Carriers

Sprint Brings New Life to 2D Barcode Scanning

Sprint introduced software (via ScanLife) that enables select phones to scan 2D barcodes. This is not new but what it does is give a high profile boost to 2D barcodes in the US. They're widely used in Japan today.

Google uses 2D barcodes to track response to print newspaper ads. Format Dynamics partnered with NeoMedia to integrate 2D barcodes into its printed ads. The Android version of ShopSavvy doesn't use 2D barcodes but directly scans conventional barcodes on products. 

One of the things, as the examples above suggest, that mobile barcode scanning does is that it turns traditional media into a jumping off point for dynamic offers (that can be demographic, time based or location based). Magazines, outdoor ads, newspapers, and so on can use them. A simplier version of this would be associating an SMS code with a traditional media ad or campaign.

As with the Sprint example, in most cases 2D barcodes requre a software download. That represents a barrier for some users. In addition there are competing barcode systems, which represents another barrier to adoption on the advertiser side. But putting these issues aside there's something very appealing about the conceptual simplicity of mobile barcode scanning. 

And the Sprint deal may give it the visibility and boost it needs to take hold in the US. 

Microsoft Moves Closer to 'Default' Search Deal with Verizon

Reuters is reporting that Microsoft, through proposed guaranteed payments, is nearing a deal with Verizon to become the carrier's default search provider:

Under the terms being considered, Microsoft would share with Verizon revenue from ads shown in response to cell phone Web searches, with guaranteed payments to the carrier of about $550 million to $650 million over five years, roughly twice what Google Inc offered, the people told the paper.

If Microsoft succeeds, it would replace a tentative deal with Google. I've written a bit more in my post on Search Engine Land.

Microsoft Seeks to Capture Verizon Search Relationship

The Wall Street Journal is reporting that Microsoft is offering substantial financial incentives to “steal away” the mobile search relationship with Verizon from rival Google. Verizon is the US’s largest wireless carrier (given the recent approval of the Alltel acquisition) with more than 80 million subscribers.

According to the WSJ:

Microsoft has gotten the mobile carrier’s attention by offering a sweeter deal to put its search service and related advertising on Verizon phones. Microsoft is also offering more generous revenue sharing and a guarantee of substantially higher payments to Verizon, say people familiar with the matter.

The article suggests that Verizon is leaning toward accepting the Microsoft proposal. This would certainly be a coup for Microsoft. However, should Microsoft succeed in capturing the Verizon relationship, it wouldn’t shut out Google on Verizon handsets, especially smartphones. Google’s brand strength would continue to guarantee a substantial market share in mobile search.

T-Mobile Reports Rising Data Revenues, Churn While Sprint Loses 1 Million More Customers

T-Mobile and Sprint reported Q3 revenues yesterday and this morning, respectively.

T-Mobile, the fourth largest wireless carrier in the US and a subsidiary of Germany's Deutsche Telekom, reported that overall revenue grew 13% from the same period last year to $5.5 billion. However, net income was down 16%.

Data revenues at T-Mobile grew by an impressive 28% and the company said that the US 3G network would "cover more than 120 cities by the end of November." 

The company added 670,000 new customers -- exactly how many attributable to the G1 is not clear -- but customer churn was also up, despite the G1 and T-Mobile's generally good reputation for customer care. Churn was 2.4%, up from 1.9% last quarter and 2% a year ago. 

Speaking of churn (with a capital "C"), number three carrier Sprint reported a Q3 loss of 1.3 million customers, which may explain how other carriers are adding customers. The company reported wireless revenues of $6.8 billion, down 13% year over year, due chiefly to the subscriber losses. 

Post-paid churn was 2.2%, up from 2.0% in Q2 and 2.3% a year ago. Sprint now has a total of 50.5 million customers, compared to 54.0 million a year ago.

Subscriber counts for the four major US carriers:

  1. Verizon/Alltel: 83.8 million
  2. AT&T: 74.9 million
  3. Sprint: 50.5 million
  4. T-Mobile: 32.1 million 

While the Samsung Instinct has sold well -- Samsung has apparently passed Motorola in US market share according to Strategy Analytics -- Sprint has fewer in-demand handsets than its rivals (no Bold or Storm, no G1, no iPhone). It does have some nice HTC models (Touch Diamond/Pro) and an array of BlackBerry devices.

However the company has no real brand identity in the market. All this spells continued trouble for the troubled carrier and signals to me that Sprint may try and cut prices to get attention and grab some subscribers. If that happens other carriers would probably match any reductions. The counter argument is that carriers won't engage in a price war during a recession, because it becomes self destructive after a point. We'll see.

No Buyers for Sprint's Nextel Unit

This is the time of aborted or delayed deals, given the bad economy. Yesterday Motorola said it would delay or suspend a deal to spin out its troubled mobile devices unit. Today US carrier Sprint said it would hold on to Nextel, for which it had been seeking a buyer. According to a report in the Wall Street Journal:

Earlier this year, Sprint began searching for potential buyers for Nextel, which has struggled since the two companies merged in 2005, losing millions of customers in the face of stiff competition from AT&T Inc. and Verizon Wireless, a joint venture of Vodafone Group PLC and Verizon Communications Inc . . .

Sprint attracted interest from several parties during the process, including private-equity firm Cerberus Capital Management LP and Latin American cellular provider NII Holdings Inc., people familiar with the situation say. But the credit markets made it difficult for any player to raise the cash for a deal at the valuation Sprint would have liked -- something north of the $5.4 billion in debt Nextel carries.

Yesterday the US Department of Justice approved the acquisition of AllTel by Verizon. After final approval by the FCC, the combination will create the US's largest carrier:

  1. Verizion-AllTel: 84 million subscribers
  2. AT&T: 75 million
  3. Sprint: 52 milllion
  4. T-Mobile: 31 million

Verizon-AllTel Deal Approved by Justice Department

The US Department of Justice has formally approved -- there was little question it would not -- the acquisition of AllTel by Verizon. The $28.1 billion deal did come with the condition that assets be divested in roughly 100 US markets where both companies currently operate. There remains the perfunctory step of FCC approval before it can be truly finalized.

The combined company will be the largest in the US and have roughly 84 million subscribers. AT&T has 75 million and Sprint has 51 milllion, followed by T-Mobile at 31 million.

Wal-Mart Sells G1 for Less ($150), Google Study Shows Handsets Gaining in Importance to Users

If you buy the G1 at a T-Mobile store or online, it will cost you $180. But if you buy the same phone, with the same plan, at Wal-Mart it will now cost you $150, a savings of $30. According to Dow Jones Newswires:

Wal-Mart will carry the Google Inc. G1 phone, sold through Deutsche Telekom AG's T-Mobile USA, in 550 Wal-Mart stores at the reduced price of $148.88 for new customers, or existing customers eligible for an upgrade, who sign up for a two-year agreement, Wal-Mart spokeswoman Melissa O'Brien said.

Price, in large part, drives consumer purchase behavior, especially in a bad economy. However, it's not clear how many G1 prospects shop at Wal-Mart.

In a related bit of news, a recent Google-commissioned study found that handsets are driving more consumer decisions about whether to renew or defect from their existing operators. As summarized in AdAge:

What matters to wireless shoppers:

  • Handset only: 24%
  • Handset + carrier (read plan price and/or network quality): 28%
  • Carrier only: 48%

The survey also looked at the online and offline site and resources that consumers use in making purchase decisions.

Given the rise of the mobile Internet and the emergence independent applications stores from Apple, Google/Android and Blackberry, carriers risk being marginalized. But that has been a threat they could see coming for years.

Operators will continue to see growth in data revenues over time, but they will be less and less central to the mobile user experience, unless they take some action in the near term. Short of creating their own competitive content, services and/or apps stores, it's not clear what they can do on the consumer side to avoid the "dumb pipe scenario" -- although data-plan pricing and service (network and customer) come to mind.

There are in fact a number of things they can do "on the back end" to participate in some of the mobile ad revenues to come. But that's a discussion for another time. 

The balance of power began to shift away from the carriers with the advent of the iPhone (and newer FCC "openness" rules) and that consumer trend continues with Android.

US Carrier Verizon Has Strong Wireless Revs, Takes iPhone Churn Hit

US carrier Verizon reported Q3 revenues this morning. Here are the wireless highlights:

  • 1.5 million organic net customer additions, all retail (non-wholesale); 2.1 million total retail net additions including customers from acquisitions.
  • 70.8 million total customers; 68.8 million retail customers, up 11.3 percent.
  • Industry-leading low churn -- 1.33 percent total churn and 1.03 percent retail post-paid churn.
  • 12.5 percent increase in total revenues; data revenues up 42.5 percent; 44.2 percent EBITDA margin on service revenues (non-GAAP).

As part of a broader industry trend, wirelines continue to be down:

 Verizon Q3 wireline

Wireless churn was up somewhat: 

Verizon Q3 churn

According to ZDNET (which listened to the earnings call) the iPhone was partly responsible for some of the increased churn:

On a conference call with analysts, Verizon chief operating officer Dennis Strigl was asked about the wireless unit’s 1.33 percent total churn rate (1.03 percent post-paid) in the third quarter. That tally was up from a year ago and sequentially.

Strigl said Verizon Wireless’ churn rate remains low, but did note a seasonal uptick and the impact of the iPhone. “I’m not concerned about year over year churn. We did see some churn to the iPhone from the quarter,” acknowledged Strigl.

However, Verizon's churn rate is better than AT&T's. But I'm predicting a Verizon Android phone in 2009 to try and defensively address the iPhone threat.   

Verizon has yet to close its $28 billion acquistion of Allel (approx 13 million subs), which will effectively make the carrier the largest in the US.

Cox Cable Building Wireless Network

Cox Communications, which has a range of assets including cable TV is planning to launch its own wireless servic. According to the Associated Press this morning: 

Cox had signaled an interest in building a wireless network by spending $550 million on licenses to use the airwaves. But such spectrum purchases don't always lead to the building of a network, and privately held Cox hasn't previously detailed its plans.

The Atlanta-based company plans to build its own network in its cable service area, and partner with Sprint Nextel Corp. for roaming outside those areas.

This is both a way to gain more revenue from cable subscribers and a defensive move to prevent AT&T and Verizon from stealing customers with so-called "quad play" offerings: cable, Internet, landline and cellphone service. 

TimeWarner and Comcast are investors in the Sprint-majority owned Clearwire WiMax service

Sprint: WiMax Will Be Available to 80 Million in US by Next Year

Ben Wolff, CEO of Clearwire, majority owned by Sprint, told USAToday that by the end of 2009 WiMax will be available to 60 million to 80 million US consumers. By 2010 that could potentially increase to 140 million (the Internet has about 190 million users in the US today). Sprint's Xohm mobile broadband service recently launched in Baltimore and will roll out in several other US cities next year: Chicago, Portland, Ore., Philadelphia, Washington and Dallas/Fort Worth. Xohm will likely become a part of Clearwire. 

WiMax is in a race with LTE, the 4G standard/system supported by Verizon and AT&T. However LTE is at least three years behind WiMax in terms of implementation in the US. In addition, according to the USAToday article, Verizon and AT&T don't own anywhere near as much 4G spectrum as Sprint/Clearwire. That could further delay rollout of LTE, which isn't expected to have any sort of presence until 2012 or later.

Consumers don't care about which standard is used -- they're not even aware of 4G more generally -- but they do care about fast, affordable Internet access. Whether WiMax or LTE, the notion of a nationwide wireless system that could support home or on-the-go access to the Internet is very appealing to many people -- assuming it's priced right. 

Eventually mobile broadband will start to replace conventional wireline ISPs. And once it hits national reach, all sorts of interesting things can happen with Internet-connected devices that aren't necessarily laptops or mobile phones per se. 

It also won't be until substantial 4G penetration that "mobile TV" really becomes mainstream either. Though the subscription (as opposed to advertising) business model for mobile TV is unlikely to succeed regardless -- unless it's part of a bundle or upsell with a home cable TV subscription. 

Clearwire is a joint venture between Sprint, TimeWarner Cable, Comcast, Intel and Google. 

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Related: Sprint's debt and the credit crisis may challenge its WiMax ambitions to some degree. 

Sprint's Boost Cuts Prices

Sprint's lower-cost youth brand Boost Mobile, which offers prepaid plans, has cut prices and is seeking to expand its reach to older users. According to report in the Wall Street Journal:

Boost Mobile, last week slashed its rate to 10 cents a minute from 20 cents a minute. It will also modify its unlimited-usage plan, which currently starts at $50 a month, though the company declined to specify how. Boost plans to roll out its new plans in select U.S. cities.

The idea here is apparently to cast a wider net and go somewhat upmarket as users seek to cut expenses in a bad economy. The issue of how the economy will affect the major post-paid carriers is a bit of an open question. Will, for example, one of the US majors lower prices on unlimited plans or sweeten them in some way, as T-Mobile previously did by halving the price of a second unlimited plan. Sprint is the likely instigator here, given that it continues to lose subscribers. 

US carriers have largely been competing with phones and networks. And other than the momentary flurry of price competition earlier in the year when the major carriers all matched each others' "all you can eat" plans, there has been little movement on this front.

None of the US carriers want to engage in a price war in a bad economy; they're all trying to find ways to gain more revenues from customers. Along those lines, Verizon last week threatened to raise the price of SMS messaging, which caused a wave of protest. Even the proposed $.03 increase per message would have generated millions in additional revenues because of the massive volumes (billions) of text messages being sent each month. 

Data now constitutes 20% of US carrier revenues according to CTIA.

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Related: prepaid mobile beats post-paid 2 to 1 on a global basis. 

XOHM Now Live in Baltimore

Sprint's (soon to be Clearwire's) XOHM WiMax mobile broadband initiative is now live in Baltimore Maryland. Soon it's coming to Washington DC and Chicago. There's a long digression into LTE vs. WiMax that's not very interesting to me: which standard will prevail?

What's much more interesting is to imagine what happens when most major metropolitan areas are blanketed in coverage. Google's recent patent application concerning a wireless marketplace envisions this and is trying to accelerate the eventuality of such a development. 

In perhaps 7-10 years (maybe less) we will see US and European cities blanketed with wireless broadband. Hotspots will be dead (Amen). That will usher in an interesting era of all sorts of connected and mobile devices that sit in-between most of the smartphones of today and laptops, even so-called netbooks.

We may see connected fashion in the form of Internet-enabled watches, which already exist to some degree. 

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Related: Mixed review for WiMax

 

Google Wireless Marketplace: Not Going to Happen Anytime Soon

As is being reported in a number of places now, Google has filed a patent application ("Flexible Communication Systems and Methods") to create what amounts to an open, competitive marketplace for wireless telecommunications and broadband services. It would theoretically permit users to move with their mobile devices (computers, phones, etc.) between networks and, essentially, always be assured of a connection at the best price.

Sellers of bandwidth, under the proposed marketplace system, would participate in a real-time auction to provide those connection services to end users. Here's how the patent application describes the invention:

A method of initiating a telecommunication session for a communication device include submitting to one or more telecommunication carriers a proposal for a telecommunication session, receiving from at least one of the one or more of telecommunication carriers a bid to carry the telecommunications session, and automatically selecting one of the telecommunications carriers from the carriers submitting a bid, and initiating the telecommunication session through the selected telecommunication carrier.

Here's a concrete discussion (from the application) of how it might work:

This document describes devices, systems, and methods for providing telecommunication access and applications to users in a flexible manner. Devices may operate on multiple networks, and may in certain circumstances seek out bids from telecommunication service providers. For example, a device such as a mobile telephone may have the capability to operate over multiple different networks, including a home network when in the home, to transition to a metropolitan network when outside the home but in a higher-density area (urban/suburban), and transition to a more traditional cellular network when outside such a higher density area. The connections may, in appropriate circumstances, be provided by different telecommunications providers, and may involve hand-offs of a particular communication session from one provider to another. 

The essence of all this is to create near continuous connections for people so as they move between networks they can remain "online" (laptop, mobile) and -- it almost goes without saying -- continue to use Google services. The vehicle for this continuous connectivity is an auction marketplace. Devices that operated on all wireless networks would need to come into being to take full advantage of its capabilities.

In a certain way this is like an uber-roaming plan. However, it would be challenging to build the billing and payments (and related agreements) infrastructure for this marketplace in my mind. Then there are the "political" objections of US mobile carriers and others who wouldn't want to be subject to a bidding marketplace for their services -- that Google administered or "owned."

Yahoo! oneSearch Gets Boost As 'On Deck' Search Provider for AT&T

Yahoo! and AT&T have launched the former's oneSearch as the default search engine on the carrier's handset deck. This puts Yahoo!'s search and brand in front of a potential 70 million mobile AT&T users. The deal was announced earlier in the year and is part of the broader, long-term relationship between the companies.

Under the terms of the relationship:

Yahoo! oneSearch will provide customers who search AT&T MEdia Net with access to news, financial information, weather conditions, Flickr(TM) photos and Web images, as well as Web and mobile web sites. Yahoo! oneSearch will also display relevant ringtones, wallpaper, games and other content available in the AT&T MEdia Mall within search results, eliminating the need for customers to search within a separate window for downloadable content. AT&T's YELLOWPAGES.COM will provide local search information to customers as part of the agreement.

Note that YellowPages.com will be providing the local results. It's not clear how those will be presented (probably as a layer.) As a general matter, however, YellowPages.com's results aren't as rich or complete as Yahoo!'s. For example, the reviews coverage is much more limited. It's also not clear whether events (part of YellowPages.com's mobile iPhone app [from Zvents]) will be there as well. I'm guessing they won't. 

The companies announced that mobile search advertising will be provided by Yahoo! as part of the deal. The exception to the above is the iPhone, where there is no "carrier deck." Service on the iPhone is provided by AT&T. 

The formal launch of this deal could provide a big boost to Yahoo!, which trails Google in mobile search market share in the US. According to Nielsen Mobile (6/08), US mobile search market share breaks down as follows: 

  • Google: 62%
  • Yahoo!: 21%
  • Microsoft: 9% 

LMS found the following market share in a recent North American mobile user survey (8/08, n=789):

  • Google: 55%
  • Yahoo!: 16%
  • Microsoft: 13% 
  • Carrier's Search Engine: 9%
  • AOL: 6% 

Yahoo! has 60 carrier relationships globally, which the company says make a potential market of 800 million users around the world. Google has been in talks with Verizon to become its default search provider.

Currently AT&T is the largest US carrier, but Verizon will surpass it if its acquisition of Alltel is approved by regulators.

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Related: Alltel has a deal with ChaCha, which may or may not be affected or expand to Verizon when the Alltel transaction closes. 

 

 

U.K.'s O2 Finding Consumer Appeal for Mobile Payments

Using mobile phones to purchase goods and services is a fast-growing concept that is gaining traction from carriers, consumers and payment networks alike. Mobile payments rely on near-field communication (NFC) technology to facilitate purchases and include associated technologies for mobile couponing and payment authentication.

U.K. carrier O2 released the results of six-month mobile payments trial in which 500 people were given Nokia 6131 handsets loaded with cash to make store purchases or travel throughout London. According to O2, nine out 10 participants enjoyed making cell phone payments.

Among the mobile payment activities in the O2 trial included:

  • Travel on subway, buses and trams in London, using the handset like an Oyster contactless payments card
  • "Smart posters" containing embedded tags which serve as shortcuts for services enabled through the handset by tapping the phone on the poster.
  • Barclaycard payment application allowing purchases of £10 or less at retailers including Books Etc, Chop’d, Coffee Republic, EAT, Krispy Kreme, Threshers and YO!
  • Ability to check available funds and locate nearby retailers that accept payments.

Elsewhere, Visa announced the launch of new mobile payment programs in Brazil, South Korea and the United States. Visa has been working for some time with financial institutions, telecommunications providers and handset manufacturers in delivering mobile payments with efforts to improve the consumer payment experience.

According to the release, the latest programs include:

  • Brazil: Visa announced yesterday the availability of remote mobile payments in Brazil by Banco do Brasil. It is the first program of its kind in Latin America, allowing Banco do Brasil's Visa cardholders to pay with their mobile device and confirm the transaction via text message. The service is accessible through any Brazilian mobile carrier serving the more than 140 million subscribers in the country. Companhia Brasileira de Meios de Pagamento (VisaNet Brasil), the acquiring institution for all Visa debit and credit payment transactions in the country, will be running the deployment of this technology in Brazil.
  • Korea: In a world first and in partnership with T-Money provider KSCC (Korea Smart Card Company), card issuer Shinhan Bank and Korea Telecom Freetel (KTF), Visa has made it possible for commuters to use their Visa account to top up their T-Money balances automatically on the phone's SIM card when it falls below a certain level. By conducting the entire transaction automatically over the mobile network, commuters are freed from the inconvenience of waiting in line at transit kiosks or other agents to top up their transit account.
  • U.S.: Visa recently announced a partnership with Chase Bank for a pilot program to deliver personalized mobile offers to select consumers in Phoenix, AZ. With more than 50 participating merchants, the program has capacity for 5,000 participants who will receive offers, including discounts or special deals, directly to their mobile devices via text message. They will be able to redeem these offers at the merchant’s location or online. The pilot will also cover special game day offers for baseball fans attending games at Chase Field, home of the Arizona Diamondbacks.
  • North America: Visa is working with multiple leading issuers, such as PNC Bank, SunTrust Bank, U.S. Bank, Wachovia, and Wells Fargo in the United States, and RBC, TD Bank Financial Group, and Vancity in Canada, to trial a transactions notification program that is able to send near real-time information to cardholders. Participating cardholders will receive e-mail or SMS text messages on their mobile devices whenever one or more transaction "triggers" occur, sometimes before they leave the store. These mobile notifications will be created simultaneously with the transaction, providing cardholders with an effective way to monitor and manage their accounts.

Google and Verizon Wireless: Mobile Search for the Rest of Us?

This post is further comment on Greg Sterling's previous note:

Last week, Wall Street Journal reporter Amol Sharma reported that search giant Google was in serious talks with Verizon Wireless to establish a relationship "which would make Google the default search provider on Verizon devices and give it a share of ad revenue". According to Sharma, based on talks with an executive close to the deal, the arrangement "is aimed at dramatically simplifying what is now a confusing set of search options for cellphone users." In other words, establishing a deeper relationship with Google is part of Verizon Wireless' competitive response to AT&T Mobility's iPhone-based offerings in association with Apple. According to the story, this represents Verizon's rejection of a role for Microsoft and its advertising platform as the default search on Verizon's devices. It should also be a boon for Medio Systems, which will continue to operate an "all-in-one" aggregater presenter of mobile content from a multiplicity of Web service providers.

In a slew of other coverage, discussion surrounded the thaw in a chilly relationship between Google, playing its role as chief proponent of open networks for wireless application and service providers and Verizon as adherent to the transformative model for licensees of wireless spectrum. Frankly, this appears to be more ado about a marketing agreement than is warranted. If Verizon is looking for Google "exclusive" as a source of product differentiation, that's not happening. Steve Jobs and Apple were smart enough to roll out the iPhone with access to the most popular web applications "on the glass". That included YouTube, Maps (based on Google Maps), iTunes, Weather, and its own AppsStore. Google was also embedded as the default search engine in the iPhone's rendition of the Safari Web browser. I'm not privy to what the considerations are in terms of division of advertising revenues (among Apple, AT&T Mobility and Google) for such preferential treatment of Google in the iPhone click-stream, but it's already working for all parties involved.

As for the implications for Local Mobile Search, we've already catalogued a few dozen iPhone apps  that take advantage of geo-location, social networking, reviews and the like. For the most useful, it is the creative marriage of geopositioning, the gravitometer and (thankfully) access to the faster Wi-Fi links by the approved third-party application vendors that make for the best user experience. A Verzon Wireless/Google joint offering doesn't get you there, yet.

Nothing New about Potential Verizon-Google Deal

Since last week people have been buzzing about a potential mobile deal between Verizon and Google. There's nothing new about the deal in terms of a carrier-search engine relationship. Google and Microsoft have such relationships with Sprint, and AT&T and Yahoo also have an advertising relationship. There are similar carrier-search partnerships outside the US (Google-Vodafone, Yahoo-multiple carriers). What's remarkable or noteworthy about the rumored deal is that it comes after some fairly harsh public rhetoric between the two companies.

For those who didn't already read about it, here are the broad strokes of the potential deal, from the Wall Street Journal:

Verizon Communications Inc. is nearing an agreement with Google Inc. on a wide-ranging partnership, according to people familiar with the situation, in what could be a much-needed jolt for the anemic mobile search business.

It's the latest sign that telecom companies are finally conceding that their homegrown search services have stalled -- and that they need help from the Internet's big guns. Carriers have been reluctant to team up with established Internet players, not wanting to hand over a potentially lucrative stream of advertising revenue.

The deal under discussion, which would make Google the default search provider on Verizon devices and give it a share of ad revenue, is aimed at dramatically simplifying what is now a confusing set of search options for cellphone users. Today, users have to go to different places to look up services such as ringtones, restaurants and Web pages. Verizon wants to create a new search platform that would be a one-stop shop.

The trend toward operator-search engine deals is problematic for the range of "white label" search vendors whose central value proposition is to help carriers defend against search engines. But the trend also reflects a sober recognition on the part of the carriers that (at least) smartphone users are typically going to blow past carrier search to get to their preferred search provider. Indeed, these carrier-search partnerships are part of a larger movement to "open up" the carrier deck, which is both smart and inevitable in the wake of the iPhone. Such moves in the US include SprintWeb and T-Mobile's statements about building an iPhone-like apps store. Verizon has similar ambitions to build a developer community.

Previously, Verizon announced that it would support Android, even as it joined the rival LiMo Foundation. Google has likely offered a sweet rev share or other terms to Verizon that have produced something of a change of heart for the carrier. But Google is pursuing its long-term interests; it needs the largest US carrier (with the Alltel acquisition) to support Android. 

As presented previously in our report, Will Google Dominate the Mobile Web?, the company already has a significant lead in the US mobile search market: 


Nielsen

Source: Nielsen (6/08), n=undisclosed 


LMS 1

 Source: LMS (12/07), caution small sample


LMS 2

 Source: LMS/Multiplied Media (8/08), caution small sample

A deal that would incorporate Google prominently into Verizon's "deck" or otherwise promote Google mobile search and services to Verizon mobile subscribers would likely further advance Google's position in the US market. 

Rumor: T-Mobile "Dream" Android Phone Coming Next Month

First there were the rumors of technical problems and delays surrounding Android. Now there are rumors that the first T-Mobile Android phone (the HTC Dream) will be available in mid-to-late September.

The first Android phone to hit the market will be important and influential in terms of determining how much of a competitor the platform will be for the iPhone. In addition, T-Mobile will be seeking to capture subscribers with the phone and if early sales are strong it may persuade larger carriers (Verizon, AT&T) to offer Android handsets -- although Verizon has said it will permit "any legal handset" on its network.

I'm eager to see and play with an actual Android phone to see how compelling it is.

Strategy Analytics said that BlackBerry devices comprised just over 10% of all Q2 US handset sales. In the smartphone market the battle is shaping up to be between BlackBerry and the iPhone, Symbian will struggle in the US (though it's the global leader). Overll US market leader Motorola is not really a force in smartphone sales. Palm, despite the success of the Centro, is a diminishing factor.

Android and Windows Mobile are unknown variables. Android could be a hit or a flop and, absent substantial innovation, Windows Mobile may find itself overshadowed by these other platforms and thus vulnerable.

One key to success in the smartphone market will be software development. Platforms that are neglected by developers will probably languish.

Leap Seeks to Block Verizon-AllTel Deal

Leap Wireless, which relies on both Verizon and AllTel for roaming agreements, wants the FCC to block the $28 billion acquisition of the latter by the former:

Their smaller rival Leap said risks include less competition and difficulties creating roaming agreements that allow customers of one carrier to use another's services when traveling outside their home network coverage area.

Presumably, compulsory roaming would satisfy Leap. But it's unclear that will happen. It's also unlikely that the FCC will block Verizon's acquisition.

Leap is being sober about its situation. Without some sort of guaranteed access to a national network, smaller US carriers are unlikely to be able to remain independent and would have to merge to have sufficient resources and scale to compete with the larger operators.

Leap has roughly 3 million US subscribers (Q1) and rebuffed a merger overture from rival MetroPCS last year.

Wither the Deck: T-Mobile to Build iPhone-Style Apps Store

Sidekick

On Friday it was reported that T-Mobile is going to get rid of its conventional deck and create an iPhone style Apps store. Google has said it will likely do the same for Android. Accordingly, the iPhone has not only impacted hardware design it's now affecting fundamental carrier strategies and software decisions.

Despite its derivative nature, the T-Mobile decision is smart on many levels; it may help the carrier differentiate or retain customers that might otherwise flee. It will create new revenue opportunities as well, with an Apple-like revenue split (probably more skewed toward developers in this case).

Much of the historical conversation about "off deck" and "on deck" will fade as the carrier "deck," of necessity, transforms into a personalized start page. Sprint already announced such a move, but with an emphasis on personalization rather than third-party software.

Verizon presumably will do some hybrid of the Sprint and T-Mobile approaches. And before all this Allel's Celltop was something of a conceptual model (Alltel was acquired by Verizon for $28 billion).

Most of this action will be on smartphones, which are gaining and outpacing sales growth of feature phones.

T-Mobile is the fourth largest U.S. carrier and at one time had talked about buying Sprint:

  • Verizon Wireless — 80.4 million (incl. Alltel)
  • AT&T — 71.4 million
  • Sprint — 51.9 million
  • T-Mobile USA — 30.8 million
  • U.S. Cellular — 6.2 million
  • MetroPCS — 4.6 million