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Last week's Mobile World Congress reinforced the trend for smartphone capabilities to migrate down the food chain in to low cost handsets, spreading the mobile internet to wider user bases.

Phones like the HTC Smart are leading the way, and the operators are coming up with consumer propositions to match - often involving their own branded user experiences. And the chipmakers are rising to the challenge - Marvell showed off a chipset to enable a sub-$99 smartphone; Texas Instruments discussed a cutdown implementation of its OMAP3 application processor for midrange handsets or new device formats like e-readers; and ST-Ericsson pinned its growth hopes on 'smartphones for all'.

Gilles Delfassy, the CEO of the joint venture, told Dow Jones that STE would not reap the full financial benefits of the mobile internet boom until next year, and that success would depend on broadening access to smartphone capabilities. "We want to give the masses access to smartphones. We aren't far away from a scenario where all mobiles will be 'smart'. We'll have low end, mid and high end smartphones," Delfassy said in the interview.

Last week, the firm showed a platform, optimized for Android, that promises to enable a sub-€100 smartphone. But this will not turn up in commercial devices until 2011. "2010 will be a year of transition as we are still submitted to the older product line but next year we should see the full potential," Delfassy said.

More immediately, Orange and Telefonica O2 are working out their low cost smartphone offers. Orange is to provide an Android phone - as yet unnamed - priced below €150 on a prepaid deal, before the holiday season this year. By then, there will be a wide choice of affordable Android smartphones - until now, the main player has been the Huawei Pulse, used for prepaid deals by T-Mobile.

Orange knows that lower cost devices will drive the uptake of web services among the still apathetic prepaid base, and should push down churn - lower end users are more likely to be hooked into operator controlled experiences, since they are less web-savvy.

"The fact that anyone can get the Android OS for free makes the possibility of a low cost prepay smartphone a reality," said Yves Maitre, senior VP of mobile multimedia and devices at Orange. "In 2010 we will be offering an Android handset at €150 on prepay, and I would expect that we will have an Android handset at below €150 before Christmas. This was considered unachievable six months ago," he told Total Telecom.

O2 is being more specific about the flagship handset for its own bid for younger mobile web users. It will bring the HTC Smart, the focus of a similar midrange strategy by AT&T in the US, to its European footprint in April. The Smart does not run Android or Symbian though, but the grandfather of mobile web OSs, Qualcomm Brew.

Once confined to the CDMA base, this has been reinvented as an open developer platform geared to the mass market. Initially, the HTC Smart will be launched as an exclusive by O2 in the UK, Germany and Ireland.

Steve Adler, VP of devices at Telefonica Europe, said affordability and complexity are major barriers to mass adoption of smartphones. "They are costing more than laptops," he said. "We as operators hide that cost in the way we put subsidies in," but it is still there. O2 will target the prepaid base, particularly users aged between 16 and 22.

In non-O2 territories, other carriers will use the Smart to pursue a similar strategy - among them, KPN in the Netherlands, Telecom Italia in Italy and Netcom in Norway. Florian Seiche, a VP at HTC Europe, said the vendor was getting "daily requests to extend that footprint".

The trend for mass market smartphones could open up opportunities for non-traditional vendors, although this will be largely a game of scale. Once Samsung and LG get more serious about Android, they will be best placed to dominate that platform, although HTC is making a good play to achieve critical mass in the meantime, on Android and Brew. Nokia, of course, is virtually guaranteed to sweep the midrange market on the Symbian front.

However, until the giants consolidate their positions, there may be inward routes for other players. For instance, Alcatel Mobile Phones introduced its first Android phone, the OT-980, at Mobile World Congress. It sports a touchscreen, vertical slider Qwerty keyboard, Wi-Fi and HSDPA and will ship in June at an unsubsidized price point of below €200.

Unlike most Alcatel phones, which are targeted at developing economies, this will be marketed mainly in Europe, with the UK, France, Spain and Italy the prime markets because the firm believes the Alcatel brand is strong there. Alcatel Mobile Phones is owned by TCT Mobile of China, which acquired the business from what is now Alcatel-Lucent several years ago but kept rights to the brand. Like other Chinese players like ZTE and Huawei, it aims to use affordable smartphones as the route to gain a presence outside developing markets.

Copyright © 2010, Wireless Watch

Wireless Watch is published by Rethink Research, a London-based IT publishing and consulting firm. This weekly newsletter delivers in-depth analysis and market research of mobile and wireless for business. Subscription details are here.

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