US mobile carriers want more devices, fewer OSes
And they take their time saying it
Yes, the carriers want new business models and partners as their traditional wireless voice and data markets saturate, but these must work within the cellco assumptions, expanding the operators' total addressable markets while engaging in a clear profit share. In other words, not Skype.
A huge range of devices
But Verizon and AT&T recognize that the new embedded applications will require a huge new range of devices – which will only be feasible to support, for developers and carriers, if there is some harmonization of software platforms. Echoing similar calls from AT&T and T-Mobile USA, Verizon Wireless CEO Lowell McAdam said the carrier needed to reduce the “eight or nine” operating systems it had to support to “three or four”, with a unified development environment on top, though he did not pick out any particular OS.
Verizon Communications. CEO Ivan Seidenberg also took to the stage, and his theme was increasing wireless penetration and Verizon's revenue streams and account control – by going well beyond handsets and supporting a huge range of devices with embedded wireless and a host of applications. This could lead, on a powerful network like Verizon's planned LTE system, to “500% penetration”.
He added: "There will be no limit on the number of connections as part of the mobile grid. Everything has the potential to be connected to the web” – provided there are broadband mobile networks and open platforms. So far, Verizon Wireless has certified 36 devices in its Open Development Initiative (ODI), as it moves towards open access (mandated on its 700MHz spectrum) – and most of these are 'smart grid' gadgets like health monitors, not phones. “If we think in terms of the complex web of wireless connectivity that next generation technology will bring about, then the opportunity to explode past the 100% ceiling to 300%, 400%, or 500% is not only possible, it's probable,” Seidenberg concluded.
Among the new devices launched at CTIA under the ODI were Sierra Wireless' USB 598 modem; and Motion Computing's F5 rugged tablet PC for field workers and its C5 Mobile Clinical Assistant, the latter a hospital grade product that is used for clinician documentation.
"There will be no limit on the number of connections as part of the mobile grid. Everything has the potential to be connected to the web." Ivan Seidenberg, Verizon
Convergence and LTE
Another key issue for Verizon is convergence, as its wireline business comes under pressure. So it put heavy emphasis on its Hub product, which offers connectivity through any broadband connection and supports unlimited VoIP calling for $35 per month, as well as integrating with Verizon Wireless services like VZ Navigator and VCast. This is an example of Verizon's move into non-traditional wireless devices and its attempt to support a quad play to compensate for landline displacement.
Verizon did not add much information about its LTE roadmap, having made a big splash about this at Mobile World Congress. CTO Tony Melone stressed that the 700MHz spectrum would enable it to penetrate rural areas where it does not offer CDMA services – possibly with an eye on broadband stimulus money, though he said Verizon had not yet applied for any such funding. However, most observers still expect the first LTE roll-outs to be in large metro areas, even though the 700MHz frequencies are more suited to rural networks. Seidenberg expects to have two trial markets by the end of this year, and 25 to 30 live markets by the end of 2010. This means the timeline has been pushed out a little, since the first commercial launch will now not happen until 2010, though the CEO stressed it would be “very early” in the year.
Over at AT&T, the company announced Apps Beta, a new initiative enabling developers to trial their applications with the operator's subscribers prior to retail availability, to gain customer feedback and locate bugs. A typical trial period will last about four weeks, with an interactive community forum aggregating user generated content.
But the operator, like Verizon Wireless, was even more focused on devices than on software. It has a far reaching program to help develop unconventional wireless gadgets, which it could then retail, under the management of Glenn Lurie, and in Las Vegas it pushed further into netbooks, announcing a pilot program in Philadelphia and Atlanta, which will offer netbooks to customers who subscribe to both AT&T home broadband and 3G data plans, combining the two into a single 'home and on the go' package for $60 a month. Verizon, of course, also said it would go down the subsidized netbook route so popular in Europe, and Acer has been hinting heavily that it would be the carrier's first partner in this market.
Palm pulled off one of the most high impact launches since the first iPhone in January, when it unveiled its Pre smartphone and the new WebOS software platform to go with it. Since then, it has put pretty much every foot wrong. It has now gone for three months without any clues about the two things most people need to know about a new phone – when can I get it, and how much will it cost? And while it spins out the waiting time for its new star, it has managed to alienate its existing base, so that sales of old PalmOS devices have fallen off a cliff, and one of the industry's most loyal user/developer communities is losing faith. Now its rivals are gathering to ambush its eventual shipment at Sprint, and a string of high profile smartphones are set to launch shortly after Pre becomes a reality.
The highlights will be new Android phones from Samsung and HTC, as early as June, still the most likely date for Sprint to start selling Pre (if this goes later, Palm will have broken its promise of roll-out “before mid-year” and problems with the handset will be suspected). Also, Apple could launch not just one but two new iPhones in the same period, with talk that it will add a souped-up Wi-Fi story; and RIM hopes to get 'Storm 2' out of the door at Verizon and Vodafone in September.
HTC suffers Magic delays
On the Android front, HTC has enjoyed an unexpectedly long period of being the only Android handset maker with a carrier deal, with T-Mobile for G1/Dream and now, as it launches Magic, with Vodafone and others. It will seek to add further models and operator partnerships before rivals enter the game, notably Samsung, which is promising three models in the third quarter, at least one of them also launching at T-Mobile USA.
HTC will be particularly eager to ramp up sales of its Android models ahead of Samsung's debut (and those of Sony Ericsson, Motorola and Huawei, expected to ship handsets for the Google platform in the fall), given its disappointing first quarter profit figures, which were blamed partly on delays in shipping a key product. Although the Taiwanese vendor has not identified the product, and is in the process of rolling out new Windows-based phones as well as Android ones, many reports say it is the Magic, co-developed with Vodafone.
The Magic was expected to debut at Vodafone, and shortly afterwards at T-Mobile USA and possibly Orange France, this month. But it is now reported to be delayed until May 1 at Vodafone, though this could be pushed out further, if some software and “cosmetic” enhancements are not made in time. HTC has only shown prototypes at recent shows such as Mobile World Congress and CTIA Wireless, and these have not featured the rounded buttons that are visible in official Vodafone press releases previewing the handset. The idea that these buttons may be the source of the delay was reinforced by HTC responses to questions from gadget site Pocket-Lint.com, which cited “last minute hardware changes”.
In its first quarter, HTC.s net profit fell by 30% year-on-year to NT$4.89bn ($146.7m), with economic slowdown the other factor. Revenue fell 3.4% to NT$31.59bn, which was short of forecasts because of the delays. Analysts are predicting a sharp rebound in the current quarter, with Vincent Liao of KGI Securities forecasting a revenue increase of 10% from Q1 to Q2, and 20% growth in Q3.
<h3More Androids for T-Mobile
Meanwhile, T-Mobile USA is also looking to build on its Android advantage while it remains the only supplier of the platform in the US, but has Sprint biting at its heels. The German-owned carrier will launch a home phone and a tablet PC based on Android, according to The New York Times, though neither will ship to customers until early next year. The home phone will plug into a docking station and will have a coupling device that charges and synchronizes the handset.
More imminently, T-Mobile should launch Magic before mid-year, still ahead of Sprint's much anticipated Palm Pre debut, and the first Samsung Android phone in Q3. It is also rumored to be aiming to offer Huawei's first Android product in the third quarter. Speaking at the CTIA Wireless show last week, Samsung's executive VP of global product strategy, Dr. Won-Pyo Hong, said his firm has an Android handset due for international release in June, and will release two further models, both to US carriers, later in the year.
The first European partner is widely rumored to be Vodafone and/or T-Mobile International, while the US models will go to T-Mobile and Sprint Nextel. "Samsung has confirmed that Sprint Nextel and T-Mobile USA will launch the first Samsung phones in the US based on Google's Android platform," according to FierceWireless. Like AT&T.s iPhone, T-Mobile's G1 is said to be generating far higher than average use of data services and apps downloads, boosting carrier revenue and stickiness.
Rumors of a mid-year launch of a new iPhone have been swirling for months, especially as carriers are slashing prices on current models, but the market has been divided on whether the new device would be a more powerful 'superphone' to take on the likes of LG Arena, or a stripped-down 'iPhone Nano'. Now it seems Apple could unveil both, and also add support for ultra-fast 802.11n Wi-Fi for the iPhone and iPod Touch.
Daniel Amir, semiconductor analyst with Lazard Capital Markets, wrote in a research note that there will be a high end phone for North America and a low end version for rapidly growing economies such as Brazil, China, India and Russia, where operators rarely offer subsidies and so Apple has had trouble shifting fully priced iPhones.
According to Amir's predictions, the US model – presumably also for European carriers like O2 – would have video support, a better digital camera and 32Gb of memory; while the cutdown iPhone might not have video or Wi-Fi, and would have less memory (but could look like the long anticipated 'Nano').
Several hardware IDs were found in the beta version of the iPhone 3.0 software, raising the prospect of multiple new devices, and even of entirely new formats. Amir says iPhone shipments are stronger than expected so far in 2009 and will continue to be so, and could reach 3.8m to 4m units in the first quarter – ahead of analyst consensus of 3m to 3.5m. He also thinks that figure could double in the second quarter, though prices might fall as operators sell off current models in anticipation of new launches.
Fast Wi-Fi for iPhone
Meanwhile, Apple is readying a low power implementation of 802.11n for its mobile products, according to Network World. This may require an upgrade to the central processor, so the support would only be available in new models, rather than available as an update for existing iPhone owners.
Again, the recently unveiled beta code for the iPhone 3.0 operating software has given the clues – experts found some radio component specs that indicated a shift to a different Broadcom Wi-Fi chip, the BCM4329, a highly integrated product that combines MAC, baseband and radio for all the Wi-Fi variants (802.11a/b/g/n) plus Bluetooth 2.1 + EDR, and FM radio receiver/transmitter.
It supports both the 2.4GHz and 5GHz bands, which is important because the latter is less congested, and Apple could increase the synergy between its phones and its AirPort Extreme WLan access point or AirPort Express portable unit, by segmenting them to handle 11n mobiles on 5GHz for superior performance.
Broadcom's chip is targeted at mobile devices, supporting one data stream and one antenna instead of the 2-3 usually specified in 11n – this reduces power and size, but caps performance at around 50Mbps, rather than 11n.s full potential of about 150Mbps. This would provide a significant boost for over-the-air content downloading, especially in uncongested spectrum.
RIM Storm 2
The surprising lack of Wi-Fi support has been the most common criticism of RIM.s 3G CDMA/HSPA smartphone, the Storm, which took considerable credit for the BlackBerry maker.s unexpectedly buoyant quarterly results. This should be remedied in 'Storm 2', according to many sources, and this phone could appear as early as September. Also expected is a brand new touchscreen design.
Verizon Wireless justifies the lack of Wi-Fi by arguing, reasonably enough, that its fast EV-DO Rev A network is enough for any user, but this does cut customers off from the option of using sometimes cheaper WLan connections, or apps not supported on the operator.s network. And RIM.s other major 3G phone, the Bold, does support Wi-Fi.
Looking ahead into fiscal 2010, we see exceptional opportunities for RIM and its partners to leverage the investments and success of the past year to continue growing market share and profitability." Jim Balsillie, RIM
Other criticisms of the Storm have focused on the screen and some software glitches, which caused high reported return levels in the phone's early days, in the US market at least. In particular, customers moaned about 'dead spots' in the corners of the screen, that do not register clicks effectively. The new screen design should correct this problem, according to blogs such as BoyGeniusReport, which also expects the SurePress typing experience to be replaced with an upgraded system called TruePress.
RIM, which opened its software store at CTIA Wireless last week, also announced strong results for its fourth quarter, which ended in March. These showed clear signs that a smaller smartphone player can still make an impact on the giants with sufficiently eye-catching handsets. The launch of RIM.s 3G phones, Bold and Storm, helped boost fourth quarter results, with revenue up 84% year-on-year to $3.46bn and net income up 26% to $518.3m and 90 cents a share. This was ahead of analyst estimates of $3.4bn and 84 cents a share.
Co-CEO Jim Balsillie said in a statement: “Looking ahead into fiscal 2010, we see exceptional opportunities for RIM and its partners to leverage the investments and success of the past year to continue growing market share and profitability.” The company reported it gained a net 3.9m new BlackBerry accounts and shipped 7.8m devices in the quarter. Storm sales were particularly robust, as well as Latin American shipments.
In another small sign that the handset market may soon bottom out, or at least have a firmer handle on the year ahead, RIM issued a forecast for the current quarter – something most phonemakers have recently refused to do, citing lack of visibility amid economic turmoil.
RIM expects to post revenue of $3.3bn to $3.5bn in its fiscal first quarter, which ends on May 30, with earnings per share between 88 and 97 cents. It is forecasting gross margins of 43%-44% and a subscriber base of 3.7m to 3.9m.
Palm on back foot
All this leaves Palm rather on the back foot, though it did try to placate its existing user base at CTIA by announcing an emulator that will enable old Palm applications to run on the new phone. Previously, it had seemed likely this would have to be done through a third party add-on. Called Classic, the emulator was developed with MotionApps and will be available in the new software store that will be opened along with the Pre launch.
Palm also opened up its software developers kit for WebOS, Mojo SDK, to developers, which should give the world a clearer idea of the strengths and weaknesses of the Linux-based software platform. There will be no charge to download the SDK, and developers will not have to join any kind of Palm developer association.
However, Palm also wants the Pre to appeal to the growing band of users of services 'in the cloud', such as data back-up or RSS feeds that are updated over the internet, with the data held on huge remote servers like Google's. Palm followed a similar recent move from Apple in announcing a publish/subscribe service that supports these messages and updates. Called the 'Mojo Messaging Service', it "exchanges information over the internet so when new information is available, it is published to the cloud and all interested parties who are subscribers are notified that new information is available. This will allow developers to push live content to their applications or services."
Copyright © 2008, 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.