclusivity agreements are manipulating the competitive marketplace between commercial wireless carriers. Specifically, whether the ability for a dominant carrier to reach an exclusive agreement with a handset manufacturer is inhibiting the ability of smaller, more regional carriers to compete . . .

The not-so-subtext here is the AT&T-iPhone relationship, but maybe also the Verizon-Storm and Sprint-Pre deals as well. One wonders whether some of the involved Senators want the iPhone and are not on AT&T.

Do these deals restrict consumer choice? -- absolutely. Do they harm competition? That's not as clear.

We have a very competitive handset and operator market in the US. But what you'd likely get if you had all handsets available to all consumers, as you do in many EU countries, is a race to the bottom in terms of cost/price. Some consumers would stay or go to the "best network," but most consumers would simply go with the cheapest plans.

The carriers know this and increasingly recognize that, as the smartphone segment grows, they're on the cusp of "dumb-pipe" status. Opening up the market further would accelerate this development, notwithstanding the promises of app stores, etc. Exclusive handset deals are one of the few things that differentiate them. 

Telecoms are powerful enough to prevent any further opening up of the market. So don't expect any concrete action on Senator Kerry's letter. Or if there is an investigation, the conclusion will likely be that investment would be harmed and thus consumers . . . Plus ça change. 

----

Update: Incoming FCC Chair (approved yesterday) Julius Genachowski made a statement today in which he said he would "act accordingly to promote competition and consumer choice." We'll see . . .

Palm Pre Playing Mostly to Sprint Subscribers

This should come as no surprise, but reportedly the Pre is not luring new subscribers to Sprint. According to Bloomberg on Wednesday:

A survey of retail sites showed that most buyers of the Pre are already Sprint subscribers, helping the carrier retain customers, Chicago-based Jennifer Fritzsche said in a report today. Palm began selling the Pre exclusively through Sprint in the U.S. on June 6.

The research suggests the Pre isn’t drawing customers away from larger rivals AT&T Inc. and Verizon Wireless, Fritzsche said. Sprint has lost more than 4 million contract customers in the past year as those carriers introduced more feature-heavy, Web-equipped phones, like the iPhone and the BlackBerry Storm.

As we previously speculated:

The Pre has prevented me, a Sprint subscriber, from defecting to AT&T to get the iPhone but it's unlikely to lure people from AT&T in anything like the numbers that the iPhone has driven for AT&T.

When the Pre comes to Verizon in 2010 -- if the iPhone hasn't by then -- it should see strong sales. So while the Pre will probably stop some of the subscriber bleeding for Sprint, it's not going to turn in big new subscriber gains. Discounting is proving to be a much more successful strategy for the carrier (i.e., Boost's $50 plan). 

I argued before that Microsoft should take a hard look at buying Palm and largely replace Windows Mobile with Palm's WebOS. It could maintain both of course. It's unlikely that Redmond will make a bid for Palm given that that would amount to an admission WinMo is in big trouble. There's also the hope that 7 remedies some of the complaints about the the OS. 

As I've argued before however, Apple and Android are on the consumer left, BlackBerry is on the enterprise right with the Pre somewhere in-between. Notwithstanding LG and HTC's commitment to WinMo, enterprises can opt for BlackBerry and consumers will be inclined to choose other handsets, but for aggressive discounting. 

As for Sprint, it will be time to take a hard look and further dataplan and voice discounting if it hope to reverse direction and start growing its main business. Let the price war begin anew!

Android 'G2' to Be Called 'myTouch 3G'

The forthcoming T-Mobile Android G2/Ion/Magic will be apparently be formally called "myTouch 3G" according to the Wall Street Journal. It will go on sale at some point in the next couple of months and be the first of an anticipated deluge of Android-based devices to hit the US market.

The forthcoming myTouch 3G has no physical keyboard unlike the new Samsung Bigfoot (Android), which will also be sold by T-Mobile in the US at some point this summer.  

Google itself stole some of T-Mobile's thunder around the G2 by giving it away to hundreds of people at its recent developer conference. As a consequence there have been a number of reviews of the device on popular tech blogs and news sites. I have one and like it very much but find the overall experience to not match the iPhone's, although there are some features that are more desirable. 

These many soon-to-arrive Android devices will be appealing to consumers who want an "Internet phone" but who don't want to switch to AT&T to get the iPhone. Android isn't yet in a position to compete with Windows Mobile or BlackBerry for enterprise customers. But Windows Mobile phone consumer sales may be most vulnerable as more Android phones roll out.

Finally, as many more Android device hit the market and extend the reach of Android Market, its appeal to developers will grow accordingly. Apple is clearly (in my mind) making a mistake by staying with AT&T and may find itself with the "cadillac" device but with a de facto cap on its market share because of its carrier exclusivity. 

Will Carriers Get a Piece of the Mobile Ad Pie?

Yesterday there was an article from IBD about how Vodafone aims to not only build an apps store but get deeply involved in the mobile ad ecosystem:

A new mobile online store is part of Vodafone's ad strategy. So are location-based advertising and text-messaging ad formats . . . By year-end, Vodafone plans to open an online store where mobile phone users can download games and other software applications, aiming to duplicate the success of Apple . . .

Vodafone also hopes to generate dollars from ads that are inserted within some applications. 

Vodafone plans to expand a text-messaging ad service, called "Please call me," to more markets this year. Developed by Vodafone's South African subsidiary, Vodacom, the service lets prepay customers send a free, ad-funded text message to someone asking them to call back.

Vodafone also seeks to make money on mobile TV.

AT&T and Verizon have announced apps stores in the US. (Vonafone owns part of Verizon.) However I'm extremely doubtful that carrier apps stores can succeed like Apple has. There's a possibility of modest success perhaps, but apps are directed to smartphones and all the device OEMs have their own apps stores and so does Microsoft. 

Carriers didn't/couldn't get the mobile Internet experience right for their users in the past. It's unlikely they can create an apps store experience to equal, let alone rival the OEMs. 

Carriers might be able to succeed at the lower end by creating apps for users not on the major smartphone platforms. In addition they can gain a piece of ad revenue by partnering with ad networks around opt-in demo and location targeting. That's a trickier proposition; and very soon they'll start to be marginalized in terms of ad network revenues -- unless they buy the mobile ad networks.

The Microsoft-Verizon ads deal, however, will be one to watch and may represent a model for carriers going forward -- if it's successful. 

Zong Turns the Mobile Phone into a Credit Card

I spoke to Zong yesterday and was impressed by the simplicity of the user experience. Zong is a "mobile payments" system and part of a company (Echovox) that has been around for almost a decade. The company has relationships with most of the mobile carriers in North America, Western Europe and elsewhere around the globe.

Mobile payments in this context is a bit misleading; the payments system/infrastructure uses the mobile phone and carrier billing (up to a per transaction total of $9.99). But CEO David Marcus says that 95% of revenues are coming from online-driven payments (games, virtual goods, etc.) from social networks. Many of the apps on Facebook for example use Zong. (The site will be introducing its own payments system soon.)

Here's a demo of the Zong payment user experience.

When users intend to buy something on a site or application that uses Zong, they enter their phone numbers (see below). A text is sent to their mobile phones with a pin code that they then enter online, validating the transaction in a few seconds. The user pays through his or her carrier bill, eliminating the need for any credit card input.

 Picture 25

Picture 26

I asked about competitors and we discussed a number of payment companies in mobile (Obopay, Bango, others). Marcus says the payment processor he most often encounters in dealing with companies is PayPal. He says he doesn't consider the eBay subsidiary to be a competitor but rather another payment method that is often offered side by side with Zong -- akin to businesses that take both Visa and Mastercard. 

Marcus added however that while fraud can be very high on PayPal he contends that Zong is virtually fraud proof, which is a selling point with publishers and site owners. 

__

Related: CNET does a general overview of the mobile payments segment. And here's another payments round up, focused mostly on startup Boku, from the NY Times. 

Consumers Interested in Lower Cost Service Plans

We've got two contradictory but seemingly parallel trends going on in the US mobile market: consumers upgrading from feature phones to smartphones (an related data plans) and users looking for cheaper plans and options. For discussion of the first trend, see: The Mainstreaming of Smartphones.

On the other side of the spectrum we've had a price war going on in the pre-paid segment that has yet to break through to post paid (I'm keeping my fingers crossed). Boost, Virgin Mobile and MetroPCS have been trying to match each other with aggressive pricing on all-you-can-eat voice and data plans. Most aggressive among them is Boost's "all-in" plan for $50 per month. That plan has been terrifically successful for parent Sprint

The PR and advertising around these plans, together with "organic" interest because of the recession is driving online research and search behavior. Research firm comScore just put out some interesting data showing consumer visits and search behavior around these pre-paid carriers and their plans are way up: 

 Picture 2

Also interesting is the fact that more, older consumers are looking at these pre-paid options as a way to save money (probably vs. current carrier plans):

Picture 3

Reportedly, "organic" clicks to carrier sites are way up, while paid search clicks (ads) are down. To me that indicates that consumers have heard about deals (via other media or WOM) and are seeking them out directly via search engines. 

Broadband Expansion: MiFi and WiFi in the Car

Verizon and Sprint are both offering the Novatel Wireless personal "MiFi" hotspot device. The device costs about $100 and requires a two-year contract. So many, if not most, people will be deterred by the pricing. For "road warriors" it may not even be as convenient as a laptop dongle (because it has to be charged) and it's certainly not cheaper. But the advent of this device points to increasingly ubiquitous connectivity.

Also in that category is Autonet Mobile's in-car router (image below) that turns your car into a moving hotspot. It's similarly expensive, with a $399 up-front investment plus either $29 or $59 per month depending on bandwidth requirements. 

However, we should see more mobile connectivity options and should also see prices come down over time. There's a growing expectation of being able to connect to the Internet whenever and wherever you want. This provocative article argues in favor of using the iPhone with a MiFi device and dropping the AT&T plan, which is impractical for the majority:

The reasoning works like this. If you can bear to stick another gadget in your pocket or backpack, both iPods and iPhones can use MiFi's data plan. You can Skype to your heart's content (or, realistically, up to the 5GB monthly limit). This helps especially if your EDGE or 3G coverage is already awful when compared to Verizon's EV-DO network. MiFi gives you the opportunity to dump your entire iPhone plan and replace it with possibly better data. And with no US tethering yet announced for the iPhone, MiFi offers laptop as well as iPhone data; its WiFi connection appears to be platform agnostic.

If the White Spaces initiative ever becomes reality it may offer the kind of cheap yet powerful broadband coverage that we've all been dreaming of (the Feds, seeking to protect the vested interests of mobile carriers and cable companies may intervene to limit access or influence terms). But the larger point is that these devices are increasingly making it possible to get the Internet on the go and on more devices. 

Picture 4

Sprint: Pre Breaks (Our) Sales Records

According to a post on CNET, quoting Tim Donahue, vice president of business marketing for Sprint, the company said the the Pre had broken sales records over the weekend:

"We experienced our best one day of sales and single weekend sales for any phone we've launched in our history," he said. "We sold out of the device over the weekend in most of our store locations. And it happened at a much faster rate than we had planned on."

I had made an online appointment at a relatively large and busy local Sprint store early Saturday (for Monday, first one available) to try and get the phone. I indicated that I wanted a "handset upgrade" and that I was interested in buying the Pre. There was no email indicating whether or not (in fact) I would find the phone at my store. 

When I called yesterday before my scheduled appointment I asked: "I want to buy the Pre, do you have any in stock?" The torpid sales rep on the other end said, "no." Period. He didn't say "I'm sorry we don't have any but we'll put you on a list." Nor did he offer to contact me when some come in or direct me to a store that might still have one. 

By playing "hide the ball" with Pre supplies Sprint got to claim a sell-out but sold fewer Pre phones than it might have otherwise. Furthermore, Sprint is blowing it by not making it easy for me -- a loyal Sprint customer for years with two unlimited plans ($200+ per month) -- to find one of these phones. They should have made them available to loyal customers to buy online in advance or buy online and pick up in local stores. That would have satisfied customers like me and added incremental sales.

But I guess nobody thought of that.  

Palm Pre Launch a Stage-Managed Success, Apple Announcements Shortly

Sprint's forced Pre shortages seem to have paid dividends. Various financial analysts estimate the device sold around 100K (or so) units across the US over the weekend and sold out in most places. According to the NY Times:

Jennifer Walsh Keifer, a Sprint spokeswoman, said late Saturday that Sprint had sold out of Pre phones at a number of locations around the country and that the company was doing its best to restock stores.

This is all bogus because Sprint wanted to create shortages to make a sellout more likely. The company accordingly wanted to create the strong perception of demand to avoid negative coverage today had it not sold out. As a Sprint customer I received at least five emails on Saturday from Palm and Sprint alerting me to the fact that the Pre went on sale. But there was no specific information about where I could buy the phone. I want the Pre but I resent the manipulation of supplies for PR/marketing purposes. 

However the Pre's moment in the sun may be over as media outlets eagerly await new iPhone related announcements this morning at the Apple WWDC in San Francisco. I won't reproduce all the rumors here, there are many. If you're interested, there are a range of places online to see live blogging of the Phil Schiller keynote, including on the NY Times site

There are two proclaimed advantages that the Pre has over the iPhone in its current state: a physical keyboard and the ability to run multiple apps at the same time. The first one is actually not an advantage. It's a perceived advantage. 

I was initially very critical of the iPhone's on-screen-only keyboard until I got my iPod Touch and gained experience using it. Now I wouldn't want a physical keyboard. The Android G1 was also touted as better in some respects because of the fact of a physical keyboard. Interestingly, the forthcoming G2/ION has only a virtual keyboard. The Pre has no virtual keyboard. And although I don't have one in my hands yet, I can imagine the awkwardness of inputing queries on the Pre. 

The "cupcake" update for Android added a virtual keyboard to the G1 to rectify similar awkwardness on that device. 

The Apple keynote begins at 10 a.m. Pacific/1 Eastern. If Apple's 3.0 software update doesn't allow multiple apps to run simulatenously (don't recall if it does) then the Pre (and Android) will still have bragging rights. But I suspect there will be enough new stuff to reduce the Pre to another wannabe. 

Sprint Launches Customizable Screen Saver

Based on Sprint's "Now Network" promotion, the company has launched a customizable screen saver that allows to access multiple services and types of content:

While screensavers are nothing new, Sprint has overhauled the familiar application in a fresh and exciting way to encapsulate the depth, breadth and power of the Sprint Now Network. The NOW customizable screensaver, which launched today, lets you see the present moment on your screen by drawing in information from your Facebook, Myspace, Twitter, YouTube and Flickr data. In addition, it enables you to tailor other real time elements, such as local traffic and bus schedules, the weather, and even how many Google results match your name!

Customization/personalization is one of the ways that carriers can remain relevant to end users as more subscribers opt for mobile devices that offer full browsers. The "carrier deck" becomes less and less relevant or entirely absent when users are on the iPhone or Android for example. There was a deck of sorts on WinMo 6.1. But people will increasingly just go to apps/widgets or directly to the Internet.

On the back end, with user location and other user data, carriers can potentially get a piece of ad revenues by providing some of that targeting data to third party publishers and ad networks (provided the FTC doesn't bar it). However as consumers migrate to more Internet-cable phones carriers will need to offer positive reasons to consumers to interact with their content. AT&T and Verizon have accordingly said they'll be creating apps stores. 

But I imagine a situation -- a more "robust" version of what Sprint is talking about -- where users can customize a start page with third party content. Some portion of that page could be reserved for carrier branding and messaging or carrier-sold ads. This is analogous to MyYahoo today. 

But for these more compelling tools and services to mobile subscribers, the "dumb-pipe" scenario looms larger and larger for operators. 

Sprint Plans to Sell Pre on Price of Data

Owning the iPhone is expensive and Sprint is planning to exploit its competitive advantage around data pricing (apparently) as one of the key marketing angles for the new Pre, due out June 6 in the US. As an aside, I'm generally annoyed by the faux shortages that Sprint hopes will boost demand and buzz for the device.

According to Engadget, which got a copy of an internal Sprint Pre launch guide the relative pricing of competitors' data plans is one of the key points. Of course Sprint has been pushing this angle more broadly for some time.

Pre launch doc

Source: Sprint/Engadget

The hardware and software comparison points in the table above (i.e., layered contacts, NASCAR content) are unlikely to win converts. Indeed the Pre may stop the post-paid subscriber bleeding (as will a Samsung Android phone expected later this year) but I don't believe you're going to see any big defection from AT&T and Verizon to Sprint to get the Pre. Sprint and Palm are hoping that such predictions are proven to be wrong. 

However the cost of data-plans will get attention and may be a successful hook for those contemplating upgrading from a feature phone and considering one of the other carriers for a G1 or iPhone. 

___

Related: O2 will distribute the Pre in the UK. And the WebOS Palm EOS (Centro successor) is reportedly coming to AT&T in the second half of 2009. Getting this device to market quickly will help Palm if early Pre sales fail to live up to the hype.

Nokia's Way Back: Low-Cost Smartphones

Nokia wants to be a player in the US market again. However the handset OEM is facing fundamental challenges as it tries to get back in the game here. For example it doesn't having billing support from carriers for its Ovi apps store. Despite having potentially lots of apps, the absence of simplified billing will be an initial (if not long term) problem for Nokia.

Nokia will also be hard-pressed to compete at the high end of the smartphone market. The US market is now the most competitive in the world for smartphones and the dominance of RIM and the iPhone is not likely to be successfully challenged in the near term by Nokia. In addition, any smartphone costing more than $200 (with subsidy) is dead on arrival as a mainstream device. 

Price is a huge driver or barrier to adoption -- often unappreciated by those writing about mobile issues. 

What then can the company do? It can pump out low-end smartphones (or smartphone-like phones) that are inexpensive. Getting handsets into the hands of US users is the first order of business and right now the only way to do that is to offer phones that are priced around $100 or so. 

__

Related: AT&T considering lower-cost iPhone plans

Vodafone to Diversify Ad Sales Partners in UK

Vodafone in the UK is apparently going to end its exclusive ad sales relationship with Yahoo! and reach out to other providers/channels/networks. The two companies reportedly will continue to work together but the exclusive dimension of the relationship will end.

Yahoo! has more direct operator relationships on a global basis than its major rivals. For the time being the carriers still see the greatest reach to mobile audiences, although over time that will change as more people shift to smartphones and greater direct mobile Internet adoption accordingly. 

Sprint Earnings: Slower Post-Paid Losses, Boost Plan a Big Success

Sprint reported earnings this morning. Here are the highlights:

  • Consolidated net operating revenues of $8.2 billion for the quarter were 12% lower than in the first quarter of 2008 and 3% lower than the fourth quarter of 2008. Both the year-over-year and sequential decline are primarily due to a lower contribution from Wireless and lower Wireline voice revenue.
  • The company served 49.1 million customers at the end of the quarter, compared to 49.3 million at the end of 2008. This includes 35.4 million post-paid subscribers (25.3 million on CDMA, 8.9 million on iDEN, and 1.2 million Power Source users who utilize both networks), 4.3 million prepaid subscribers (3.5 million on iDEN and 800,000 on CDMA) and 9.4 million wholesale and affiliate subscribers, all of whom utilize our CDMA network.
  • For the quarter, total wireless customers declined by approximately 182,000, including net losses of 1.25 million post-paid customers – comprising 531,000 CDMA and 719,000 iDEN customers (including a net 94,000 customers who transferred from the iDEN network to the CDMA network). The company also lost 90,000 prepaid CDMA customers. The company gained a net 764,000 prepaid iDEN customers and 394,000 wholesale and affiliate subscribers. The company achieved total subscriber growth on the iDEN network.
  • The sequential decline in total subscribers improved by more than 1 million. Subscriber growth in wholesale was primarily driven by the increasing market opportunity for open network devices, such as the Amazon Kindle 2, that extend broadband wireless connectivity to a variety of electronic applications.

The new pre-paid subscriber adds are due primarily to the huge success of Boost Mobile's $50 all-you-can eat plan. That number (764K) exceeds what analysts had predicted. And while post-paid subscriber hemorrhaging may have slowed Sprint is still seeing huge numbers go out the door to AT&T and Verizon. The Pre can't get here soon enough for the embattled carrier. And the Pre is now rumored to be coming out the first week of June.

Regarding Clear/WiMax:

Sprint 4G WiMAX service is currently available in Baltimore and is expected to be available in Portland this summer. In the first quarter, the company announced it also plans to launch WiMAX service in Atlanta, Las Vegas, Chicago, Charlotte, Dallas/Ft. Worth, Honolulu, Philadelphia and Seattle in 2009, and expects 2010 launch cities to include New York, Boston, Washington, D.C., Houston and the San Francisco Bay Area.

Expect Sprint to be at the forefront of providing bandwidth for the new generation of devices that are coming. This is an opportunity and area of growth for the company. 

Boost $50 Plan Gaining Users, Marred by SMS Problems

According to AP, Boost Mobile's $50 unlimited plan is selling like gangbusters. Boost is the prepaid division of Sprint. However, there have been problems with delayed SMS and MMS messages:

But dealers and customers report widespread problems with texting on the Boost network. Messages are frequently delayed by hours, in many cases reaching their recipients early in the morning . . .

The new Boost Mobile plan uses Sprint's Nextel network, which uses a different underlying technology than the main Sprint network. Nextel users have complained of occasionally delayed text messaging for years, but the network's main selling point has been the walkie-talkie-like "push to talk" capability, used by work crews and emergency responders. Now the new Boost plan has opened the network to a new category of customers, for whom text messaging is more important.

When Sprint announces Q1 results next week expectations are that Boost will have delivered almost half a million new customers to the embattled carrier. Amazingly analysts don't expect that to make up for postpaid customer losses. We'll see what the numbers are . . . 

Verizon Q1: 86 Million Wireless Customers, Data ARPUs Up

Verizon released Q1 earnings. Here are the wireless highlights:

  • Wireless retail (non-wholesale) gross customer additions (excluding customers acquired in the Alltel acquisition) were strong, up 32.5 percent over the prior year. On a pro forma basis, retail gross customer additions were up 4.3 percent.
  • Verizon Wireless had 86.6 million customers at the end of the quarter, an increase of 28.8 percent year over year. This includes 13.2 million net total customer additions, after conforming adjustments, from the Alltel acquisition. Verizon Wireless is the largest wireless company in the U.S. in terms of total customers and revenues.
  • The company also has the most retail customers of any U.S. wireless company and continued to grow its high-quality base, adding 1.3 million net retail customers (excluding customers acquired in the Alltel acquisition) for a total of 84.1 million retail customers.
  • Verizon Wireless had industry-leading retail post-paid churn of 1.14 percent; total churn was an industry-leading 1.47 percent.
  • Revenues totaled $15.1 billion, up 29.6 percent year over year and up 9.0 percent on a pro forma basis. Service revenues were $13.1 billion, up 28.9 percent year over year and up 10.5 percent on a pro forma basis, with continued growing demand for data services. Data revenue was $3.6 billion in the first quarter 2009, up 56.2 percent, or 36.8 percent on a pro forma basis, from the first quarter 2008.
  • Service ARPU (average monthly service revenue per user) decreased 0.3 percent from the similar period a year ago, to $50.74. Total data ARPU grew by 20.8 percent to $14.16. On a pro forma basis, service ARPU increased 1.1 percent, and total data ARPU increased 25.2 percent.
  • Wireless operating income margin, adjusted for acquisition-related charges and integration costs, was 28.2 percent, up 30 basis points year over year. Adjusted on the same basis, EBITDA (earnings before interest, taxes, depreciation and amortization) margin on service revenues (non-GAAP) was 46.0 percent, an increase of 110 basis points year over year and 60 basis points on a pro forma basis.

Given Verizon's footprint, its mobile search and advertising deal with Microsoft is a big deal for both companies. It has the potential to be something of a "game changer" for Microsoft if the company can deliver.

True or False: Apple to Develop iPhone for Verizon?

By now you're read it, Verizon and Apple are allegedly talking at a "high level" about bringing the iPhone to the largest US operator. According to USAToday:

The New York-based telecom entered into "high-level" discussions with Apple management a few months ago, when CEO Steve Jobs was overseeing day-to-day business, these sources say. They declined to be named because they aren't authorized to speak publicly.

Verizon CEO Ivan Seidenberg hinted at this in remarks to the Wall Street Journal roughly a week ago:

Mr. Seidenberg also addressed the notion of Apple Inc.'s iPhone ever coming to the Verizon Wireless network, saying it is more likely that Apple would be willing to work with the carrier under the fourth-generation, or 4G, network, which follows the same technology standard as AT&T Inc.'s 4G plans. He said Apple never seriously considered making a CDMA version of the iPhone because it didn't have as wide a distribution opportunity.

However on the recent Apple earnings call, COO Tim Cook seemed to reaffirm Apple's relationship with AT&T. I didn't listen to the earnings call but according to ZDNet, Cook described AT&T as “the best wireless provider in the U.S.” and further said the company does not plan to change partners.

Some people are speculating that this rumor has been floated to make AT&T nervous, given how well the iPhone has performed for the carrier. However, I doubt that's the case. 

If the USAToday report were true, there would be a number of technical issues and challenges to overcome. Verizon's network is CDMA while the iPhone uses GSM. It may be that the alleged talks contemplate a couple of years down the road with LTE/4G is rolled out and the AT&T contract extension has expired. 

____

Related: iPhone appears to drive data-plan adoption at O2 in the UK vs. other carriers.

Will We See a $150 Palm Pre?

The Street is repeating Credit Suisse speculation that Sprint may offer the Pre when it is introduced (c'mon already) for as low as $150 vs. the anticipated $199 or $179. (Any smarphone over $200 now that requires a contract is DOA.)

While this subsidy would potentially cost Sprint a great deal here are the benefits of such a move as I see them:

  • Greater PR and "buzz" upon launch (enabling them to reduce their formal marketing spend perhaps)
  • Increased existing Sprint customer upgrades (including to data plans) to take advantage of the Pre
  • Fewer defections from Sprint, which has been losing 1M subs per quarter of late
  • Some switching from other carriers to Sprint

In the latter category I don't think Sprint will see something as dramatic as what the iPhone has done for AT&T but it may see some new customers. The other benefits (retention, upselling) would probably net out profitably for the carrier, although I don't have access to any of their internal numbers.

One of the other great benefits of the Pre for Sprint is the spark it delivers to the brand. The Sprint brand has been in decline over the past couple of years, notwithstanding their marketing efforts. The Pre and forthcoming Android phones have the capacity to change that. 

I'd love to see a Pre for $150, but we'll have to wait to see if the company has the nerve to go that low. 

3 Skype: Is This the Future of Mobile Voice?

The price of voice and data continues to decline, driven in large part by competition and consumer price sensitivity. Even though most Americans still don't have a data plan, that will change in a relatively short period of time. The price and penetration of mobile data plans is the single "X variable" in the entire mobile Internet adoption mix. Handset type is important but not as important as eliminating cost uncertainty for users. 

As we've argued in the past, an unlimited data connection will one day be more important than voice to mobile users. But US carriers have so far declined to allow users to buy data-only plans, because they want to preserve voice profits and move subscribers "up" to data as well. Accordingly, the carriers have largely resisted VoIP services such as Skype because they fear that it may lure people away from voice plans to minimal voice and data or data only (assuming that were available). That's an "empirical question" but on another level they're resisting the inevitable. 

skype phones

This past week UK operator 3 (a unit of Hong Kong based Hutchison Whampoa) announced free Skype-to-Skype voice and IM:

In a world first, 3 UK has opened up its network to allow anyone with a 3 SIM and a compatible 3 handset to enjoy unlimited Skype-to-Skype calls and messages without ever having to pay.

From 1 May, there will be no data charges or top-up fees for either contract or pay-as-you-go customers who use Skype on 3’s network.  Anyone with a 3 handset will be able to buy a 3 SIM with Skype enabled and talk as much as they want to other Skype users without ever having to pay another penny.

During the summer, 3 will expand its offer to make it possible for anyone with a compatible 3G phone to take advantage of free Skype calls, whether or not their phone is from 3.  Anyone that wants to talk on a mobile for free will be able to use a Skype-enabled 3 SIM to make and receive totally free Skype-to-Skype calls and to use Skype’s instant message (IM) service.  

By removing access and pricing barriers to Skype-to-Skype calls 3 UK is creating a compelling reason for new customers to join 3 and to enjoy all the services available on the UK’s biggest mobile broadband network.

In the 3-Skype program, it's about Skype to Skype, not Skype-Out or In. You can make Skype-Out calls to other countries, but in the UK to make calls to non-Skype handsets or landlines you have to use a 3 voice plan. That's how the operator has struck a balance here and prevented its voice minutes from being entirely substituted by Skype's services.

Reportedly 3 UK has found Skype users churn less than non-Skype users and in fact use more traditional voice minutes than non-Skype users. They also use more data as well. So it may be the case that the feared scenarios described above don't come to pass when VoIP is more directly embraced.