Carriers

Verizon Now Planning to Support Android

As we discussed and argued previously, Verizon's open access inititative was partly a response to Google's Android and the announcement effectively made Verizon a de-facto member of the Open Handset Alliance. Now the company, according to BusinessWeek, is formally embracing Android:

Chief Executive Officer Lowell McAdam says it now makes sense to get behind Android. "We're planning on using Android," McAdam tells BusinessWeek. "Android is an enabler of what we do."

Not only did the company decide to support Android, but McAdam says the new platform was a key influence in adopting open access. "Android really facilitated this move,"says McAdam.

More 700MHz Spectrum Bidders Emerge

According to the Wall Street Journal, here's the current list:

  • AT&T
  • Cox Communications
  • Frontline Wireless
  • Google
  • Leap Wireless
  • Verizon

If Google doesn't win the spectrum it may have lost the battle but not the war as the US mobile market appears poised to open up, offering more competition and giving consumers broader access to services and improving the usability of the mobile Internet. The iPhone is really to thank for the renewed focus on usability.

According to an informal online poll we recently conducted (non representative sample) the following were the biggest reasons for not accessing the mobile Internet:

  • The screen on my phone is too small (57%)
  • The network is too slow (52.5%)
  • I don't have a mobile Internet plan (45%)
  • Keying in queries is frustrating (45%)

Multiple answers were permitted.

Citigroup Analyst Bearish on Google Mobile Opportunity

Citigroup's Mark Mahaney apparently thinks that Google is crazy to bid on the 700MHz spectrum and that the effort will consume all the company's cash and resources. Here's the summary of Mahaney's comments (from Silicon Alley Insider):

Spectrum Auction / Plans: Near-term Risk for Stock

  • Winning the spectrum auction would cost Google an estimated $6.6 billion
  • Building a national network would cost an additional $5.5 billion to $7 billion
  • Together, these would consume all cash on balance sheet.
  • Results of spectrum auction won't be known until March.
  • Fear that Google will go insane, spend all cash, and become capital-hog telco may scare bejesus out of investors until then. (No, Mark didn't put it quite that way)

Apparently, Mahaney feels also that the near-term mobile opportunity is overblown, while the longer-term opportunity is underrated:

  • Near-term Google mobile opportunity overrated. Crappy mobile experience, limited consumer use, etc. Hopefully (but not definitely) this changes with 3G/4G and iPhone-like phones...
  • Long-term Google mobile opportunity underrated. Mobile search could be major catalyst for local search, which has been a disappointment for a decade.
  • Mobile search market could eventually be as big as PC search market: Mark puts global PC Search Market at $21B in '07, driven by 35 monthly searches per PC. Just one monthly search per each 2010-estimated 4 billion mobile phones would generate mobile search revenue of $2.3B.

We partly agree and partly disagree with this analysis.

In our 2012 mobile ad revenues forecast we assume an average of 18 searches per user per month (by 2012), which is perhaps slightly aggressive. But data (from the MMA) already show "the average mobile search user conducts roughly nine searches per month." In addition, an informal online survey (n=75) we recently conducted showed that roughly 47% of users performed mobile searches "more than once a week," with just over 25% saying that the searched "more than once a day."

These numbers have to be taken with some caution because the sample isn't representative of the population at large. But they are interesting and instructive. That same survey showed the following mobile search engine distribution:

Which of the following mobile search engines/sites do you use (multiple answers permitted)?

  • Google -- 90.0%
  • Yahoo -- 20.0%
  • Ask-- 8.0%
  • AOL -- 0.0%
  • Microsoft Live Search/MSN -- 8.0%

n=75

By comparison, iCrossing found the following distribution for the same question (4/07)

  • Google -- 90.0%
  • Yahoo -- 46.0%
  • Microsoft Live Search/MSN -- 19%
  • Others – 16%

n=156

Again, these numbers have to be taken with caution of course but they're indicative of Google's strength and opportunity if the mobile Internet can be accelerated.

Verizon Moving to GSM-LTE Protocol

Verizon is moving to use the new GSM-compatible LTE technology standard (Long Term Evolution) for its next generation of devices. LTE is an alternative to WiMax for mobile broadband. This may ultimately be a bigger deal, though several years away, than the Verizon "any application, any device" announcement, which appears to be a bit of a bait and switch as a practical matter, with different pricing tiers and other restrictions likely to accompany the new program.

Several years from now, the LTE standard adoption will mean that U.S. consumers will be able to use their phones on multiple networks, including Verizon (and that would include the iPhone presumably). Currently Sprint and Verizon use CDMA, while AT&T and T-Mobile use GSM.

So Who's Not Bidding in the 700MHz Auction?

So far cable companies are not:

Today is the application filing deadline to participate in the auction.

One question is: will carriers participate partly to run the price up for someone like Google? AT&T recently bought a big chunk of bandwidth ($2.5 billion worth) from Aloha Partners. So it's not clear the number two US carrier will participate. Verizon, however, is more likely to do so.

Update: The four bidders so far appear to be Google, Cox Communications (the only cable provider), Frontline Wireless and AT&T.