More expensive mobile apps are coming

One of the interesting things about legacy telephone contracts is that they were created before wireless carriers realized how valuable they were. But times change, and the carriers have been shifting their pricing plans to recognize that data access is far more valuable than minutes. The news that Verizon is moving to tiered data plans should not come as a shock to anyone. It was inevitable. And it is similarly inevitable that the other carriers will follow along. The current, unlimited, model is unsustainable.

But what will that mean to the market?

One effect is that middle-income parents will begin to think twice before buying a smartphone for their adolescent children. Maybe those kids will relearn how to play outside.

For business users, it means that those tantalizing mobile apps will become far more expensive. It won't be incrementally more expensive. It will be a LOT more expensive.

Consider this ... An electrical contractor with 30 field technicians wants them all to have tablets in order to handle work tickets electronically. If we use Verizon's pricing model as an example, that strategy will mean a minimum of nearly $11K in additional operating expenses every year. For many such firms, that will change the payback of mobile technology to something that may no longer be acceptable.

This unilateral decision by Verizon will impact mobile software developers, the Droid and Apple stores, and every firm with a mobile workforce. The technology consultant had better understand this when recommending solutions for their clients.

Now that hardware doesn't matter ...

Remember the big moments in mobile technology?

My first cell phone - actually it was a car phone - could hold 99 speed dial numbers, and I occasionally would have trouble in traffic when the cord got caught up in the gear shift of my 1988 Ford Ranger. We've come a long way.

The smart phone changed a lot for us. Its introduction was an inflection point in the way we used mobile technology. It was no longer just a phone, but it became a means for managing communications across multiple fronts. We could handle email, as well as voice. We could manage our calendars and contact lists. However, all of those functions were still tied ... one might even say held prisoner to ... the device itself.

But that has changed. The features and functionality of a device are no longer controlled by the manufacturer. Even though Apple tightly regulates what you can put the iPhone, it remains a highly customizable tool. I can buy that applications of my choosing for a Droid, making it do things that another Droid won't.

This is why we are starting to hear rumblings about speed. And I'm not referring to network speed. LG claims to have the Fastest phone at CES 2011 in the Optimus 2X. Samsung and Google are touting the processing power of the soon-to-be-released Nexus S. Manufacturers are talking about processor speed in the same way that we talked about it 10 years ago.

The mobile market is moving away from hardware differentiation at a high rate of speed. It no longer matters that I have a Motorola Droid and my wife has an LG Ally. And I won't care who makes my next phone. I'll care about chip speed and memory.

The great news in all of this is that it opens up avenues for businesses to set themselves apart with mobile technology. Five years ago, it was cost-prohibitive to write a mobile application, because the hardware changed before you got it finished. Now, you can write an Android-based app and be confident that it will bring value for at least a few years. If you haven't started thinking about how your customers can interact with your company using mobile technology, start now.

BlackBerry is to DOS as Android is to Windows

Nielsen recently surveyed about 1,700 people who purchased smart phones in the past six months. They've been doing this survey monthly (see the graph below) and it reveals some interesting trends. First of all, notice the what happened to Apple just in the July and August ... their share of new phone buyers dropped by nearly a third: from the 35% range to the 25% range. Next, notice the steady trajectory of the Android OS.

Much has been made about the upcoming availability of the iPhone on Verizon Wireless, but I don't believe that will have a material impact on the overall trend. That's because the entry point price for an Android phone is far lower than the entry point price for an iPhone.

If this sounds familiar, it's because it is the same thing that happened in the 1990's. The Apple operating systems for PCs have always been regarded as superior to Windows. They still are. It is more reliable, more intuitive and more elegant than any of the comparable and contemporary versions of Windows. Yet, you're far more likely to encounter a Windows PC than an Apple. As a colleague of mine remarked, "Everyone wants a BMW, but ..."

Is the Apple mobile OS better than the Android OS? Probably. But in a price competitive market, price wins.

So what about the BlackBerry? I stand by my previous comments. DOS paved the way for personal computing. BlackBerry paved the way for smart phones. DOS served its purpose and is now part of history, making way for Windows (which drew its inspiration from the Mac). The BlackBerry will certainly fade from relevance ... slowly, but surely.

Credit where credit is due:
The Nielsen article

Droid sales start strong

Industry analysts are reporting that Verizon Wireless and Motorola have likely sold between 700,000 and 800,000 Droids since the device was launched in early November. In his research note, equity analyst Mark Sue (RBC Capital Markets), says that sales of "1 million Motorola Droids [is] achievable for 4Q09." This would be a tremendous milestone, not only for Motorola and Verizon Wireless, but even more so for Google, whose operating system underpins the Droid.

Whatever new ground the iPhone has broken, its position of market dominance is about to be overwhelmed by this device. AT&T simply does not have the market coverage that Verizon Wireless has. And while the Droid isn't quite as good as the iPhone, history has shown that consumers will gladly sacrifice elegance for cost and utility. This is the same story as Mac versus the PC that played out in the 1990's. The old Mac operating system was vastly superior to the DOS-based PC, and later to the early Windows machines. But at less than half the price, the market clearly voted in favor of Microsoft and has only taken brief glances back.

Again, the iPhone is a better device. But in the end, that simply will not matter.

Source: Big marketing budget drives Moto Droid sales
by Marguerite Reardon, Senior Writer, CNET

100K Droids Sold

According to an industry analyst, Verizon Wireless sold about 100,000 Droids over this past weekend (Fri 6 Nov to Sun 8 Nov). Although Verizon Wireless (VZ, NYSE) is not confirming those numbers, no one is really disputing them.

What is a matter of dispute is whether 100K phones is "strong" start or a "weak" start. Those who say it's a weak start compare the phone's performance to the iPhone, with which the Droid is meant to compete. "The iPhone sold multiples of that amount in its first weekend for the original version," according to Roger Entner, an analyst at Nielsen Co.

But I tend to lean towards the "strong" start camp... partly because I'm naturally an optimist. But I also recognize that the iPhone was the first to the party. It was new and sensational. And no one can dispute that Apple does a phenomenal job of building market excitement in advance of a product launch.

The Droid is an answer to the iPhone; a response not an initiator. So it will not have the same buzz and excitement. It's not as disruptive a technology. People who were unwilling to switch to the iPhone 2½ years ago are not going to be as willing to switch to the Droid today.

On the other hand (I'm also an economist), when current Verizon Wireless contracts start coming up for renewal, I believe you'll see a tremendous number of users switching from BlackBerry's, Palm Pre's, and other smart-phones, over to the Droid. Because of that, I see the sale of 100,000 phones in 36 hours as a sign that strong Droid sales are highly likely over the next two to three years.

Credit where credit is due ...
ComputerWorld's article on Droid Sales -- by Matt Hamblen, originally published November 10, 2009

AT&T boosts wireless speed

AT&T announced that they are rolling out faster network speeds across its network. The company uses a High-Speed Packet Access (HSPA) network to provide 3G services, and it currently tops out at 3.6 Mbps downlink speed. The second-largest U.S. carrier is in the process of using software upgrades to boost that to 7.2 Mbps download speed. While the theoretical limit for HSPA is over 14Mps, few analysts expect any of the big carriers to push it to that level. That's because Sprint and Verizon Wireless are already testing the next generation of wireless broadband -- 4G -- in several markets across the country.

Since this puts the No. 1 and No. 3 carriers at a measurable and easily understandable disadvantage, I would expect that Verizon and Sprint will follow suit over the next few months. This makes sense because, given the current economic climate, most consumers will be hard-pressed to buy new 4G devices that don't give them any benefit in most of the country. And the same will be true for businesses, as well.

This will give AT&T a short-term advantage over the competition that perfectly complements their current iPhone monopoly. But the advantage won't last long, and - ultimately - customers will get the benefit.

Credit where credit is due:
InformationWeek: AT&T Beefs up 3G Network
AT&T Inc.: T (NYSE)
Verizon Communications Inc.: VZ (NYSE)
Sprint Nextel Corporation: S (NYSE)

Apple and AT&T wrestle over the iPhone

Every time I see an iPhone, I'm more amazed at what it can do. More specifically, I guess, is that I'm amazed at the creativity and practicality of the various applications that are now available for these devices. My personal favorites are the "lighter" and the level. The level is truly remarkable, using the built-in accelerometers to detect how plumb the device is, and the display is a stunning, lifelike representation of a bubble level.

Unfortunately, I cannot get one.

That's because Verizon Wireless has, by far, the best coverage where I live. And, as compelling a product as the iPhone is, coverage is more important to me than features. So, AT&T's monopoly on the iPhone is a barrier for me. Not for everyone, of course, but it is for me.

But AT&T's exclusivity agreement with Apple expires in 2010. AT&T wants to extend that agreement, but Apple has little incentive to do so.

To me, this means that the iPhone will be less profitable for AT&T over the next 18 months. That's because I believe that AT&T will find a way to get the deal done. But it's not going to be pretty. Of course, AT&T gets a lot of ancillary benefits to being the exclusive iPhone carrier. Things like additional store traffic, non-iPhone users that come in on the coattails of iPhone users (family members, mostly), and the positive brand association that comes out of the relationship. Expect an announcement over the summer, just when the Pre is coming out and when the 2-year contracts for the first crop of iPhone buyers comes up. It'll be a way to generate new buzz for the product.

Verizon to launch music store

Verizon Wireless will launch its App and Music mobile download site on April 7. This move puts the wireless giant in direct competition with Apple's iTunes store, with music available for download at $0.69, $0.99 and $1.29.

Most app stores are geared to users of sophisticated smartphones, like the BlackBerry. But Verizon sees ample growth opportunities with selling mobile programs to non-smartphones (stupid phones?), and it has opened their app store for these devices. In actuality, this really is more of a re-launch of their application store. For years, Verizon Wireless has offered the "Get it Now" service, which had applications for many different types of phones, non-smartphones included. Overall, "Get it Now" was relatively trouble-free and, I'm sure, provided a more-than-acceptable revenue stream for the company.

However, by offering full songs (as opposed to just ringtones), Verizon is, I believe, attempting to prevent more defections to the iPhone ... and more importantly to AT&T - the only carrier for which the iPhone is approved. This also signals to all concerned that a deal that would make iPhones available on the Verizon network is highly unlikely. Which is too bad.

More information at InformationWeek: Verizon unveils Music, App Stores
Verizon Communications Inc.: VZ (NYSE)

Palm gets further behind

Yesterday, Palm released their 3rd Quarter results and, to no one's surprise, it is was a difficult period for the once-dominant PDA provider. For the quarter ended Feb 27, 2009, the company had $90 million in sales, well below expectations of about $150 million. The company admits that they are enduring "a challenging transitional period" as they work feverishly on their next model, the Pre.

Certainly, their management is remaining publicly optimistic that they will come out on the other end of this storm in one piece. But unless the Pre is compellingly different from the iPhone, I believe that Palm will end up getting absorbed into Research-in-Motion or Motorola by the end of next year. They have a respectable existing user base, but they seem to be counting on current iPhone users switching to the Pre once their contracts start coming up for renewal this summer. Given the loyalty inspired by Apple's transformational product, this seems to be an unrealistic expectation.

Palm's quarterly announcement: Palm Reports Q3 FY09 Results
Palm, Inc.: PALM (NASDAQ)

Verizon pushes cell - landline convergence

Next month, Verizon Wireless plans to release a new, land-based phone that claims to integrate seamlessly with their cellular network. The phone is VoIP device which uses the customer's existing internet service for access. While they say they don't intend to compete with Vonage and Comcast internet phone service, the package is aimed squarely at the market segment that would consider switching from traditional phone service to one of those products.

The package consists of a very expensive phone ($199, after rebate) and a monthly service plan ($34.99). "Phone" is probably a misnomer, though... at least as much as "cell phone" is a misnomer for the BlackBerry that's strapped to my waist. The device incorporates a 7" screen which allows the user to access a limited number of web-based applications, such as news, sports, and traffic information. It's also where users can manage their calendars and send and receive text messages from Verizon Wireless phones.Take a look at this picture:

And this is the primary advantage that the device offers over Vonage and Comcast. I can use a softphone client on my PC over my existing Comcast internet access, thereby combining all the advantages of a phone and a PC. But it requires that I fire up my machine whenever I want to make a call. The Verizon device is "always on" and always connected. It really becomes a much more convenient PC that is relatively unobtrusive. It's a PC you can fit in your kitchen, for instance.

There are distinct disadvantages with respect to Vonage & Comcast. Cost being the most prominent. But I suspect that's a temporary state of affairs. I would bet on Dell or Apple coming out with a competing device that's, at least in the case of Dell, more favorably priced. Keep an eye on this. It should be very interesting.

Read more at C-Net: Verizon Wireless launches new product