Telecom: January 2010 Archives

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!