Hardware

3G iPhone Frenzy Builds

Amid data showing a market share decline for the iPhone, the frenzy over next week's anticipated 3G iPhone announcement is building. The Cult of Mac blog is reporting a subsidized, thinner phone will be released. The subsidy rumor has been around for some time. But it's looking like the new phone will be cheaper -- especially if Apple is to reach its sales targets, which are now being questioned by financial analysts.

According to IDC Q1 estimates, cited by CNET:

RIM's market share went from 35.1 percent in the fourth quarter to 44.5 percent in the first, while Apple's dropped from 26.7 percent in the fourth quarter to 19.2 percent in the first. Palm's Centro lifted that company's market share to 13.4 percent in the first quarter, up from 7.9 percent in the fourth. Samsung and HTC ranked fourth and fifth in the U.S. market with 8.6 percent and 4.1 percent of the market, respectively.

The success of the Palm Centro is all about aggressive pricing. Yet even with the $200 potential subsidy, AT&T exclusivity in the U.S. is a substantial barrier to adoption for a majority of users -- especially as iPhone clones are offered by AT&T competitors.

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Wired speculates about some of the potential new (social) features of the coming iPhone.

RIM's BlackBerry 'Bold' Announced, iPhone Gains Asian Distribution

Blackberry

On the desktop we have Microsoft vs. Google. And in world of mobile handsets a similar battle is shaping up between BlackBerry, the smartphone incumbent in North America, and Apple's iPhone, recently made safe for the enterprise.

In that larger context, the new BlackBerry Bold seeks to move into iPhone consumer territory with lots of multimedia features and a better display. It also features a browser that offers a "desktop" style (HTML) Internet experience. (But BlackBerry is fully aping the iPhone with a full touchscreen device (no keyboard) coming in Q3: the BlackBerry "Thunder.)

BlackBerry recently announced a $150 million fund to help cultivate applications development for the device (to rival the iFund). The company is also making a new international push through a distribution relationship Brightpoint.

Meanwhile Apple signed agreements with carriers in Singapore, India, the Philippines and Australia. And the iPhone, in a strategy shift, is pushing broader and non-exclusive distribution -- for example through Vodafone in 10 markets globally. The iPhone has yet to find a Chinese partner.

BlackBerry and the iPhone face competition from HTC and, outside the US, from Nokia. And, until we start seeing them in action, Android phones remain something of a wild card in this segment.

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Related:Microsoft and RIM are announcing "global integration of Microsoft’s Windows Live services into BlackBerry smartphone devices." These include Windows Live Hotmail and Windows Live Messenger. Thus Windows Live services for BlackBerry will extend the reach of Windows Live to the largest smartphone user population in North America.

The Android, the iPhone and the BlackBerry

I previously argued that the future of BlackBerry is tied to it becoming a "platform" for third-party applications; and the corresponding health of that "ecosystem" will determine whether it falls prey to the iPhone and/or other competitors (e.g., Android phones). The BlackBerry is the U.S. smartphone market leader, with roughly 40% share, but the iPhone has been gaining.

In order to defend against the iPhone now that it's "enterprise capable" BlackBerry has to take the fight to the iPhone's stronghold: consumers. In order to survive it will have to go from being "an email device," to a full featured consumer handset. That means helping developers create compelling applications for it.

There's the iFund (for Apple iPhone development) and the Android Developer Challenge (funding Android application development) and, now apparently, an equivalent effort (at $150 million) to fund BlackBerry applications development. Several sources this morning are discussing the forthcoming announcement.

Back to Android: The developer challenge is over now and the top 50 applications will each get $25K each. Those folks will be competing for ten $275,000 awards and ten $100,000 awards. Here's what Android/Google had to say about the array of applications that were submitted, many of which apparently fall into the "local" and/or "social" categories:

Many of the top submissions took advantage of the geo and social networking capabilities of Android. These apps allow friends to share their personal experiences and favorite content such as vacations, photos, shows, music, cooking recipes, restaurants, and much more as they relate to certain locales. I've also seen applications that connect people during emergency situations and others that allow users to share information on how they can reduce their carbon footprint. One developer even turned a real city block into a playing field where gamers can role-play and chase after villains.

Furthermore, some of these applications provide rich interactive experiences by combining web services and mash-ups to bring together data that's on the web with data that's on the mobile device. One application combined weather, pollen and allergy information in the context of a map that is relevant to a user's location.

Though many applications use a traditional "download" model for data, many also enable users to publish content, such as photos or even voice memos, for others to use on other mobile devices or the web.

TechCrunch captured some images (and brief discussion) of some Android apps that were developed by MIT students.

For the foreseeable future, the mobile market will never not be fragmented (say that 10 times fast). However, there are now too many "platforms" and would-be platforms out there, some of which simply won't be widely adopted.

We're now in what might be called the "Mesozoic era for mobile" and it's going to be a Darwinian fight for attention and survival.

Motorola's Z9 in $99 Centro Territory

The NY Times was reporting the other day that AT&T is selling the Motorola Z9 smartphone for $99 in the US with a two-year contract. This makes it a competitor of and in the same price range as the Palm Centro, also being sold for $99. The Centro has done very well for Palm, although I understand the margins are not great.

The iPhone is also potentially going to be subsidized by AT&T when the 3G version launches this summer.

Why is all this significant?

Smartphones comprise about 6% of the US market and perhaps a slightly larger share of the EU market. Price drives consumer adoption (hence the success of the Centro) and smartphones change user behavior.

Smartphone users access the mobile Internet and conduct mobile search three to four times as frequently as conventional cell phone users. This is even more pronounced at the highest frequency levels, with smartphone owners accessing the mobile Internet many more times and in higher numbers than conventional cellphone users:

Smartphones vs. conventional phones
Source: M:Metrics (2008)

iPhone Previews Future Sales Strategy

Apple is going to start formally selling the iPhone in Italy through two carriers: Telecom Italia and Vodafone. It marks a strategy shift for Apple, which had previously pursued exclusive carrier deals with a corresponding demand for a piece of subscriber revenues. (Although European law requires Apple to sell the phone more broadly.)

This was a greedy and short-sighted strategy on Apple's part. Now the company appears to be recognizing that the task at hand is to get the device into as many hands as possible before more viable competitors emerge.

Even though demand for the iPhone has been very strong, wide availability through multiple carriers would boost sales considerably -- at least in the US. A 3G version is expected in June of this year.

HTC Replaces 'Touch' with 'Diamond'

Taiwan's HTC officially announced a replacement for the popular HTC Touch, called the "Touch Diamond." As the name suggests, the phone has a touch screen and runs the Windows Mobile OS. HTC is also a member of the Android Open Handset Alliance and is expected to introduce an Android phone later this year.

The Touch Diamond will be available in June in the EU and somewhat later in the U.S. The Touch sold impressively around the world (3 million units) and this phone looks to be a significant upgrade. It appears to have a slide out keyboard as well.

HTC Touch Diamond

Credit: HTC

Phones such as the Touch Diamond and the Samsung Instinct seek to emulate the touch-screen interface and user experience of the iPhone to varying degrees, although HTC built touch screens long before Apple brought its iPhone to market. Still, the arrival of the iPhone has helped boost HTC's visibility and shift the market toward touch screens.

Phones such as the Instinct and Diamond start to close the aesthetic and usability gap between the iPhone and its competitors somewhat. They also offer physical QWERTY keyboards, which gives them an advantage in some people's minds over the iPhone's virtual keyboard.

Vodafone to Sell iPhone in 10 Global Markets

Vodafone is going to carry the iPhone into 10 of its markets worldwide: Australia, the Czech Republic, Egypt, Greece, Italy, India, Portugal, New Zealand, South Africa and Turkey.

This is good for Apple and ironic for Vodafone given that Vodafone Deutschland sued T-Mobile challenging its right to be the exclusive seller of the iPhone in Germany. Simultaneously Vodafone CEO Arun Sarin criticized the iPhone as a “pretty poor experience.”

The Vodafone CEO must have been feeling grumpy when he lost out to Telefonica’s 02 to be the exclusive UK distributor of the device and to T-Mobile in Germany. I would imagine he is probably happy now and has accordingly changed his mind about the device and its usability, with this new deal.

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The 3G iPhone looks to be coming on June 15 or thereabouts.

U.S. Underdog Nokia Readies American Handset Push

Nokia dominates the handset market globally, with roughly 40% market share. However, in the U.S. it has only about 10% and is an underdog, especially in the smartphone market where Blackberry and the iPhone dominate. (Nokia's smartphone dominance in Europe is one reason the iPhone isn't performing as well there.)

Now the Finnish handset maker is preparing going to flood the U.S. market with a range of new products -- a version of spaghetti on the refrigerator -- to see what gains acceptance and adoption, in the hope of driving more consumer adoption.

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Blackberry is making a broader global push itself but will bump up against Nokia too in perhaps the same way the iPhone has outside the US. It needs to do so in order to defend against what will certainly be an eroding U.S.-based smartphone market share as the iPhone gains adoption in the enterprise and Nokia's more aggressive U.S. move puts pressure on the "e-mail device" maker.

French iPhone Sales: Bien Sur!

Apparently iPhone sales in France, which were expected to be slower than the U.S., are going pretty well:

"We thought it would slow at the beginning of the year but we were wrong," [Didier Lombard, head of Orange parent France Telecom] told The Associated Press during a gathering at the Elyse Palace after a speech by French President Nicolas Sarkozy. Lombard said that sales are going "very well," but declined to provide figures due to the blackout period ahead of the announcement of France Telecom's full year results Feb. 6.
Orange said Dec. 5 that it had sold 30,000 iPhones in the five days after it went on sale in France. Lombard had previously said he hopes to sell as many as 100,000 of the handsets by the end of 2007.

At MacWorld, Apple CEO Steve Jobs said that the iPhone had sold 4 million units in the U.S. since it went on sale in June 2007.

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Related: The iPhone's reach in the U.K. so far fall short of estimates: "The [Financial Times] says that between Apple, O2 and the Warehouse, only about 190,000 handsets were sold in the first two months against a target of 200,000."

iPhone Maps 'with Location' Added

I realize I've been writing too much about the iPhone recently. But Google and Apple are driving much of the U.S. wireless news right now. Yesterday, during MacWorld, which I didn't attend (Mike Blumenthal did), Apple CEO Steve Jobs announced market share figures for the iPhone. Jobs said that Apple sold 4 million iPhones in 200 days and that it now has a 19.5% share of the US smartphone market. Here's the market share breakdown as Jobs presented it:

  • RIM/Blackberry: 39%
  • iPhone: 19.5%
  • Palm: 9.8%
  • Motorola: 7.4%
  • Nokia: 3.1%
  • Other: 21.2%

What's more remarkable is that unlike these other hardware makers, Apple's iPhone is available from a single carrier. Presumably Windows Mobile is distributed throughout the list on Palm, Motorola and Other phones.

In addition to boasting about market share, Jobs also announced a number of upgrades to the iPhone but not a 3G iPhone as many had expected. Among those upgrades was "Maps with location":

Maps, one of the most popular and helpful applications on iPhone, has a new interface that is simpler and easier to use and adds incredible new features such as the ability to find your location automatically. With just the tapof a button, iPhone can now triangulate your position using nearby Wi-Fi base stations or cellular towers. You can use this as a starting or ending point for directions or to find local points of interest. The new hybrid map view combines map view and satellite view so you can see major street names overlaid on satellite imagery.

This is very much like Google's "My Location" functionality, recently introduced. Skyhook Wireless is behind Apple's "Maps with Location" capability. From a press release issued this morning by Skyhook:

Skyhook Wireless, provider of the Wi-Fi Positioning System (WPS), today announced Apple is using its technology for the new Wi-Fi location positioning feature in its Maps application on both iPhone and iPod touch. Using WPS, iPhone and iPod touch users can now locate themselves in the popular Maps application with the tap of one button.

"Apple sells the most innovative mobile products on the market today, and now iPhone and iPod touch include Skyhook's Wi-Fi positioning capabilities," said Ted Morgan, CEO of Skyhook Wireless. "We are very excited to be a part of these great Apple products."

By mapping known Wi-Fi signals throughout entire metropolitan areas, Skyhook has built a database of over 23 million Wi-Fi access points with their locations. The patented technology behind WPS leverages that database to provide location information. Skyhook's software-only system offers high accuracy indoors and the ability to make location more precise for users.

While location was not an essential missing piece from maps on the iPhone, it's a very nice to have feature. (It also aids ad targeting and other LBS.) All the iPhone upgrades are also available on the iPod Touch.

Meanwhile, JiWire announced ad-supported free WiFi access for iPhone and iPod Touch:

The option will be available at select Wi-Fi hotspots located in airports, hotels, cafes, and other desirable locations around the world. Major airports include Atlanta-Hartsfield, JFK and LaGuardia in New York and Chicago's O'Hare. Members of the JiWire Wi-Fi Advertising Network collectively operate more than 100,000 hotspots.

It will be interesting to see if the economics of ad-supported WiFi will allow the development of a national system for access. If so, there are numerous implications for the adoption non-phone mobile devices (e.g., the Touch) and for VoIP mobile calling on those devices.

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Here's a bit more on Skyhook and Apple, which has put the company (Skyhook) on the map (so to speak) for many people who hadn't heard of it.

iPhone Making the World Safe for Android?

We and everyone else have written fairly exhaustively about the iPhone and its impact on the competitive dynamics of the market. However, on the cusp of MacWorld, three articles appeared today that cover Google, the iPhone or both.

Miguel Helft at the NY Times discusses how Google saw a surge of traffic on Christmas (presumably after a bunch of activations) and how the iPhone drives mobile traffic to Google at levels second only to Symbian phones. As Helft points out that's somewhat remarkable, given the iPhone's recency and tiny market share compared with Symbian.

The topical "hook" for the article is a suite of Google services optimized for the iPhone (Gmail, Calendar, Reader, iGoogle, etc.). A new version of this suite (dubbed "Grand Prix") will apparently be released today. Elinor Mills at CNet writes similarly about the new release of these mobile apps and suggests that Google Gears (the ability to work on applications when not connected to the Internet) is coming to the iPhone at some point in the near term.

And USAToday covers a small company in San Ramon, CA, A La Mobile, which has reportedly developed a suite of apps for the Android platform. The article goes on to confirm (via Google's Andy Rubin) that an Android phone will be out by Q2. (Dan wrote about an Android prototype sighting at CES.)

Even though Android was in the works before the launch of the iPhone there's a way in which they're "connected at the hip" or Android is the direct beneficiary of the iPhone in a certain way. There might not have been as much carrier and OEM interest in Android had their not been an iPhone to show the benefits of a better mobile user experience. Indeed, as the NY Times article makes clear, a better user experience results in more usage and traffic and, ultimately, monetization -- this is pretty much our mantra at LocalMobileSearch.

Google is seeking to take that learning and expand it beyond a single, proprietary device to the entire industry and hopes that the OHA and Android will be the vehicle to do so. The disruption and fear that the iPhone has caused arguably has driven many to embrace Google's initiative, which might not have otherwise.

Wired on the iPhone's 'Untold Story'

Wired has a lengthy and relatively entertaining piece, The Untold Story: How the iPhone Blew Up the Wireless Industry about the genesis of the iPhone and some of the drama behind its development. There's no question this is the most significant mobile device of the past decade. Whatever its ultimate sales, it has changed the landscape (at least in the U.S.) for good.

But while it has shaken things up but it's not entirely clear what the ultimate impact of the iPhone will be. As Wired contributor Fred Vogelstein points out:

It may appear that the carriers' nightmares have been realized, that the iPhone has given all the power to consumers, developers, and manufacturers, while turning wireless networks into dumb pipes. But by fostering more innovation, carriers' networks could get more valuable, not less. Consumers will spend more time on devices, and thus on networks, racking up bigger bills and generating more revenue for everyone. According to Paul Roth, AT&T's president of marketing, the carrier is exploring new products and services -- like mobile banking -- that take advantage of the iPhone's capabilities. "We're thinking about the market differently," Roth says. In other words, the very development that wireless carriers feared for so long may prove to be exactly what they need. It took Steve Jobs to show them that.

Carriers thus have an opportunity to avoid the "dumb pipe" scenario. Let's see if they can.

Apple and the Return of the Newton?

Apple Tablet

There are many rumors of a forthcoming Apple "sub-notebook," small laptop. And an independent company created a keyboard-less Mac-based tablet computer, the ModBook (with GPS).

Years ago Apple was way ahead its time with the failed Newton. The iPhone and iPod Touch are successor devices that point to mobile computers with somewhat larger screens but that are more portable than traditional notebooks. A better designed and perhaps smaller version of the Amazon Kindle would be such a device.

I believe there is a market for an Internet-enabled, touch-screen tablet device (with some sort of virtual keyboard or slide-out keyboard) that offers a mobile Internet experience more like the desktop but small enough to be truly mobile.

Thomson/GE Speed Dials GOOG411 at CES

One of the featured products at this year's Consumer Electronics Show introduces simplified access to free directory assistance from a fixed line telephone. A GE-branded cordless home phone (model # DECT 6.0) features single-button, speed-dial access to GOOG-411 (normally accessed by dialing 1-800-GOOG411). This is a hardware-based, preemptive strike resulting from a partnership between one of the leading providers of cordless phones and the undisputed leader in Web-based search.

Google introduced GOOG411 roughly a year ago as its brand of speech-enabled mobile search. It has not yet added the sorts of audio-based advertising that provide an obvious revenue model around category search and location-based marketing. Instead, Google is still in development mode, introducing a trialling a multiplicity of access methodologies for its local search service. The button is hard-wired into the GE handset, but it could just as easily be rendered as a soft-key or widget on the touch-sensitive screens of forthcoming smartphones.

Meanwhile, because automatic connection is baked into GOOG411, it should not be long before DECT 6.0 owners begin to use the button as an intelligent speed dialer. The good news is that the original query is through a tool free number and, thanks to IP connectivity, Google provides call completion for free.

Single button access, offered by Google and others, are poised to change long established user behaviors, like dialing 411 or longer, toll-free access numbers. This is a major threat to incumbent, fixed line DA providers that generated something like $3.5 billion in highly profitable revenue from roughly 4 billion calls last year. Meanwhile, thanks largely to the fact that Google has yet to attach either connection fees nor promotional charges to its service, advertiser supported, "free" DA services generated less than $20 million in top line revenue.

The partnership with Thomson/GE shows that Google will pursue a number of avenues to generate more call origination. No firm has been better at converting activity to revenue and profits.

iPhone Faces Likely Tepid Reaction in Japan

This BusinessWeek article speculates about the prospects for the iPhone in Japan, which it characterizes as the world's most advanced mobile market. It details the ways in which the iPhone won't impress Japanese mobile users and how it's already inferior to existing Japanese phones in many respects:

In its current form, the iPhone doesn't work on Japan's advanced third-generation, or 3G, network. Rumors abound that Steve Jobs & Co. will release a new, faster 3G iPhone next year. But analysts are skeptical that will be enough to please consumers in Japan. In its current form, the iPhone's 3.5-inch touchscreen and its access to online applications such as YouTube and Google Maps are about all that set it apart from other handsets in Japan.

In other ways, the device is inferior, and some of its functions won't be all that useful. The iPhone's Wi-Fi networking, for instance, won't get much of a workout since few Japanese retailers are wired for such short-range broadband wireless Internet service. "I don't think it's going to do that well," says Makio Inui, a managing director at UBS in Tokyo. He predicts the iPhone's high price and limited features will be a turnoff for many in Japan.

Yet in the US and many European markets the iPhone does represent a dramatic advance over what has existed in the way of mobile user experiences. In addition to the persistent question about whether the future of mobile will be about the "carrier deck" or "off deck," there's the related question of whether HTML rendering for mobile (Safari, Opera Mini and the forthcoming Mozilla browser) will become increasingly mainstream or whether WAP will predominate.

It's also the case that while some mobile trends in Japan and Asia may come to pass in Europe and the US, one cannot look to these markets as direct "roadmaps" for what will happen in the West. Cultural, economic and competitive variables prevent that from being the case.

Smartphones Gaining in U.S. Popularity

This article from MarketWatch offers a survey of an increasing number of smartphone options for US consumers. This Bloomberg piece discusses American's increasing willingness to splurge on the pricer handsets. Indeed, smartphone sales are growing (now representing about 12% of the market). We also know from empirical research that smartphone users access the mobile Internet more and search with greater frequency than non-smartphone users.

The question of how mainstream smartphones will eventually become is an interesting one. It's partly dependent on intangible cultural factors like buzz and fashion, which are helping drive iPhone sales, in addition to function. But perhaps the biggest determinant of smartphone sales is price.

Most smartphones retail for hundreds of dollars, but the Palm Centro is $99 and the LG Rumor is only $50, both with a two-year subscription. If the prices come down, we'll see more smartphones in the market -- with direct implications for mobile Internet adoption.

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Related: Apple is expected to announce sales of 5 million units of the iPhone at the forthcoming MacWorld event. That's ahead of schedule. Apparently Xmas demand for the devices remains very strong despite the anticipated announcement of a 3G phone early next year.

Z2: Another Interesting Non-Phone Device

Z2

The new Z2 from Zipit Wireless allows users to send and receive text messages (connectivity not included) as well as store and view photos and play music. There's no browser that I'm aware of, but that would theoretically be possible. Relying on the popularity of IM with its target youth market, the company plans to charge $4.99 per month for roughly 3K messages, undercutting the text plans of wireless carriers.

I'm skeptical that the device has the right combination of features (it needs Internet, which could include VoIP) to gain broad adoption (cost: $149) but it's another interesting wireless device that has potential.

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The Kindle has reportedly sold out but the Internet browsing experience is apparently quite poor. I think that version 2.0 with a better Internet experience (and slightly different positioning) could make this device a mainstream success. The Internet is included (based on Sprint's 3G network), which is the most compelling part of the whole thing.

Android Prototype Spotted

From Gizmodo, with screenshot:

Our source, a Giz reader, had some feedback to add to the prototype, which he used for a day: Even in early form, it's light and fast, much faster than the desktop emulator at times. And as a longtime programmer, he thinks it's a lot more put together than Window Mobile 5 on the back side of things.

We'll see how quickly these phones (or a phone) makes it to commercial release. HTC will likely be first to market with a working device. As some of the comments in the Gizmodo post suggest, the handset leaves quite a bit to be desired aesthetically.

'Point and Shop' With Nokia

Nokia phone

The U.K.'s Sun covers a plan by Nokia to use camera phones -- Nokia is the largest digital camera seller in the world (via phones) -- to allow consumers to take pictures of items in the real world and immediately find the same item online for the best price, etc. (As an aside, Nokia may want to buy a shopping engine to really indulge this plan.)

The article says "a prototype is being kept under wraps and will not be launched for about three years, according to the firm." Why? This technology has been around for some time and is already in use in Japan.

Expect similar camera-phone shopping to be introduced in the U.S. next year. Companies such as GeoVector, NeoMedia, Mobot, SnapTell and a couple of others already have this capability in market to varying degrees. It's just a question of introducing it to mainstream U.S. and EU consumers. (Phones with cameras will represent 40% of the digital camera market worldwide, next year, according to LGERI.)

One of the interesting things to contemplate about camera-phone "point and search" or "point and shop" scenarios is that they're like voice search in a way: potentially mass market tools that don't require much in the way of behavioral change from users. As such, this camera-phone technology represents something of a wild card in the market in terms of potential consumer adoption.

Can Apple Save Palm, And Will Motorola Break Up?

Jon Rubinstein, Apple's former head of hardware engineering, often dubbed the "Podfather" because of his early shepherding of the iPod, is now in charge of Palm. The question is can he revive the sinking fortunes of the company?

As this WSJ article points out, the company is banking on the low-end Palm Centro to become popular and gain market share among younger users. However, despite widespread marketing and an aggressive price point, the Centro is not likely to be the hit Palm had hoped. And product development cycles are such that it may be a couple of years before any Rubinstein-inspired handsets make it to market.

Over at Motorola, the WSJ speculates, the company may be preparing for a sale of its troubled handset division, which hasn't had a hit since the wildly popular Razr. But the market is fickle and the Razr was "yesterday's handset." Motorola's CEO Ed Zander was bounced in an effort to inject new blood and energy into the company. He is being succeeded by company president Greg Brown.

Worldwide market share of smartphones, based on Q2 shipments of approximately 30 million units:

  1. Nokia -- 46%
  2. "Others" -- 29%
  3. RIM -- 9%
  4. Sharp -- 8%
  5. Fujitsu -- 5%
  6. Palm -- 4%

Source: Garnter (numbers are rounded and so exceed 100%)

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Related: CNET reports on forthcoming layoffs at Palm. Silicon Alley Insider suggests that Palm could create a great user experience and revive by adopting Flash as a developer platform.