Recently in Telecom Category

With a four-way price war going on between AT&T, Verizon, Sprint and T-Mobile, we have seemed to lost track of VoIP over 3G. Software from companies such as Fring or Truphone allow you to make VoIP calls on your iPhone, but only over WiFi. There are hacks (crash-x) that allow you to trick the iPhone into thinking you're connected to WiFi and make VoIP calls over 3G (or downspeed to EDGE/GPRS). I'm still wondering ... why bother? If the idea was to save minutes or money, the carriers have already responded by driving cheap voice with price reductions. Besides, VoIP over 3G needs massive data compression and low latency to battle quality of service issues that make the user experience poor.  Skype claims they only need a small amount of bandwidth - between 6 kbps and 40 kbps, but I don't think they can overcome latency issues. Many users were disappointed Skype 1.3 did not include push notifications or support VoIP over 3G. They still have usability issues using Skype when "real" phone calls come in (it logs you off). Eventually data plans will race for the bottom too so Skype could become irrelevant on 3G/4G handsets.

I believe there will be a continued demand for unlimited service rate plans in the $40-$60 per month range such as those being offered by providers like MetroPCS, Tracfone and Boost Mobile. The low-end market of pre-paid plans as grown to over 22% of the total market vs. 16% three years ago, according to Sanford Bernstein.  Martin Peers from the WSJ picked up on my idea that we could see the Google Nexus show up heavily discounted to compete in this prepaid space.  Meanwhile the major carriers struggle to grow ARPU in spite of increased costs due to bandwidth "hogs." Even Verizon's CTO, Dick Lynch says metered billing would benefit most consumers because they would not be subsidizing others. With plans to move to LTE by AT&T and Verizon, I see that exacerbating the problem. You provide faster water through the spigot; the users want to drink more water. Carriers and handset makers have created an addiction for what will become an expensive habit. The question is will users trade down-market for cheaper service instead of staying top-shelf at pure 4G.

The launch today of the Google Nexus was less about technology and more about changing how customers obtain mobility service. Carriers needed a handset alternative to the iPhone and Android's timing last year was perfect. Windows Mobile or RIM Blackberry was not going to unseat the iPhone, even with their recent App Store forays. By offering an unlocked phone, Google avoids some of the negative backlash of network quality because they allow users to select their own carrier; poor service won't be their fault, or HTC's. The big winner here I believe is Verizon as they will have both the new 4G iPhone and several Android handsets including the Nexus One by this summer. The business managers at the carriers can justify their next round of network upgrades to 4G and take advantage of the new spectrum they've acquired. One thing to remember, unlike cable TV and satellite, there is no alternative to carriers with regards to cellular service. No carrier, no service; no VOIP, no Mobile Internet, no SMS and no PCS. Much has been reported of the billions of App Store application downloads but I believe users only use a very small subset of what they download. I would think 100 applications would be plenty and you can always change them out. Google is courting more developers with their friendly, open source licensing schemes. I went ahead and ordered mine, even got customized etching. 

Palm's press conference at CES will be Thursday January 7^th where they'll likely announce the Palm Pre 3 with Verizon. It's taken almost a year since I first recommended Palm needed another carrier. Palm's stock performance this year was certainly improved by the original Pre introduction but it failed to translate into meaningful revenue and profit growth. I believe Palm's Webkit and friendly developer tools still make it a viable device but Verizon will have to position it against the highly marketed Droid and quite possibly by summer, the Apple CDMA iPhone 4G. The New Year is shaping up well for Verizon as they seem to be placing their bets across the smartphone "blue line." When you have real spectrum, you have nothing to worry about. I would be concerned with how the unlocked Google phone would perform on T-Mobile. Even a subsidized T-Mobile handset would be dependent on wide spectrum availability (>100MHz) in thin metro spots. With the new Verizon deal, Palm needs to show it can grow revenue and profit margin. Verizon could have the Pre 3 at the low end, the Droid in the mid-range and the iPhone 4G at the high end. The CDMA communication logic for the 4G might not be ready in time for the Apple Tablet (should it have built-in WWAN support in the first place), but I'd like to see Verizon pick up the Apple Tablet early on. No doubt, January will be a busy mobility month!

Sprint's core postpaid business has been gradually shrinking as seen by a net loss of approximately 3 million customers during the first nine months of 2009. They have increasingly been focused on the prepaid market with recent success in their $50 monthly unlimited prepaid rate plan. Their subsidiary, Boost Mobile offers prepaid services to nearly 6 million customers in the United States. Their recent acquisition of Virgin Mobile this summer for $483 million provides Sprint another 5 million prepaid customers. Let's not forget their other 48 million subscribers. Sprint has about $20 billion in debt, 2.8 billion shares outstanding and with the recent price of $4.00/share; Google could pick up the company for a 25% premium. This would only be about $14 billion in Google stock with Google assuming their debt. At Google's share price, that's only 7% of their outstanding shares. (See Exxon's recent acquisition of XTO, all stock deal of $31 billion). Google would have the spectrum, WiMax/4G, and access to Sprint's R&D. This is the fastest way they can become a carrier. The open Android OS would still be available to other handset manufacturers and market acceptance would be a result of who creates the better user experience.

Is it real or a PR buzz generator for Google? The device is built by HTC and patterned after the HTC Passion but is reportedly thinner than the iPhone. Is this just a Passion running an alpha version of Android 2.1?  Google employees have been tweeting and showing off their new toy to their friends. This has generated a storm of speculation and controversy on the blogs both in favor and against Google selling their own hardware. Google has handed out developer phones before such as the unlocked G1 HTC Dream last year. In the U.S., if I buy this unlocked phone I can put in my AT&T or T-Mobile SIM card and get it to work. But I would be unhappy if it only supports EDGE speeds on the AT&T network! Unlocked phones occasionally suffer some technical disadvantages by not supporting advanced services and quite often ratchet down in connect speed. The Snapdragon chip from Qualcomm runs 30% faster and consumes less than 10 milliwatts in standby mode. This makes video scream, but I'd be concerned with getting the bandwidth I need with the carrier. You'll get free GPS voice navigation, Google Talk/Wave and QR (Quick Response) Tagging; making it a great advertising vehicle. Google's taking a play out of Apple's playbook. The innovator needs to have some level of control over both the hardware and the software of the device. The challenge will be in managing the market supply chain and technical ecosystem. They should target prepaid MVNO carriers who need a decent smartphone option thereby avoiding the potential backlash from paid subscription carriers.  I will probably add one to my utility belt in January.

In 2009, Google made great strides with Android with key cell phone makers such as HTC, Motorola and Samsung and high-volume Asian OEMs and ODMs. Because the OS only supports a limited number of processors and does not support the native C language, tool makers such as Mentor Graphics have begun to port Android to a variety of chip sets in an effort to overcome these limitations. This opens up a larger market beyond smartphones. Contract manufacturers supporting ARM or MIPS processor designs have a tremendous opportunity if Android penetrates consumer electronics. If this happens,  we could see Google Android powered large-screen TVs, Set-tops, GPS handhelds, automotive gadgets and MP3 players. Japan's Open Embedded Software Foundation already has 50 participating companies. If you know anything about "embedded" devices you know that market is several orders of magnitude larger the computer and communication device market.

Last week HTC launched their latest Android device, dubbed the Hero. In addition to supporting multi-touch Flash Player 10 content, the Hero has a new UI layer called "HTC Sense." Among other things, it allows the use of widgets to bring information up the UI stack, like Twitter or other applications. It has similar behavior to the Palm Pre in this respect, allowing more end user customization. From a business perspective, it is strategically valuable to separate the user experience from the underlying operating system. That way, HTC can choose to change out Android for Windows Mobile and HTC Sense will still look the same. However this begins the fragmentation of open source code that could disrupt a fledgling ecosystem. For one thing, users would need to wait for HTC and the carrier to release updates. Google Android has made strides last year at the expense of the more prolific mobile OS, J2ME. Both Windows Mobile and J2ME variants suffer from a high degree of code fragmentation. J2ME is slowly dying and MIDP3 is way too late to make an impact. Apple got it right because they control the device and the OS, not to mention making app discovery and payment seamless and carrier independent. Developers will still need to maintain multiple versions of popular applications for Smartphones. We need a stable Android in order to achieve break-through market traction and avoid the developer frustration experienced with J2ME.

A WSJ article highlights recent discussions between Verizon and Microsoft to develop a new touch-screen multi-media device "in an ambitious effort to challenge Apple's iPhone." With Apple recently reaching over 1 billion application downloads, the bar is quite high for RIM, Google, Palm and Microsoft. Both Microsoft and Google prefer to stay out of the hardware design altogether. That makes sense because they are software companies. However, Apple has better control over the harmony between device and software. They recently hired AMD/ATI's CTO, Bob Drebin. A new CPU/graphics processor could be in the works under Drebin's direction utilizing talent Apple acquired from PA Semiconductor. Apple OpenCL is a specification that enables a single chip to do both graphics and computing. In chip-speak, it allows GPUs and multi-core CPUs to handle tasks like physical awareness & video rendering on a single die. Verizon seems set on retaining control by launching their own download store for a variety of applications and devices. I don't see them being too eager to introduce the device reported to be bigger than an iPOD and smaller than a laptop because it will have native WiFi & VoIP capability. Verizon is keeping their options open but they seem to be increasing subscribers fine without the iPhone ... for now.

With all the focus recently on social media and cloud computing, some might have missed recent developments in the next generation wireless network, LTE. Verizon announced at CTIA their new development center and one thing I find interesting is the fact that the operating system choices will have to collapse for 4G. Developers are still forced to choose between Windows Mobile, Android, iPhone, Qualcomm Brew and Symbian. Maybe what's needed is a mobile hyper-visor of sorts that will run managed code on any device, more on that later. The other thing that will trip us up will be the change in the economics of mobility revenue and profit opportunity. I believe LTE will require operators to abandon flat-rate, monthly unlimited data plans altogether - including wired. Time Warner and other MSOs got some backlash this year with their experimentation of metered broadband. Real-world bandwidth is nowhere near theoretical peaks (I expect users will get 10-20Mbps download links for LTE vs. the 100 Mbps advertised). Busy websites and network congestion happen. Spectrum is a shared and non-deterministic media. Combine this with operator backhaul capacity, device receiver power and cell configuration diversity and you have an industry marching to data caps, bandwidth restrictions and questionable service guarantees. Think about this easy example: when you are able to download data faster, you download more thereby triggering increased usage and reaching your data cap more quickly. Stacey Higginbotham had an excellent example of the difference in downloading HD video in a metered world where you thought you were saving money by not driving to Blockbuster!