zcallingcard.com

It’s that time of year again. The FCC has to develop its next annual report to Congress on the state of competition in the U.S. wireless industry. In the last few years, the FCC has done a good job of expanding the scope of information it analyzes to inform its opinion. The agency’s focus on the wireless industry value chain–from network infrastructure, to over the top operators, to device manufacturers–is a very good trend, but there is room for improvement. 2011 was a year of dramatic regulatory activity with the denial of the AT&T/T-Mobile merger and the proposed acquisition of the cable companies’ idle spectrum by Verizon Wireless. How will these watershed events be analyzed in the next competition report? I hope the FCC will generate a dispassionate, objective and fact-based report on the state of the industry. The analysis and utility of the report could improve if the FCC took the following into consideration: 

• The FCC must recognize the fact that wireless carriers are no longer the “Masters of the Universe.” Although they remain the core of our entire wireless-enabled ecosystem, they are no longer able to chart their own course due to competitive pressures being imposed by other parts of the ecosystem. Paradoxically, however, the FCC is intervening in the activities of the network operators more than it ever has before. It would be very helpful to have the FCC explain this dichotomy, and make clear how it figures that more regulatory hurdles for network operators would grow the ecosystem and serve consumers.
• For customers, the wireless experience is so much more than just their service provider. If the FCC is going to craft sensible policies based on its wireless competition reports, the agency must adopt a holistic view of the sector and consider how application providers, operating systems and device makers inform and influence the industry’s competitive dynamic, including the consumer impact of over the top providers competing with network operators. Services ranging from WhatsApp to iMessage are competing with services offered by the carriers. This reality could relegate operators to being dumb pipes. Is this a good thing for consumers and the sector overall? Rendering a dynamic growth sector to a stagnant set of dumb pipes doesn’t sound terribly consumer friendly.
• The FCC must recognize that it needs to view the sector through a clear lens, not one clouded by regulatory hubris. Google and Apple play an extremely powerful role in the wireless ecosphere now. For example, Apple has truly become a king maker in the wireless industry, highlighting how quickly the competitive dynamic changes in this space. If you are a wireless carrier and don’t have the iPhone, you are losing postpaid customers. And if you get the iPhone, your profitability takes a serious hit. In the fourth quarter of 2011, Sprint spent about 0 million on iPhones, which represented about one-third of its OIBDA profits. Despite this significant impact on profitability, the company felt it had no choice but to accept Apple’s terms. Fortunately, for US Cellular and many other providers, Google offers Android as the chess proverbial Queen to handset providers that lets them compete on an almost even footing with Apple. All the while, Google makes more than a billion dollar from mobile advertising through Android handsets. If the FCC fails to take this competitive dynamic into account, any policies it adopts will be immediately outdated and likely to distort the market.
• The FCC must accept the fact that every wireless operator needs more spectrum. The more successful the operator, the more spectrum it needs, as more customers use more spectrum. Trying to hold up network upgrades and capacity enhancements by some operators as a way to help less successful carriers is a policy that will doom everyone, including the less successful players. Introducing spectrum restrictions on larger operators is, in the long run, akin to managing market share. When the larger, more spectrum-constrained operators have reached their respective spectrum wall, quality declines and prices rise, prompting customers to leave and join other less spectrum-constrained operators. Those networks then become spectrum constrained, leaving customers with nowhere to go for high-quality, low-cost services. The best approach is making more spectrum available to all, and quickly.
• The FCC has to recognize that all spectrum allocated to CMRS is useful in a loaded network. Below 1 MHz spectrum offers immaterial advantages over above 2 MHz spectrum in a loaded network. At the same time, the FCC should elaborate on why it counts only half of Clearwire’s spectrum in its spectrum screen calculations. If half of Clearwire’s spectrum is unsuitable for mobile broadband service, then it should say so and take the necessary steps. If it is suitable, then it should include it in the spectrum screen since counting only half distorts the level playing field.
• Contrary to what many want you believe, the market became even more competitive among operators in the last year. The resurgence of Sprint from its near-death experience when it acquired Nextel is living proof of a resilient wireless carrier ecosphere. Sprint is gaining subscribers from all of its major competitors as evidenced by the net positive porting numbers from those operators.
• Reseller and Mobile Virtual Network Operators are more important than ever. Tracfone is the 5th largest service provider in the country. With a smart-tiered product portfolio, Tracfone demonstrates to the industry how profitable prepaid can be if it’s done right. Page Plus has carved out a healthy niche, and new entrants like Net Zero are planning to shake up the industry. Don’t expect all of them to survive; it’s a competitive market after all.
• Side-entrants such as Amazon are also making a major impact. Over the course of the last year, Amazon has become the go-to place to get mobile devices and services. Not only does it resell service from all major operators, but it is providing its own hardware. It will be very interesting to see if a 4G Fire tablet will make the same impact on wide-area connected tablets as the Wi-Fi version has made on the local-area wireless tablet market.

We can only hope that the FCC recognizes that it is overseeing a vibrant market that is driven by consumer demand for more and faster mobile capabilities, and it is shaped by competitive forces. The FCC should expand its focus even further to give each part of the value chain the necessary attention it deserves.

Roger Entner is the Founder and Analyst at Recon Analytics. Recon Analytics specializes in fact-based research and the analysis of disparate data sources to provide unprecedented insights into the world of telecommunications. Follow Roger on Twitter @rogerentner.           

FierceWireless

Mozilla stepped into the spotlight last month when it announced its first ecosystem partners for its HTML5-based mobile operating system, Boot to Gecko. But, there are still many unanswered questions, such as how apps in the Mozilla Marketplace will be discovered and how revenue will be split with developers. Despite the concerns, the platform could appeal to developers because it will use the Web to enable HTML5 apps while also providing access to core device APIs. The platform also promises to provide a more open development and business environment than Apple’s (NASDAQ:AAPL) iOS and Google’s (NASDAQ:GOOG) Android, while reducing development hassles and costs. The platform has the support of the likes of Adobe, Qualcomm (NASDAQ:QCOM) and Telefónica, but will it take off? Special report

FierceWireless

Iridium launched service Nov. 1, 1998 and plunged into bankruptcy nine months later. Its mission to deliver satellite-phone service to globe-trotting executives and consumers was destroyed by competition from unexpectedly pervasive and cost-effective terrestrial cellular services. After being bought out of bankruptcy by private investors, Iridium remade itself with the help of Matt Desch, who joined the company as CEO in 2006. Today, Iridium’s primary markets today are maritime, aviation and terrestrial handheld devices. While the U.S. government accounts for 23 percent of Iridium’s revenue, the fastest-growing part of Iridium’s business is machine-to-machine communications. Desch recently discussed Iridium’s future with FierceBroadbandWireless Editor Tammy Parker, and talked about his vision for the company. Hot Seat

FierceWireless

• The fourth quarter of 2011 was excellent for the wireless industry. More than 5.7 million net additions in the quarter were fueled by the iPhone 4S launch, demonstrating that massive growth is still possible in wireless. This is welcome news for handset makers, app developers, operators and network vendors alike. AT&T beat its best smartphone sales by more than 50percent in the quarter, Verizon Wireless had the best contract quarter in three years and Sprint had the best subscriber addition numbers since 2005.
• The launch of the iPhone 4S and the impact it had on the fortunes of the wireless operators, especially Sprint and T-Mobile, made it clear who is the king maker in wireless: Apple–as long as nobody else starts to develop something different and completely magical.
• Sprint as the most recent “iPhone have” gained contract customers for the first time in almost six years. At the same time, the woes of T-Mobile, as the last remaining nationwide “iPhone have-not” got worse. Customers left T-Mobile in large numbers on the heels of the iPhone 4S launch and the failed acquisition by AT&T.
• Verizon and AT&T attracted the most contract customers, while Sprint and Tracfone attracted the most non-contract customers. AT&T and Sprint were most successful in attracting wholesale and connected device customers.
• Who would have thought that Sprint would add 16-times more total customers in the fourth quarter of 2011 than Verizon?
• The failed acquisition leaves T-Mobile the most vulnerable operator. With mounting customer losses, six months to two years behind the competition in 4G LTE and lukewarm support from its parent, life will be hard for the Seattle-based operator. Will they be able to make it alone or will a new suitor appear?
• US Cellular is in a precarious situation as it is also behind with its 4G LTE network. In addition, it has to find a reason why people should join them, and it must do that quickly.
• Clearwire has to execute like it has never executed before. Squandering a two-year lead on 4G (WiMAX) was bad enough. Now its strategic investors are bailing. The company has to build its 4G LTE network quickly to give Sprint enough of a reason to put the unique LTE Clearwire technology in enough of its devices. Without Sprint, Clearwire is dead. Better forget all the romanticized rumors of another white knight carrier coming along to come to the rescue of Clearwire. We have heard it before–many times over the years. Sprint is all you’ve got.
• The opposition of the Department of Justice and FCC against the acquisition of T-Mobile by AT&T and the similar front lines appearing against the sale of the previously unused cable company spectrum by Verizon Wireless leaves one to wonder how successful carriers are supposed to get the spectrum they need to satisfy their customer’s demands.

* off due to rounding
** Not counted in totals due to avoid double counting. Tracfone is additive to no contract and subtracted from Wholesale totals. Clearwire was not added to totals

AT&T (NYSE:T) had a gangbuster quarter. It added 9.4 million smartphones in the quarter alone, smashing its previous smartphone record by 50 percent. On the heels of the iPhone 4S launch, AT&T more than doubled contract subscriber additions to 717,000 for the quarter. AT&T leads the industry with 56.8 percent of contract customers using a smartphone. Even though Sprint launched the iPhone for the first time, churn stayed muted at 1.4 percent. This shows that there is a significant disconnect between the negative press coverage that AT&T continues to receive and how customers are actually behaving as existing customers stay with AT&T near record low numbers and large numbers of new subscribers are joining them.  Surprisingly, prepaid was weak for the quarter, as prepaid phones are often given as holiday gifts, making December 25 typically the day with the most activations in the year. While Santa seems to have come up short on the prepaid side, the wholesale and connected group made massive gains. Since AT&T dominates the e-reader segment this has been largely driven by Amazon Kindles and Barnes & Noble Nooks. 

In January 2012, AT&T introduced new data plans during the quarter. Customers get 50 percent more data for more. There was widespread confusion and misreporting in the press regarding the motivations behind this change. The pricing move has to be looked at through the prism of declining operating margins, which plummeted from 22.9 percent last year to 15.2 percent. The reason for the decline in operating margin is smartphone handset subsidies. AT&T has to slow down the smartphone conversion rate to improve its operating margins as the typical smartphone comes with a 0 to 0 device subsidy. Early adopters and mainstream customers motivated by technical novelty and value have become smartphone users, driving ARPU significantly up. Technology laggards and less affluent customers still using feature phones remain to be converted. For these feature phone users, price is a major motivating factor if they are converting to a smartphone. By increasing the monthly recurring charge the conversion rate especially from their own feature phone base is going to slow down and margins are going to begin to improve due to a better revenue to subsidy ratio.

Santa was very good to Sprint (NYSE:S) in the fourth quarter. Sprint had the most customer additions in the last seven years. APRU went up by .68, the highest of any operator in the United States. Also, Sprint finally gained contract customers. The company now has more customers than ever and has officially recovered from its disastrous merger with Nextel six and a half years ago. While the Nextel platform is in terminal decline and continues to lose customers, the Sprint network is adding more and more customers. Sprint sold more than 1.8 million iPhones in the fourth quarter, and 40 percent of iPhone sales were to new Sprint customers. This translates into roughly 720,000 customers, which was substantially more than the 161,000 net contract additions. Numbers like that show that the power in the wireless industry has clearly shifted towards the makers of blockbuster devices. Without the iPhone it is quite likely that Sprint would have continued to lose customers in the fourth quarter. What is concerning is that the percentage of prime postpaid customers on Sprint declined from 83 percent to 82 percent, which is roughly 330,000 customers. This means that twice as many sub-prime customers became new postpaid customers at Sprint than the company had contract net additions. While Sprint was focusing on selling new iPhones, its sales of 4G WiMAX devices slowed down substantially. Sprint added almost 1 million customers on Clearwire’s 4G network. While this is still a respectable number, it was only half of what Sprint added in the previous quarter. Sprint’s churn numbers are also manageable, with contract churn at 1.99 percent and non-contract churn at 3.68 percent. Despite all the concerns about Sprint’s profitability, Sprint raised billion in debt recently for the 4G LTE network expansion and to help out Clearwire.

T-Mobile had a pretty miserable quarter, losing 706,000 contract customers and a buyer. While the quarter began well with the introduction of T-Mobile’s value plans, the iPhone 4S launch on competing networks, combined with the collapsed AT&T deal, devastated T-Mobile’s hope for a positive quarter. Contract churn increased to a disappointing 3.6 percent–the range in which prepaid operators generally see their churn. T-Mobile’s prepaid churn was 6.8 percent. It is admirable that T-Mobile was able to add 220,000 prepaid customers when faced with such high prepaid churn. In an effort to get churn under control, T-Mobile is planning to recontract a lot of their customers, which is a complete reversal of their strategy of the last several years. In other positive news, T-Mobile was able to increase smartphone contract customers to 11 million or 40 percent of its base. T-Mobile’s wholesale business only declined by 39,000, despite one large customer disconnecting 265,000 lines during the quarter. The overall impact of this customer loss was negligible as these 265,000 lines represented only million in revenues or 30 cents of APRU. A 20 percent increase in data ARPU helped to keep blended ARPU flat at . With the spectrum that T-Mobile is getting from AT&T as part of the break-up fee, the company is launching a 4G LTE network in the AWS band. It is able to use the optimal 20 MHz configuration in half of its footprint, with the other half using 10 MHz. T-Mobile is able to compete with this, even better than Sprint, which is initially using 10 MHz nationwide. While building out the AWS spectrum with 4G LTE, T-Mobile will move some of its HSPA+ to the 1900 MHz band. This will open the door for T-Mobile to offer the iPhone in the United States. In the short run, jailbroken iPhones running on T-Mobile will be able to take advantage of HSPA speeds first, giving them faster speeds than Verizon or Sprint customers until everyone will see some Apple 4G LTE love.

Verizon Wireless (NYSE:VZ) had a terrific quarter. It added the most contract customers, by far, in the fourth quarter, with more 1.2 million customers, over 50 percent above AT&T’s tally. The company had its best ever smartphone quarter in its history, with 44 percent of its contract base now on smartphones. Contract churn was near record lows at 0.94 percent. The no-contract segment of Verizon Wireless, which traditionally suffered from benign neglect, showed a nice customer uptick. On the heels of the nationwide rollout of its Unleashed product, prepaid net additions jumped to more than a quarter million. The all-you-can-eat plan gives Verizon Wireless an offer to compete against other unlimited prepaid providers albeit with a quality premium built-in. Verizon had to clean up its connected device database, which led to a decline of more than 1.3 million connections. The company also announced that it has come to an agreement to purchase AWS spectrum that is currently owned by several cable companies; the spectrum covers 93 percent of the United States. While the spectrum is currently idle, Verizon Wireless will be able to use it for 4G LTE services–if the transaction gets approved. Verizon and T-Mobile would create a healthy ecosphere in this spectrum band, leading to lower prices for handset. Ironically, this would help T-Mobile the most even though it has petitioned against the spectrum acquisition. Verizon also expanded its 4G LTE network to 195 markets, covering more than 200 million customers.

Leap Wireless (NASDAQ:LEAP) gained 209,000 voice customers and lost 30,000 broadband data customers for a net gain of 179,000. This was a dramatic improvement from only 10,000 net additions during the third quarter. Interestingly, 65,000 new subscribers were added outside of Leap’s network footprint. Generally, operators try to minimize usage outside their own network footprint because roaming costs make these customers unprofitable. Like almost every other carrier out there, Leap is building its own 4G LTE network. MetroPCS (NYSE:PCS) benefitted from the seasonally strong forth quarter by adding 197,000 subscribers.

US Cellular is still in the doldrums, having lost 13,000 subscribers overall, with 20,000 contract customer losses and gains of 7,000 no-contract subscribers. The problem with US Cellular is that it does not get enough new people in the door as postpaid churn is a healthy 1.5 percent. Hence, the company is looking for a new advertising agency to reposition the company. The Belief Project advertising campaign worked well for the US Cellular customer base but did not inspire the proper belief in customers from other carriers. The good news is that US Cellular’s customers are very satisfied with the company and enjoy one of the best networks. The bad news is that this a very well kept secret. US Cellular is also lagging behind in smartphones with only 30 percent of its customers using one. Its smartphone percentage rose to just above 30 percent; 50 percent of devices sold this quarter were smartphones. The company knows that if it wants to remain a viable provider, it has to compete on 4G. The unlaunched 4G LTE network covers 25 percent of US Cellular’s licensed population, with an expected 50 percent by the end of 2012.

While Clearwire (NASDAQ:CLWR) had a good quarter, with 873,000 subscriber additions, the bad news from its strategic investors keeps piling up: Google announced it is selling its Clearwire stake for .1 million, which is a 94 percent discount from what it invested at Clearwire’s inception. To make matters worse, Google was only able to realize a price of .60 per share compared to the .15 the shares were trading at before the announcement. It is becoming clearer and clearer that Sprint is the only friend left for Clearwire. While its other strategic investors are bailing on Clearwire, Sprint is raising more money for them to give it a chance to surive. How dependent Clearwire is on Sprint becomes clear when we look at the net add breakdown. Sprint added 904,000 customers to Clearwire while the company lost 31,000 Clear-branded customers. This is half of the previous quarter due to Sprint’s focus on the iPhone, and this sends a direct message to Clearwire about how vulnerable it really is.

Tracfone had another great quarter, adding almost half a million subscribers. One of the most interesting developments is that Tracfone, one of the savviest advertisers and notorious for stamping out wasteful spending, has a full-fledged TV campaign for Straight Talk. It is a testament to Straight Talk’s success, product positioning, and widespread appeal that Tracfone is going down that route.

Roger Entner is the Founder and Analyst at Recon Analytics. Recon Analytics specializes in fact-based research and the analysis of disparate data sources to provide unprecedented insights into the world of telecommunications. Follow Roger on Twitter @rogerentner.       

FierceWireless

Quick news from around the Web.

@FierceWireless: “@verge: Droid Fighter and LG Lucid 4G release date leaked on Verizon? Article” | Follow@FierceWireless

> Sales of the PlayStation Vita appear to be relatively sluggish. Article

> A U.S. Senator is requesting the Federal Trade Commission to probe into the privacy situation on iOS and Android devices. Article

> C Spire reduced the price of its iPhone 4S to 0 with a service contract. Article

> ZTE hopes to pass Alcatel-Lucent in network equipment sales. Article

> A trade panel said it will review a decision on patent infringement between Microsoft and Motorola Mobility. Article

> HTC released more device APIs, including those for Beats Audio. Article

> A Nokia executive said the company’s PureView camera technology will eventually be ported to its Windows Phone gadgets. Article

> The HTC Titan (also known as the HTC Triumph) is headed to China, becoming that country’s first Windows Phone. Article

Mobile Content News

> Nokia said it will discontinue its Ovi Share service. Post

> Google is reportedly preparing a Siri-style service for Android. Article

> Apple’s App Store has surpassed the 25 billion download benchmark. Article

> Nokia will discontinue its Ovi Share media sharing site on May 31, 2012. Article

Broadband Wireless News

> U.S. mobile networks are bogging down as customer demand for high-end data services mushrooms, according to a semi-annual report from J.D. Power and Associates. Article

> ZTE is now set to deliver infrastructure equipment based on software-defined radio technology to upgrade the operator’s 3G network in Sweden. Article

> Cisco and Alcatel-Lucent have separately announced significant LTE infrastructure developments with operators in the United Arab Emirates. Article

European Wireless News

> The impact of Free Mobile on the French mobile market continues unabated as the owner of SFR, Vivendi’s CEO Jean-Bernard Lévy, slated FT Orange for providing Free Mobile with favorable network sharing terms. Article

> The auto industry is now a focus in wireless M2M. Editor’s Corner

> Telefónica has joined with Spain’s largest publisher Grupo Planeta to expand its e-book content range and to combat Kindle’s success in the fast-growing market. Article

And finally… What’s after Android Jelly Bean? Key Lime Pie, of course. Article

FierceWireless

Quick news from around the Web.

@FierceWireless: “@verge: Microsoft testing Windows Phone 8 with dual-core Snapdragon S4 for Sprint? Article” | Follow@FierceWireless

> MetroPCS will start a mail in promotion in March. Article

> Samsung’s Galaxy Tab 7.7 is now available through Verizon Wireless. Release

> Verizon Wireless is offering 0 off all its LTE smartphones for one day. Page

> Huawei said it will build phones using the Tizen platform. Article

> Hewlett-Packard cut another 275 workers from its webOS staff. Article

Mobile Content News

> Nokia and Microsoft’s maps are unifying their appearance. Article

> Sprint Nextel’s Sprint TV service is launching on iOS. Post

> Samsung Electronics plans to “significantly” increase investment in its bada smartphone operating system, pitching the platform as an alternative to Google’s Android. Article

> Cloud services provider Brightcove unveiled the latest edition of its App Cloud content platform here at Mobile World Congress 2012. Article

> Images stored on devices running Apple’s iOS mobile operating system are vulnerable to downloaded applications that can copy the user’s entire photo library without any further notification or warning, The New York Times reports. Article

> A new report indicates iOS developers can gain unapproved access to iPhone and iPad users’ photos and videos. Article

> Marvel graphic novels are now on sale in the Apple iBooks bookstore. Article

Broadband Wireless News

> The first Qualcomm Gobi modem chipsets to support LTE Advanced will begin sampling in the fourth quarter of 2012 and will feature carrier-aggregation capability. Article

> Sunil Mittal, chairman and managing director of Bharti Airtel, called for the GSM Association to launch an ultra-low-cost smartphone program to help build mobile broadband in the developing world. Article

European Wireless News

> Wireless operators suffering from sluggish revenues and increasing threats from the likes of Facebook and Amazon should invest in customer-friendly cloud services to win the hearts of consumers, explained Rene Obermann, the chairman and CEO of Deutsche Telekom. Article

And finally… BlackBerry lost another customer to iPhone, this time the U.S. Bureau of Alcohol, Tobacco and Firearms. Article

FierceWireless

Check out this week’s most-viewed stories across Fierce’s wireless publications:

FierceBroadbandWireless
1. Huawei makes a stand with billion worth of U.S. supply orders
2. Data throttling: Annoying but effective
3. SuperWiFi launched in Canada, but it’s not U.S. Super Wi-Fi

FierceDeveloper
1. Developers flock to HTML5 as over 1B compatible handsets are expected to sell in 2013
2. Wireless companies expected to launch IPOs in 2012 and beyond
3. How Google is holding back in-app revenue growth

FierceMobileContent
1. RIM launches BlackBerry Video Store with PlayBook OS 2.0
2. Sprint creates New Ventures unit to tap Android growth
3. Mozilla Marketplace opens for HTML5 app submissions next week

FierceWireless
1. Verizon restores service after LTE network falters again
2. AT&T, Verizon and T-Mobile all claim to offer nation’s ‘largest 4G network’
3. Sprint announces job cuts as part of reorg

FierceWireless:Europe
1. Nokia Siemens will focus on profits, not market share, says chairman
2. Wi-Fi offload poised to dominate network news
3. Rumour mill: Telefónica Spain to select Alca-Lu for LTE network

FierceWireless

FCC filings are usually a sure sign of a release date in a month or less.  Now that the over- delayed Droid Bionic documents have been filed with the FCC , there is hope that it will be released soon, maybe on the leaked roadmap release date (September and some features have been confirmed.

The most useful part is the ‘users manual” first drafts and warranty. The touchscreen has a light sensor.  Your touchscreen might stay dark if the sensor just above it is covered. This feature will probably help with battery drain. The Droid Bionic will feature mobile hotspots and tethering.

The diagram shows a 4.3″ touchscreen it also looks like it has the new music/media player found in the Editors’ Choice Motorola Photon 4G.   As previously leaked the Droid Bionic has HDMI mirroring and now features Netflix and induction charging.

The Droid Bionic is a global phone in that it has SIM card that can be activated for world travel. It is not clear it like the Motorola Photon that we reviewed today that can also connect to global 3G/4G data networks.

Here are all the specs found from the Motorola development website that appeared briefly for the Droid Bionic followed by what we learned today.

• 1GHz OMAP4430 dual-core processor.
• 1GB RAM.
• 4.3″ qHD touchscreen.
• 8MP camera.
• HD video recording 1080p.
• VGA front-facing camera.
• HDMI 1.4 video output.
• Android 2.3.4
• Webtop-connectible.
• 4G LTE connectivity.
• ——–
• SIM for gobal roaming.
• Netflix.
• HDMI mirroring.
• Mobile hotspots.

Read all Droid Bionic articles.  Read Motorola Photon review.

WIRELESS AND MOBILE NEWS

Chris Nicoll

This may sound strange, but I have not owned a Nokia or Microsoft OS phone for about a decade. Remember Windows Mobile? Shortly after Y2K I thought it would be helpful to run the same OS on my phone as on my PC. As with my PC I quickly found out I was plagued with the same frequent reboots and crash problems on my phone. My Nokia experience, which was an old feature phone I used on my trips to Europe, was much more successful because of the interface, but it didn’t translate to a U.S. version, at least for me. Given my preceding statement, why am I predicting that Nokia will succeed in North America, thanks to Microsoft?

At CES I saw a Nokia Lumia 800 demonstration of the Windows Phone 7 (WP7) OS and was blown away on several fronts: the user interface is new and different, the operation is simple and the 800 is an uncomplicated yet powerful platform. But before you go crazy on the definition of success let me define what that means in the short term: Nokia pulling 10 percent of the U.S. handset market share and Microsoft pulling in 20 percent of the OS market share by 2015.

The “A”s are still dominant

To date the US market has been dominated by Android and Apple devices. In any quarter, one or the other is in a leadership position depending on a particular hot phone release. RIM has a small but loyal following. The key development in the smartphone market is that the devices have become personal objects. Many iPhone users fiercely identify with the Apple brand; Android users have flocked to a wide variety of devices and formats, and RIM users are attached to their unique messaging features. 

Smartphones are going the same way as the automobile. There are over 350 different models of cars for sale in the U.S. In a similar vein, according to CTIA, vendors brought an additional 120 new smart phone models to the market in the last year. People want a choice, and the successes (and challenges) of the Android Ecosystem are giving Nokia and Microsoft a clear playbook from which to pull.

Nokia has gotten smarter and revamped its channel strategy, using the operators as a primary channel, which requires a device customization strategy. This is a change from the company’s earlier attempts at the U.S. market with its one size fits all approach. Samsung realized the importance of creating segmentation with operator-specific models of its phones, and Nokia is signaling the same strategy. This was evident at CES 2012, where Nokia joined the AT&T Developers Summit, touting not only the virtues of Nokia and MS, but the speed and power of the AT&T network. These comments were repeated at the Nokia Analyst events, highlighting the strength of the AT&T network helping to power the Nokia/WP7 user experience.

Microsoft, after starting off with stringent rules governing WP7 customization, has figured out what rules to maintain and which to relax with WP8 in order to allow its device partners to have a customized WP experience without suffering the fractures straining Android. Does Microsoft have it all figured out? Doubtful and likely missteps will occur, but the initial release is already a step in the right direction.

Simplicity rules

My resident mobile device expert at home is my 14 year old son, he of the mobile gaming and 4,500 texts a month clan. His favorite phone was the AT&T Galaxy S II I have (models on both AT&T and T-Mobile) before we bought him an iPhone 4S (to combine the iTouch he lost and the Droid phone he broke). Then he started toying around with the Lumia 800. He marveled at the compact design, but what caught his attention is the user interface. His refrain was, “this is too simple; it’s too easy to use.” Some adults may need some training and that may require a quick video tutorial when first programming the phone, but clearly the younger users get it.

The WP7 interface reminds me of my iPad app, Flipboard, one of my favorite apps for tying many different information sources together simply and clearly. I no longer spend time looking at my Android phone for the various icons on top of the screen to see if I have any e-mails, texts, IMs, Tweets, LinkedIn messages or other notifications. I just glance at the screen and see what is going on. Instead of icons and opening apps, there are active tiles that show messages or status. During a demo of the Lumia 800 at the Consumer Electronics Show in January, Chris Weber, president of Nokia North America, pointed out that “voice is the new/old UI” as he used voice commands to control the Lumia 800.

Although some markets are fretting about Nokia’s brand recognition in the U.S., message board comments from teens and young adults suggest that Nokia’s brand is gaining traction. My kids and their friends know that Nokia makes good phones, but old timers like me remember solid phones with an easy-to-use UI. For a company that needs to position itself in a key market, this is a great place to start. And with strong partnerships with Microsoft and AT&T (and T-Mobile), Nokia is not exactly going at it alone.

Multiscreen could be the difference

Do Nokia and Microsoft have a slam dunk? Of course not, app support is lagging, and the company must have early success with the Lumia 800 and Lumia 900 to generate enthusiasm with three key constituents: consumers, operators and app developers. My early programming experience with my Lumia 800 was not exactly cumbersome, but I had to create yet another I.D. (on Microsoft Live), revalidate that I.D. on the Nokia system and activate Zune. The initial phone update required me to physically connect the phone to my laptop. Not ideal, but not unlike what you go though if you are a first time Google or Apple user and want to access the full service features.

The future of mobility and entertainment is multiscreen with users creating their own value-add with their smartphones, tablets and laptops. Entertainment is driving users’ behavior into simultaneous content of which enterprises and operators are not taking advantage. This affiliated content, which is increasing usage of mobile devices, is getting the attention of the entertainment industry. And let’s not forget that it represents another revenue opportunity.

The ecosystem that finds a way to include the largest and most powerful screen of all (TV) will be the winner. Apple, Google and Microsoft, the three major OS vendors, (assuming we can call MS a major OS vendor in the mobile space at this early date) have a play on TV and each of the mobile screens. If played correctly, this is where MS could help drive mobile success. Apple has something of a lead, but it is far too early to be picking winners just yet. 

Chris Nicoll has more than 20 years of expertise as a leader in defining telecom strategy. Chris is the principal analyst for ACG Research‘s mobility service and is responsible for consulting engagements, client relations and providing thought leadership for the industry. Prior to joining ACG Chris was principal analyst at Nicoll Consulting, where he developed marketing strategy and positioning for leading telecom operators. For more information about ACG’s mobility service contact Chris at cnicoll@acgresearch.net.

FierceWireless

Hercules was a big, fast and powerful god, the Samsung Hercules is expected to be a big, fast, super powerful smartphone from T-Mobile and now we have a photograph of this gigantic god of a smartphone with a 4.5′ Super AMOLED touchscreen and HSPA+ speeds of as fast as 42Mbps down.

We also have confirmation that it will be part of the Samsung Galaxy S II line of super-smartphones.

The photo shows the Samsung Galaxy S II logo as well as the T-Mobile logo on the back of the phone. The unnamed source who supplied the photos claims that the new Samsung galaxy S II Hercules will have a 4.5″ touchscreen, Netflix preinstalled with new messaging, email and calendar apps.

The Model number is SGH-T989 for the Samsung Galaxy S II Hercules.  Previously it was estimated that the Samsung Galaxy S II Hercules would have a September 21 release date.

Speculated specs of the Samsung Hercules also include, Android 2.3
Gingerbread , 16GB ROM,
1GB
RAM, NFC suport and an external microSD for up to 32GB.

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