Once Skype becomes reliable enough and the quality is consistent enough -- it's getting pretty close -- it will begin to eat into carrier voice revenues. I don't have the most recent data but it must be destroying international long distance. As of the end of last year, Skype had well over 500 million users globally.
The company today revealed cheaper and more flexible calling plans:
Starting tomorrow, Skype is rolling out calling plans to more than 170 countries that provide customers with a savings of up to 60 percent compared to Skype's standard Pay As You Go rates.
Customers will also have more choice with subscription plans available in 60-minute to unlimited packages, and the ability to buy 1-month, 3-month and 12-month calling subscriptions.
Skype's range of subscriptions start from as little as €0.89* ($1.09/£.69) per month and offer effective rates as low as €0.01 ($.01/£.01) per minute to almost any destination around the globe.
Basically you can now get an unlimited calling plan for the US and Canada (landlines and mobiles) for $36 per year. That's effectively the cost of one month of domestic landline service from AT&T with no long distance.
The only thing that keeps people from defecting from traditional carriers is the quality issue (and/or their lack of awareness). And with more WiFi and soon WiMax/LTE coverage people may feel increasingly confident about considering not subscribing to a mobile voice plan.
T-Mobile in the US now has data only and AT&T's iPad plans are data only as well. My iPad and iPod Touch devices are both phones using Skype. The separation of data from voice subscriptions means that voice revenues will decline over time. The barrier for Skype adoption on mobile devices is reliability and quality.
Skype is also unveiling a group video chat capability next week that will be free at first but cost money over time. Depending on the quality of that service the question needs to be asked: why would you pay for dedicated screens or expensive video conferencing functionality -- ever again?
Late last week the NY Times published an article on the diverging fates of Motorola and Palm: Palm failed, Motorola has thus far apparently succeeded. The success factor? Android, says the piece:
On Wednesday,, the PC giant, announced it would buy the loss-ridden Palm and use its technology across a range of H.P. devices. On Thursday, the similarly loss-ridden Motorola, however, announced it made an unexpected profit during its first quarter, beating Wall Street expectations . . . The reason for the different outcomes, in a word, may be Android, ’s operating system for mobile devices.
Perhaps. While adopting Android may have sped Palm's time to market or enabled it to diversify in a way, Palm screwed up on a number of fronts:
HP suggested that the reason for Palm's lackluster performance was the Palm brand itself. That's pure spin, however.
The Pre was partly dragged down by Sprint's tarnished brand, though the carrier did spend marketing dollars on the Pre trying to position it as an "iPhone killer." The problem there was that it simply wasn't competitive with the iPhone and so the advertising just didn't ring true. It should have been priced more aggressively and positioned differently. But the user experience itself was not optimal overall.
Motorola's Droid has succeeded in part because of Android and the fact that it's a strong though not great phone. But perhaps more importantly, Verizon put millions behind marketing it in an effort to combat AT&T and the iPhone. Motorola is unlikely to get such a gift in the future and the "Droid Does" campaign will end if/when the iPhone comes to Verizon, which some anticipate will be in June.
If Apple fails to deliver a Verizon iPhone in June it will be a massive strategic blunder for Cupertino. However if it does come through as promised, Android's reign at Verizon will have ended and so will the anti-iPhone marketing that has driven its success.
Accordingly it's premature to declare Motorola a success with Android. It will be fending off HTC, Samsung, Dell and others in the very near future and its handsets could well get lost in the blizzard of all the Android releases.
News comes from MobileBurn that Verizon will sell the Palm Pre Plus and the Palm Pixi Plus for $49 and $29 respectively with a "buy one get one free" off (like previous RIM promotions). This extremely aggressive pricing will likely capture interest and drive some sales but it's not likely to radically boost the fortunes of Palm. Even if they gave the phones away for free I'd still say the same thing.
As have lived with and used my Palm Pre for now over a year I've found it increasingly wanting in comparison to other devices on the market. Indeed, I'm infuriated by the device in many circumstances.
I won't go into a laundry list of its weaknesses again -- though that's my inclination -- but I'll say that while the OS may be well done, the execution and expression of that in hardware and software is not. The conceptual difference between what Palm did with the Pre and Apple's iPhone is that the iPhone got most if not all the "little things" right, while the opposite is true with Palm.
The only thing that will "save" Palm is the release of some new hardware devices.
I was in a movie the other night and saw a commercial for 4G from Sprint. As mentioned before the carrier will have roughly a year on its rivals to gain subscribers and solidify a new image in the market. Clearwire, the 51% Sprint owned WiMax network provider, is the backbone of Sprint's 4G initiative. The WiMax vs. LTE debate is not significant here; consumers don't understand or care and Clearwire can implement LTE itself fairly easily.
The challenge for Sprint is to build out the 4G coverage so that the marketing claims can become true and the faster speeds (but not true 4G) can be experienced by consumers. The carrier also needs to aggressively subsidize 4G handsets to literally get them into consumer hands. If I were Sprint CEO Dan Hesse I would also seriously consider re-branding the entire company. Though that's not likely to happen, Sprint has a weak-to-negative reputation that its 4G marketing has to overcome.
Its 3G network is as good or better than Verizon and AT&T but it can't convince the public of that.
The iPhone would help Sprint -- a CDMA version is rumored to be on the way, but who knows -- but in its absence so would more Android handsets. The first 4G Sprint handset is the HTC Evo, an Android device that appears to trump the Nexus One in several ways, not just in terms of the 4G capability. I might consider giving that away for free to new subscribers with a two-year contract. That would get plenty of attention.
At the beginning of 2011 we'll know if Sprint's 4G initiative is paying dividends for the company or whether its rivals have been able to hold subscribers as they launch their own LTE networks. I'm going to bet that Sprint is unable to move the needle and that it won't be able to use 4G to substantially improve its fortunes but we'll see.
Beginning tomorrow, the Sprint Free Guarantee gives any customer opening a new line of service the chance to try Sprint for 30 days. If a customer isn't completely satisfied, they can get reimbursed for the device purchase and activation fee, get the early termination fee waived, get a full refund for service plan monthly recurring charges incurred and get all associated taxes and Sprint surcharges associated with these charges waived. In addition, Sprint will waive the restocking fee for new customer exchanges as part of this policy.
The CTIA show in Las Vegas was primarily a showcase for carriers, handset OEMs and "infrastructure" providers. It made me think a great deal about the future of the carriers. Obviously they will continue to collect voice revenue and growing data revenue for some time. (Although as VoIP gains voice revenues will decline.) They will also subsidize handsets and try and offer exclusive deals of one sort or another. But the era of the operator is largely over.
Handsets, apps and the mobile Internet have replaced voice and carrier centrality. Now the carriers are scrambling to figure out a) how to maintain relationships with their subscribers as other than commodity providers of network access ("dump pipes") as smartphone adoption grows and b) how to develop new revenue streams.
I believe that the US carrier app stores and efforts will largely fail, except potentially when it comes to feature phones. There's still a fairly significant opportunity there and that's where there's likely to be the greatest return on their app store efforts.
However mobile advertising is an area where the carriers can potentially play to varying degrees, and most are in one form or another. But as the "deck" increasingly becomes obsolete (absent some radical changes), they need to figure out viable "off deck" strategies. At one end of the spectrum is Orange with its announcement about a partnership with OpenX to create a digital advertising exchange in Europe:
Orange and OpenX Technologies, Inc. (OpenX) today announced a partnership to launch Orange Ad Market, a new online advertising exchange model designed to lead the evolution of online exchanges in Europe. Orange Ad Market will increase the value of display advertising by helping publishers maximize revenue and helping advertisers much more easily reach their target audiences across large numbers of publishers.
The Orange and OpenX exclusive multi-year, multi-country partnership will see Orange bring the benefits of OpenX's proven global marketplace to European users at a local level. The initial launch will take place in the second quarter of 2010 in the UK and France with planned launches following elsewhere in Orange's European footprint.
This relationship is focused on the PC market but could extend into mobile potentially. Regardless, this move represents an operator/ISP's aggressive effort to build a marketplace for advertising. In mobile, carriers can do a version of this too. More modestly, operators can provide their subscriber data (with privacy controls) to existing ad networks or exchanges to improve targeting capabilities.
Operators could also buy ad networks. Why wouldn't Verizon or AT&T, for example, look to buy Millennial or JumpTap? Sprint at one point tried to create its own ad network unsuccessfully. However an acquisition would be a quick way to do so.
A time is also coming with there will be viable alternatives to traditional carrier calling and data plans: WiFi/MiFi white spaces, 4G networks that blanket entire municipalities. As those networks become accessible and trustworthy, people may abadon traditional mobile phone plans for data + VoIP alternatives. But that's still a few years away at least. Regardless, the disruption has begun and carriers will need to reinvent themselves to some degree if they hope to continue to grow revenues over time and remain "relevant."
Coming out of the CTIA trade show yesterday -- we're here trying to meet with as many folks as we can in 48 hours -- was news that T-Mobile and especially Sprint would be boosting the speeds of their networks. T-Mobile said that it would upgrade its network, beyond 3G speeds (HPSA), in over 100 US cities by year end.
Sprint said that it would have WiMax in 120 US cities by year end. The company also debuted the first 3G/4G phone in the US, the HTC Android Evo. The handset itself wasn't on display at CTIA (or at least I couldn't find it) but it has received a glowing initial review from Engadget.
Most of the "4G" speeds offered by Sprint and its rivals won't be true 4G. They'll be more like 3.5G but still considerably faster than what exists today in the US.
Sprint may have as much as a year lead-time on AT&T and Verizon before LTE is fully deployed. This represents a window of opportunity for the carrier to add some new subscribers, with aggressive unlimited pricing, a stronger (much improved) network and a pretty sexy phone. I won't say this is a "last gasp" at growth for Sprint by any means. However if the opportunity is not seized and promoted correctly it will be lost and the existing market dynamics will be re-established once AT&T and Verizon roll out LTC.
I don't believe that T-Mobile will gain many new customers with improved speeds; this is more of a defensive move. However the combination of an upgraded network with even more aggressive pricing could win the operator some converts.
Another iPad-related consumer survey: this time comScore has just come out with data from a poll of 2,176 US adults, conducted earlier this month, about interest in the iPad and purchase intent. The survey shows the same levels of aided awareness for the iPad and Kindle; and, interestingly, it shows that 6% of respondents have purchased a Kindle while 1% report purchasing an iPad.
In the next three months, the survey reports, 14% of respondents are "seriously considering" buying the Kindle and 15% of respondents are considering the iPad. Here's some discussion of the findings from the release:
Consumers were asked several questions regarding their awareness of various e-readers and tablet devices and their past purchase behavior or intent to purchase these devices. The results showed very high awareness of the iPad out of the gate, with an aided awareness of 65 percent, the same as that of the Amazon Kindle e-reader. Overall, consumers have demonstrated a high level of interest in these types of devices with between 58 percent and 69 percent of consumers having conducted online research of the top five devices. Amazon Kindle rated highest in terms of current device ownership at 6 percent of all Internet users, followed by Sony Reader at 4 percent. The iPad rated highest in terms of consumers seriously considering purchase over the next three months at 15 percent of Internet users, with the Kindle at 14 percent.
As the quoted passage above reflects -- and perhaps the most striking numbers in this survey -- 66% and 69% of users said they had conducted online research about the iPad and Kindle respectively. If those numbers can be extrapolated at all it means that there's potentially substantial demand that could be unlocked if the iPad turns out to be at all worthwhile.
Here are a few additional findings (verbatim from the release):
Below are the stated usage intentions. People appear to be, at least at this stage, less interested in this device as a gaming platform than as an Internet and email device, as well as a media pad for consuming magazines, newspapers, video and music.
Last week the Wall Street Journal cited unnamed sources for the proposition that Apple had already sold "hundreds of thousands" of iPad units. I suppose the truth will out.
Next generation broadband -- commonly referred to as "4G" -- is technically supposed to deliver download speeds of 100Mbps. Current 3G speeds are about 2-3 Mbps. The first 4G mobile network is being deployed in in Sweden and Norway by TeliaSonera. Users in those markets will experience download speeds of 20 to 80 Mbps.
In the US all the hype surrounding mobile 4G is mostly just that -- hype. Speeds that mobile users in the US will experience will be a fraction of those now being offered in Scandanivia. Verizon's LTE deployments, rolling out later this year and next will offer actual speeds of 5Mbps to 12Mbps. Sprint WiMax promises "average download speeds of 3 to 6 mbps." Still that will be a meaningful improvement over what exists today.
Meanwhile US cable ISP providers are seeking to upgrade their networks to offer true 100 Mbps speed. According to an article in CNET, 100Mbps exists today.
From a technical standpoint, 100Mbps is achievable today. In fact, Cablevision is already offering a 100Mbps service, and Comcast, which has been offering 100Mbps to business customers since September in one test market, is about to launch 100Mbps service to consumers in several markets in the first half of this year.
Verizon Communications, which has deployed fiber directly to people's homes, doesn't offer 100Mbps service right now, but a company spokesman said such a service will be available soon. And Cox Communications, which is also upgrading its cable network, said it will have 100 Mbps service this year as well in some markets.
The article goes on to discuss the key issue: consumer pricing, which will make 100Mbps too costly (at least in the near term) for most US households. Prices will come down over time as competition heats up and consumer expectations evolve.
As speeds improve consumer behavior will continue to change, especially among mobile users. The faster that mobile (and WiFi) networks become the more people will turn to their handsets and other mobile devices (think iPad) before they go to the PC.
Among the four main US carriers a pattern has emerged. On the one hand you've got T-Mobile and Sprint positioning themselves as the "value" carriers with lower prices and more flexible or inclusive plans. On the other side are AT&T and Verizon, the "premium" carriers that have many more subscribers and tout their networks in their promotions and ad campaigns.
Now it's not entirely black and white; Sprint is pushing 4G and the fact that it will be the first carrier with a working 4G network in the US. And both AT&T and Verizon have recently lowered prices. But basically those are the battle lines in the market.
Last week, T-Mobile USA released Q4 and full-year results and grew subscribers by almost 400K:
In the fourth quarter of 2009, total customers increased by 371,000, compared to net customer losses of 77,000 in the third quarter of 2009 and 621,000 net new customers in the fourth quarter of 2008.
The reason for that growth was largely attributable to T-Mobile's aggressive pricing:
Branded customer additions benefited from strong holiday sales and the launch of the new Even More and Even More Plus rate plans during the quarter. The Even More and Even More Plus rate plans offer industry-leading value with features including unlimited nationwide voice, text and data services, and include rate plans with and without contracts and subsidized handsets.
Sprint for its part has seen substantial gains on the pre-paid/no-contract side of the house (Boost et al.) but not on the post-paid, higher value customer side. While it has stopped the dramatic customer losses it has seen in recent quarters, there are no indications of growth there. And with AT&T and Verizon lowering prices recently Sprit is forced to defend it's position as value carrier:
T-Mobile and Sprint now both have an array of strong handsets, which doesn't seem to be impacting their subscriber numbers in a huge way. Price will continue to probably be the lever that T-Mobile and Sprint compete with for the foreseeable future, notwithstanding Sprint's 4G plans. In order for the Sprint network to gain traction and attract new customers it will need to be noticeably much faster than rivals' 3G networks.
In the UK the merger of T-Mobile and Orange's UK operations has gained European Commission approval. More consolidation is coming to the US market and probably to one or both of Sprint and T-Mobile (as in the UK example).
I was somewhat surprised to see that T-Mobile now offers data-only plans, which I didn't think would happen (because of the potential for voice revenue erosion). Indeed, it portends the decline of voice revenues for carriers over time.
Sprint may be forced to match T-Mobile's more aggressive pricing in the near term. Meanwhile Verizon and AT&T don't seem to be compelled to match price reductions in the same way; they mostly respond to one another. But I wouldn't be surprised if we see another round of price cuts as T-Mobile and Sprint fight it out in the trenches.
US mobile subscriber numbers:
Roughly a year ago the release of the Palm Pre kept me from defecting from Sprint to AT&T for the iPhone. But today I'm an unhappy camper. Compared with the iPhone and Android it turns out that Palm has almost completely failed. The venerable company may have created a great OS in "webOS" but the overall execution is poor.
Yesterday that harsh reality was acknowledged when Palm said it was way off revenue targets:
Revenues for the quarter and full year are being impacted by slower than expected consumer adoption of the company’s products that has resulted in lower than expected order volumes from carriers and the deferral of orders to future periods. Accordingly, Palm expects fiscal year 2010 revenues to be well below its previously forecasted range of $1.6 billion to $1.8 billion.
"Lower than expected" . . . attempts to soften the failure. Palm isn't going to sell Pre handsets at anything like the volumes originally anticipated. In fact, the Pre is dead. The Pixi may have a future however.
The following comes from a letter to employees from Palm CEO Jon Rubinstein:
As we mentioned in our press release, our softer than expected performance is due to slower than expected customer adoption of our products, which in turn has prompted our U.S. carrier partners to put additional orders on hold for the time being.
The company is now clearly takeover bait, worth just under $2 billion. But the reason someone might buy the company is almost solely for webOS, which is worth less than the company as a whole. Arrogance blinded Palm to the challenges it faced in the market, including apparently the features and functionality to release on the Pre.
In addition, the company should also have done a lot more, earlier, to cultivate the developer community and build a better set of apps for the device:
Image credit: Distimo/Wired
Finally, let's revisit comments made in early 2009 before the Pre's release by Roger McNamee, co-founder of Elevation Partners, which owns 39% of Palm:
"If you bought the first iPhone, you bought it because you wanted the coolest product on the market,” said McNamee, 52. “Your two-year contract has just expired. Look around. Tell me what they’re going to buy.”
How wrong could someone be? So wrong in fact that Elevation may lose lots of money on its investment Palm. Yesterday AdMob put out data showing that "webOS users are 3.4x more likely to not recommend their device relative to iPhone OS users."
Microsoft has said with Windows Mobile 7 that it no longer needs an acquisition to be competitive. Nokia may turn out to be the buyer, itself struggling to compete in the smartphone market against more advanced rivals. There are other OEMs that might also be interested too.
It's pretty clear to me, however, that Palm's days as an independent company are numbered.
Notwithstanding Windows (7) Phone's launch yesterday, some people believe that the only smartphone platform truly competitive with the iPhone is Palm's WebOS. But Palm's handsets are being overshadowed by Android, RIM and the iPhone -- and maybe Windows later this year when 7 handsets start coming out.
By most accounts Palm's handset sales have not met expectations, although the company is rolling out with other carriers in the US and abroad. However if sales don't improve the company will be under tremendous pressure. That raises again the question of an acquisition.
However the most likely company to buy Palm, Microsoft, now says with the launch of Windows Phones it doesn't need to:
Asked whether Microsoft might ever buy a more fashionable rival, like BlackBerry maker Research in Motion, Ballmer said: "The word 'ever' is a big word but I certainly don't feel like that's the right strategy for us today."
He also said no major change should be expected in the company's policy of charging license fees to handset makers for its mobile software. Microsoft is the only major company to still charge a fee for using its mobile operating system.
"We don't comment generally but there's nothing that interestingly new," he said. Later, he told a news conference: "We plan on staying with the model that we are on."
I own the Pre and I've grown to dislike the phone over time, from ambivalence at the start. However, I think the major failures are ones of marketing and branding rather than design. Still, in retrospect, the Pre launched with too few apps. In addition, the absence of voice search or voice control and a virtual keyboard were and are also problems with the user experience. There were some poor choices and miscalculations by Palm executives. While the WebOS and new handsets offer a big improvement over the Windows Mobile Treo and Centro, they aren't dramatic enough to capture consumer attention in a market that is crazy with new product launches and competition. Palm will be in an increasingly tough position unless it gets a boost from newer carriers or overseas. Perhaps if it had launched originally with Verizon instead of Sprint it might have achieved more sales. We won't know. Now, at Verizon, Droid and BlackBerry dominate. Maybe the Pixi (as a low-cost feature phone upgrade) will see some adoption there. I suppose Nokia is potentially a candidate to acquire the company -- althought that's also a longshot with the company now developing and building on two operating systems.
I own the Pre and I've grown to dislike the phone over time, from ambivalence at the start. However, I think the major failures are ones of marketing and branding rather than design. Still, in retrospect, the Pre launched with too few apps. In addition, the absence of voice search or voice control and a virtual keyboard were and are also problems with the user experience.
There were some poor choices and miscalculations by Palm executives. While the WebOS and new handsets offer a big improvement over the Windows Mobile Treo and Centro, they aren't dramatic enough to capture consumer attention in a market that is crazy with new product launches and competition.
Palm will be in an increasingly tough position unless it gets a boost from newer carriers or overseas. Perhaps if it had launched originally with Verizon instead of Sprint it might have achieved more sales. We won't know. Now, at Verizon, Droid and BlackBerry dominate. Maybe the Pixi (as a low-cost feature phone upgrade) will see some adoption there.
I suppose Nokia is potentially a candidate to acquire the company -- althought that's also a longshot with the company now developing and building on two operating systems.
Everybody's got an apps store, including many carriers. But the carriers increasingly see themselves becoming marginal players, ISPs providing the data connection while software and hardware providers take their place at the center of the mobile universe. Today at GSM a consortium of global operators announced an initiative aimed at creating an open apps ecosystem to bolster and improve their "relevance" to end users.
Called the Wholesale Applications Community, it consists of the following carriers to start:
América Móvil, AT&T, Bharti Airtel, China Mobile, China Unicom, Deutsche Telekom, KT, mobilkom austria group, MTN Group, NTT DoCoMo, Orange, Orascom Telecom, Softbank Mobile, Telecom Italia, Telefónica, Telenor Group, TeliaSonera, SingTel, SK Telecom, Sprint, Verizon Wireless, VimpelCom, Vodafone and Wind
A selection of these companies are also part of the Google-led Android Open Handset Alliance.
The stated objective of the group is the following:
The alliance's stated goal is to create a wholesale applications ecosystem that – from day one – will establish a simple route to market for developers to deliver the latest innovative applications and services to the widest possible base of customers around the world. In the immediate future the alliance will seek to unite members' developer communities and create a single, harmonised point of entry to make it easy for developers to join.
This makes sense and may work for feature phones and in-between devices that are not feature phones but not quite smartphones. However it's unlikely to have much impact on smartphone users/owners. With moves like allowing VoIP over 3G (see Verizon and Skype's anticipated announcement), carriers are becoming less and less central to the user experience. (Indeed, they will likely see the erosion of voice revenues in the near-term.) They provide the pipe and not much else.
Vodafone has perhaps been the most aggressive of the carriers in offering cross-platform social tools in Vodafone 360 and a range of developer APIs. The company is also getting more involved with mobile advertising. Location and demographic targeting data can be offered to third party networks with a revenue share to the carrier.
Apple changed the mobile landscape and smartphones forever by making the device and platform more important than the data/voice provider. Carriers are reacting and struggling to play catch-up with moves like this, as ambitious as it sounds.
Notwithstanding this impressive lineup, it's very unlikely that the operators will have much success with consumer services/software for smartphone owners. However I believe there's still a massive feature-phone opportunity that's largely being neglected -- and that's where their efforts should be concentrated. That's where this consortium and its developer community can really play and potentially succeed.
Related: Google reportedly believes the effort won't succeed.
And speaking of carriers and advertising . . . Orange is rolling out ambitious MMS/SMS marketing throughout its European and some Middle Eastern markets:
Building on its UK success, Orange is sharing innovation across its footprint, starting in Spain this month with new interactive ad-supported service, Mio. Orange is taking a different approach with Mio, offering all mobile customers in Spain the chance to opt-in, reaching beyond youth audiences. Mio customers will receive gifts, content and the opportunity to win monthly and annual prizes. Interactive SMS and MMS advertising campaigns will roll-out to other Orange markets in 2010. Other mobile advertising trials are also taking place in Egypt and Jordan in the first half of this year, allowing for expansion into emerging markets, as well as mature markets.
The operator has partnered with Blyk in the UK and Velti in Spain, as part of the program.
Years ago there were always suggestions and discussion about whether Google would acquire a newspaper or yellow pages publisher. The culture of Google and those types of companies were so different -- which the proponents never fully understood -- that it was never going to happen. Now we have a similar argument going on in favor of Google buying the US operations of German carrier T-Mobile.
T-Mobile is struggling in the UK and US. In the UK the company has sought to form a joint venture with Orange and merge their operations. It has yet to be approved by regulators. In the US there have been persistent rumors that T-Mobile would have to do something similar or buy smaller carriers or merge with Sprint, etc. to advance its position in the market.
Android devices and aggressive pricing have not been able to move the needle for the company. The same is true for number three US carrier Sprint, however the company did lose a much smaller number of postpaid customers last quarter.
From Google's point of view, there's a certain logic to buying a carrier:
However, I'm still quite skeptical that this would happen because of HR issues (buying employees) and other questions (direct competition with carrier partners). But it's not as much of a stretch now, given Google's plans and strategy, as the "Google should buy a newspaper" arguments made in the past.
While Google is unlikely to buy a T-Mobile it's hypothetically possible that Google would make an investment in T-Mobile to gain access to its network, as it has with Sprint's Clearwire.
This morning US operator Sprint announced quarterly earnings and full year 2009 results. Here are some highlights:
The company served 48.1 million customers at the end of the fourth quarter of 2009, compared to 48.3 million at the end of the third quarter of 2009. This includes 34.0 million post-paid subscribers (26.0 million on CDMA, 7.3 million on iDEN, and 725,000 Power Source users who utilize both networks), 10.7 million prepaid subscribers (5.7 million on iDEN and 5.0 million on CDMA) and almost 3.5 million wholesale and affiliate subscribers, all of whom utilize our CDMA network.
Sprint reported a loss but lost fewer customers than from Q2 to Q3 last year, when it saw its subscriber rolls decline by 500,000. Better handsets and aggressive pricing helped staunch the bleeding.
The company also announced a partnership with GetJar that will provide access to the GetJar's 60,000 apps, for Sprint feature phone and RIM customers:
Through this agreement, GetJar's catalog of more than 60,000 free applications will now be available to all Sprint customers with feature phones such as the LG Lotus EliteTM, Samsung ReclaimTM and the Sanyo 2700. In addition, Sprint customers with RIM BlackBerry(R) and Windows Mobile devices also will have access to the GetJar library of applications.
Apparently Sprint is also considering launching new brands in the pre-paid segment, where it already has three brands but also showing greater strength than in post-paid relative to the competition. According to DowJones newswires:
Sprint plans to target Boost Mobile--the principal driver of its prepaid growth over the past year--to heavy callers. For those looking for more features or data services, there is Virgin Mobile USA, which the company acquired in December. Last month, Sprint launched Assurance Wireless, which targets low-income households that receive government assistance.
Hesse hinted at launching one or two more brands in the second half of the year, noting there was still demand from the pay-as-you-go and heavy-user segments.
"What you're going to see from us on the prepaid side is the creation of brands with a very unique value proposition that appeals to specific segments of the market," said Dan Schulman, the former CEO of Virgin Mobile USA who runs the prepaid business for Sprint.
Each pre-paid brand would be targeted to a different demographic or user segment as the quote above suggests. Sprint's 48.1 million customers compare to 91.2 for Verizon and 85.1 million for AT&T.
In the UK, the proposed merger between the UK unit of France Telecom/Orange and T-Mobile hit a bit of a snag. According to Bloomberg the UK Office of Fair Trading wants to take over review of the deal from the EU. If that regulatory transfer should occur, it could delay or even thwart the ultimate completion of the merger. If concluded the combined operation would represent the UK's single largest operator with roughly 43% of UK mobile subscribers.
Back in the US market tier-two carrier Leap Wireless, which operates Cricket wireless, is seeking a buyer. According to a report earlier this week in the Wall Street Journal:
Cellular provider Leap Wireless International Inc. has hired advisers and formed a special board committee to look into selling the company or merging with rivals, several people familiar with the matter said . . .
While some bankers consider rivalInc. as the most likely partner for Leap, the company's advisers have in recent weeks been feeling out larger wireless carriers such as AT&T Inc. and Verizon Wireless to see if they would be interested in acquiring Leap, these people said . . .
One indicator of the change in prepaid operators' fortunes: Leap in late 2007 spurned an unsolicited all-stock offer from MetroPCS initially valued at $5.5 billion, about five times Leap's current market value.
The company has just under 5 million customers, most of whom are "underserved" by the broader market:
The prepaid carrier offers a $45 monthly unlimited plan. Most of its customers, however, don't use the mobile Internet but are heavy SMS users. The impetus behind Leap's search for a merger or buyer is pressure from "above," in the form of major carriers encroaching on the prepaid carrier domain. In particular Sprint with Boost and Virgin is making significant gains among Cricket's prospect base, which it identifies as "91 million" people in the US.
Another thing to contemplate is whether Sprint itself and T-Mobile in the US will be compelled to do some sort of deal like the Orange-T-Mobile proposed merger in the UK in order to compete against larger rivals AT&T and Verizon. Sprint's WiMax/4G advantage may be very short lived as Verizon and AT&T push LTE aggressively. Reportedly those rollouts are on schedule.
Sprint doesn't seem to be able to do much to grow its post-paid business and T-Mobile is in roughly the same boat. The market will put pressure on both to do . . . something. We'll see whether that pushes them together.
On the morning after the iPad unveiling people are still trying to figure out whether consumers will want the device, what it might be good for and even what it is. The mule (half horse, half donkey) of mobile computers, it seeks to create (or solidify) a new category of devices that offer the benefits of smartphone mobility, but with a larger screen is are lighter and more elegant than a laptop or netbook.
A number of companies rushed out releases saying they would build apps for or support it. In the mobile advertising realm JumpTap, Greystripe and Mobclix were among the first to make announcements or public statements. Motally said it would provide analytics for the iPad.
Because of the high expectations there are a fair number of disappointed people. I'm relatively bullish on this device, but I see the confusion and hestitation as partly justified.
Many of those disappointed have characterized it as just "an iPod Touch on steroids," using the tired metaphor. But is it? The iPod Touch analogy and the fact that it runs iPhone apps suggests that many/most of the advertising options will be comparable. I believe, however, that there will be many more and more varied opportunities for advertisers on this device -- assuming it sells.
The 9.7 inch screen size means that ads on websites viewed through the Safari browser will be "viable" in a way they aren't currently on the iPhone or other smartphones. But it equally means that ads appearing within iPad-specific versions of magazines and newspapers will be more compelling and interesting than they could be within an iPhone app or on the mobile Web more generally.
Video will be central to the user experience, and so will video advertising. This is really the first device where mobile video advertising could get really interesting.
And then there's retailing and catalog sales; this could be another very interesting opportunity on this device. Imagine the Macy's catalog on this device with embedded e-commerce -- not the Macy's e-commerce website but a visually rich version of the catalog, where users can turn pages as do in the physical, paper catalog.
As these examples seek to illustrate the larger visual "canvas" will be a potential "game changer" (to use another tired metaphor) for marketers.
Another striking element about the iPad is the pricing of the 3G plan from AT&T. Many (including me) had expected a more expensive devices with a cheaper version subsidized by a two-year carrier commitment. Instead the device offers two options: $14.99 and $29.99. The latter is "unlimited" and unlocked; there's no contract required.
This pricing scheme may be a new precedent: low-monthly unlimited data on a non-phone connected device (Kindle doesn't count here). This isn't exactly like a dongle or wireless card. (BTW: this device can be used as a phone with a VoIP app.) However this lower-priced model for data could enable a wide range of new connected mobile devices. It could also bring competition from carriers like Sprint with additional capacity, looking for new revenue streams.
Before IDC Gartner made the same prediction, but by 2012. Both of these firms could turn out to be wrong -- very wrong.
It makes sense that Android will continue to gain, given the number of OEMs building and releasing devices with the OS. Indeed, Google SVP Jonathan Rosenberg, on the Q4 earnings call, said "Android started 2009 with just one device and is now at 20 in 48 countries." And the Verizon Android Droid is credited with dampening some of the iPhone's recent sales momentum: the iPhone sold "only" 8.7 million units vs. the 9.1 - 9.5 million that some of the most bullish Wall Street analysts had anticipated.
OK, Apple sold 8.7 million iPhones in the most recent quarter, but it also sold sold 21 million iPods. The company doesn't break out iPod Touch sales. But while iPod sales are declining, iPod Touch sales are up. At the end of the last quarter there were almost 60 million iPhone OS devices around the globe (including the iPod Touch). Morgan Stanley estimated the number at 57 million in early December.
So let's assume that 5 million of those 21 million iPods are iPod Touch devices. That would put the combined sales of the iPhone OS units at more than 70 million today. So the iPhone OS (not the iPhone itself) has already beaten the IDC Android unit sales projections for 2013.
What happens tomorrow with the iPhone is important for the future success of the platform in the US market. Regardless of whether there's a new iPhone OS or 4G device, if Apple announces that AT&T exclusivity is through and that the handset will be available from Verizon and/or others, we're likely to see Android momentum falter. If not, Android will continue to gain steam.
Apple executives made some comments yesterday, however, that suggested AT&T exclusivity may not be done. They expressed confidence in AT&T and its ability to "fix" network problems that have frustrated and infuriated iPhone users. That kind of remark doesn't sound like one from a company about to walk away from its exclusive relationship with AT&T. But we'll see.
If Apple fails to "cut the chord" tomorrow and broaden iPhone distribution in the US it will cede millions of users to Android. I would be happy using the Nexus One rather than switching to AT&T, with its network's mortally wounded reputation, to get the iPhone (I have an iPod Touch). And while it's not as intuitive or "elegant" as the iPhone, and the apps are not as polished, the N1 generally substitutes. Its speed and screen are better than the current iPhone as well. And the voice-text input features are compelling.
Apple may not see this timing issue as critical. It will exit AT&T exclusivity at some point. If it does so now, it will establish itself on a trajectory to become the dominant smartphone in the US market and Android's rise will be blunted (though perhaps not RIM's, the current market leader). If it waits for 2011, US iPhone prospects will likely have moved on or set their sites on other handsets. All the defectors that are going to head to AT&T for the iPhone have already done so.
As suggested, RIM is a wild card in this discussion and so is Windows Mobile, which is declining now but could get a big boost from WinMo 7. Nokia, regardless of Symbian UI upgrades, will continue to lose share in the US and Europe in the coming 12-18 months. It will remain strong in Asia, Latin America and Africa -- emerging markets that seek lower-cost handsets. Palm, I'm afraid, will be largely an also-ran in this race.
The market for smartphones, however, is very much evolving and in flux. What happens tomorrow (from Apple) could be very significant for both the iPhone and for Android's future in the US. It might be that Apple makes the wrong choice, falters and Android benefits. The thinking that Android will automatically grow to be the world's number two, however, is simplistic.
Finally, after the FCC investigation and finger pointing between Google, AT&T and Apple after the rejection of Google's Voice app for the iPhone, Google has created a "Web app" version of Google Voice. This is consistent with the direction that Google is generally taking on smartphones, as the company focuses less on "apps" and more on the mobile Web.
But between the "mobile Web" and true "apps," there is the "rich Web app," which offers almost all the functionality of an app but without the approval process or the required consumer download.
Here's what Apple publicly said last July about why it rejected Google Voice as an app:
Contrary to published reports, Apple has not rejected the Google Voice application, and continues to study it. The application has not been approved because, as submitted for review, it appears to alter the iPhone’s distinctive user experience by replacing the iPhone’s core mobile telephone functionality and Apple user interface with its own user interface for telephone calls, text messaging and voicemail. Apple spent a lot of time and effort developing this distinct and innovative way to seamlessly deliver core functionality of the iPhone.
According to Apple, the Google Voice app did a kind of "end around" around Apple's core calling function and so the company rejected it. But using Google Voice or Skype or Truphone is less about circumventing Apple than the carrier for most people, in this case AT&T.
Now the new HTML5 Google Voice the Web app can't be blocked by Apple or AT&T. In addition, iPhone users can add it to their home screen so that it's just as easily accessible as any app. The only thing that it doesn't do is integrate with the phone's contacts (but it does integrate with Google contacts). There's also a version for the Palm Pre/Pixi.
From the Google Blog post earlier today:
Today, we're excited to introduce the Google Voice web app for the iPhone and Palm WebOS devices. This HTML5 application provides you with a fast and versatile mobile experience for Google Voice because it uses the latest advancements in web technologies. For example, AppCache lets you interact with web apps without a network connection and local databases allow you to store data locally on the device, so you don't lose data even when you close the browser.
Here's the customary demo video that goes with it:
CNET offers a generally favorable review; I haven't used it yet.
Stepping back this new Google Voice Web app is symbollic of the different approaches of Google and Apple to the mobile market and user experience. I am now using a Nexus One, which has access to all the Android apps but isn't really about apps. People may disagree, but Android is really about fast access to the mobile Web. Apps are a strategic necessity in the short term, Google believes, to compete with the iPhone.
Over the long term Google envisions a mobile Internet that offers rich HTML5 "apps," accessible from the browser and without a download like the mobile Web version of GMail or the new Google Voice.
Apple, while recognizing the value of the "mobile Web," sees strategic importance in apps and views it as a competitive advantage vs. rivals including Google. Apple's "app leadership" was mentioned at least two or three times on the earnings call yesterday by Apple executives. In addition, the company bought Quattro, according to Apple CFO Peter Oppenheimer, because Apple "wanted to offer a seamless way for our developers to make more money on their apps, especially those providing free apps."
The company wants to cultivate, care for and feed well its developer ecosystem. The iPad coming out tomorrow will expand the apps marketplace for Apple and further reinforces its commiment to apps, even as it promises a potentially better mobile Internet browsing experience.
Verizon reported Q4 results this morning. The wireless division added 2.2 million new subscribers, beating estimates, for a total of 91.2 million mobile customers. The company also reported strong increases (45.9%) in data revenue. However, jobs elimination-related charges pushed the company to an overall quarterly loss.
Verizon Wireless saw revenues of $15.73 billion (a 22.5% increase vs. a year ago). Post-paid churn was down to 1.06% from 1.13% in the third quarter. The company also said 4G/LTE was on schedule:
Verizon Wireless plans to launch its 4G network in 25 to 30 markets in 2010 and cover virtually all of its current nationwide 3G footprint by the end of 2013.
I didn't listent to the earnings call, where Droid might have been discussed, but the earnings release and related materials don't discuss Droid sales. Some analysts speculated yesterday that iPhone sales (which just missed expectations) might have been hurt in Q4 by Droid (and Verizon's $100 million ad campaign).
Separately, T-Mobile is arguing in the UK that its merger with Orange should go through or the two carriers will have difficulty competing with Telefonica's O2 and Vodafone, a part owner of Verizon Wireless. That same logic may soon play out in the US market, as T-Mobile and Sprint struggle to keep up with Verizon and AT&T.
Bloomberg is reporting that all US carriers may get access to the iPhone over the next 18 months, according to a financial analyst report. The key word in that sentence is "may."
On Wednesday it's very likely that AT&T will lose iPhone exclusivity. Indeed if Apple wants to push the iPhone deeper into the US market it must make the device more broadly available.
The Nexus One, which I've been using for a few weeks, is the first Android device that's "good enough" to preempt the iPhone. In some ways the N1 is more impressive than iPhone 3GS; but expect the 4G iPhone to pull out some surprises.
The current iPhone is GSM. But there's speculation about a CDMA version for Verizon, which could also work on the Sprint network. Apple reports earnings today and it will also reveal how many iPhone OS devices it sold last quarter. The total could well push the OS beyond the 70 million mark on a global basis. We'll see.
The Palm Pre (which I own and increasingly dislike) and its sibling the Pixi are coming to Verizon. If Apple announces the iPhone for Verizon it will kill Pre sales there, though perhaps not the Pixi since that's a potentially different audience of potential buyers. One question is whether we'll see the same subsidy from Verizon that AT&T has been providing. Probably so.
Another variable is the forthcoming tablet: Will it affect iPhone or iPod Touch sales? That depends in part on the price. That's unclear at this point although there is a range of theories: $800 unlocked to $500-$600 with carrier subsidy. The iPhone probably wouldn't be affected by the "iPad" but the iPod Touch could be.
If in fact the iPhone comes to all US carriers, it will very likely become the dominant smartphone in the US market. RIM and Android/Google (and its OEM partners) will try and prevent that but the momentum would be huge. The caveats and questions are: whether the device will become available widely and how soon?
Even with "only" Verizon availability that would mean access to 89 million more potential buyers in the US market.