Time to dump smartphone data plans? Why not? The cell phone market is stagnating--and worse while only a fraction of wireless customers own smartphones. Any way you look at it, the global cell phone market appears to be in miserable shape.
Some recent headlines to consider:
• Motorola loses $3.6 billion
• Sprint Nextel announces plans to cut 8,000 jobs
• Nokia's profits plunge 69 percent
• New subscriber growth at T-Mobile USA (which coincidentally offers the only Google Android phone in the U.S. market) suffers a steep decline.
• While the fourth quarter is usually the best time of the year for carriers, global vendor shipments fell in the period by more than 12 percent compared with a year ago.
(Credit:
Strategy Analytics, Bernstein analysis)
Against this backdrop, the (increasingly few) optimists out there believe that smartphones will ride to the rescue of the wireless industry. Ryan Reith of IDC put it this way:
"As long as operators are able to continue to subsidize these devices, and developers continue to enhance applications, then this segment will be a silver lining to an otherwise gloomy market."
That's the conventional wisdom and it might be the right prescription during a normal period. But we're living through such a rough patch that not only is North America reaching a cell phone saturation point, but even the optimists at IDC worry that sales may wilt in the face of weakening demand, currency volatility, and reduced access to credit.
In tech-obsessed areas, such as Northern California, New York, Boston, and Los Angeles, you'll find lots of people who have traded up and bought fancier, higher-margin smartphones. They are in the minority. Fact is that smartphones represent 17 percent of the 1.3 billion mobile handsets expected to be sold around the world this year.
The rest may be dying from iPhone envy or whatever. But they ain't close to signing their name to the line which is dotted. The culprit: the exorbitant cost of the various data service plans.
I'm not concerned here with the geeks, the cool kids with the big bank accounts or the corporate types who can justify the purchase to their bosses. For the average Joe, who already pays a fortune for subscription television and Internet service, paying a monthly data service on a smartphone qualifies as a luxury that can be postponed until normalcy returns. A dowdy cell phone is more than enough to put you in touch with the wife and the kids and hey, you can also call Sal's Pizza for Saturday night delivery. Your cell phone may not run Google Latitude just yet. But trust me, Western civilization will survive.
In the meantime, I'd like to offer a modest proposal, courtesy of Bernstein Research's reliably incisive Toni Sacconaghi. In a note published Wednesday, Sacconaghi discussed the impact of the monthly charge for required data service and the effect on sales of Apple's iPhone. Here's the crux of the argument:
"Apple is effectively not participating in 83% of mobile handset market today. To more effectively address this part of the market, we believe Apple should offer an iPhone that does not require the user to sign up for a data plan. Note that we do not necessarily believe that a non-data plan iPhone needs to be priced significantly lower at retail than the current 3G iPhone ($199 in the US, with service contract), but waiving the data plan requirement alone would save users on the order of $30 per month, or $720 over two years-making it accessible to a much larger base of users."
Sacconaghi was writing about Apple and AT&T, but let's extend the analysis elsewhere. Maybe other carriers wind up subsidizing less of the upfront cost of their devices. (Or maybe not.)
That wouldn't be charity. There's a good business case to be made. In Apple's case, Sacconaghi estimates that a non-data plan iPhone represents an additional $7 billion in annual sales and $4 billion in gross profits (assuming 3 percent market share).
Of course, the carriers may deem this nonsense and instead decide to hold out as long as they can. It wouldn't be the first time they resisted change, but there are tens of millions of potential new subscribers up for grabs in an increasingly volatile world.
For at least a few minutes in the daily spin cycle, the news about Mark Papermaster and Tony Fadell topped the interest in the fate of those two other guys attracting lots of attention today.
Since Apple's preferred mode of communicating with the rest of humanity is via the issuance of press releases, we're only left to speculate about the cosmic import of what is, on the surface, a big event in the company's recent history. The company confirmed that Mark Papermaster, who had been a vice president at IBM, who will join Apple as senior vice president of devices, responsible for the company's iPod and iPhone hardware-engineering teams.
IBM now says it plans to sue to prevent Papermaster's defection. At first blush, it reminded me of the dustup over Kai-Fu Lee's move from Microsoft to Google a couple of years ago. Lee, a star computer scientist who built up Microsoft's research operations in China, was hired by Google to do something similar for his new employer. Microsoft and delayed his departure. Ultimately, a settlement was struck, but Microsoft made the point it wanted to prevent further poaching.
But the Lee analogy doesn't really work. If he gets to punch in at Apple, Papermaster would be managing iPod and iPhone development. At IBM, he was involved with blade server development and the Power chip. (Unless I missed something and Big Blue was secretly working on smartphones and MP3 players, there's not much to connect the two examples.)
Would Papermaster's arrival signal a more concerted push by Apple into the enterprise business? Apple doing blade servers? Nah. Eliot Van Buskirk at Wired News offers a more credible scenario, suggesting that the move may be the prelude to a "major shift" in Apple's music strategy:
Times have changed since 2001--or even 2006, when Fadell took charge of the iPod division. Apple has settled on general iPod designs (classic or touchscreen), flash memory has stabilized as the portable music format of choice and, perhaps most importantly, connected devices such as the iPhone are accessing music less on their own hard drives and more on Web-based music services.
As my colleague Tom Krazit notes, the Papermaster hire probably has more to do with Apple incorporating more computing smarts into its devices. (Check out the accompanying video.)
Meanwhile, over at ZDNet, Larry Dignan points out that the shuffle clouds the succession picture at Apple:
Jobs isn't going anywhere at the moment, but recent press conferences may indicate that he's at least pondering a succession plan. Jobs has been yielding the spotlight to other top execs like Chief Operating Officer Tim Cook. While the Jobs successor is a topic of conversation among techies, it's unclear whether anything is imminent (it probably isn't). Nevertheless, Faddell was noted as a possible successor.
More likely, this is going to be about the money. If IBM can make Jobs sweat, that's going to be at least some small consolation for losing a coveted executive.
A unexpected bump in the head landed yours truly in the emergency ward earlier in the year. When they wheeled me into the CAT scan, I handed over my cell phone.
"Oh, we don't need that," the attendant told me. "We only take iPhones."
Wow, I thought. Of all places to land a scoop!
"You mean there's something about the device which interferes with the picture process?"
(Credit:
Apple)
"No," the attendant laughed. "We're just looking for iPhones, not that other stuff."
OK, I thought. Apple had developed a very good product, but this bordered on mania. Truth be told, I also felt slightly guilty as a sometimes accomplice in the hype machine. If we're going to be honest here, it's impossible not to acknowledge that Apple plays the press like a fiddle when it comes to product releases--a willing fiddle, but a fiddle nonetheless.
Fact is that Apple has always been terrific copy--going back to the original partnership of the "Two Steves," through the prolonged corporate melodrama of the mid-1990s and right up to the return of the prodigal co-founder. It mattered little that other companies' products had bigger market share. Reporters just found Apple to have been a more interesting company to write about.
But it's sometimes hard to tell who is driving the train any more. Most of the time, Apple's corporate marketing mavens can count upon reams of free publicity during the run-up to a product debut. A suggestive comment here or a false leak there is all it takes to trigger a media scrum. How crazy has it become? Harvard Business School professor David Yoffie noted last year that the iPhone generated $400 million in free publicity for Apple. When was the last time Sun Microsystems or IBM got that kind of treatment?
A bemused Dave Winer had the right idea as he watched the day's coverage unfold.
It's really upsetting watching all the geek journos scrambling for scraps.Which raises a simple question.
1. Why don't they broadcast Apple keynotes on MSNBC or CNN? All this makeshift jury-rigged michegas. It was cute for a while, but this has been going on for 25 years!
He's got that right. So it was that in the last week nearly every self-respecting tech blog worth its salt wigged out over the approaching debut of the second-generation iPhone. The pack picked up the scent and nobody dared get left behind. You'd think the Jobs keynote at the Worldwide Developers Conference might have been anticlimactic? No way. There were live blogs everywhere--even the normally staid New York Times got into the act.
I guess it's a case of keeping up with the Joneses, though the risk is that we've all inadvertently become fan boys. Let's face the truth: Apple gets a enormous amount of free publicity because we've all bought into the idea that it's special. I suppose kudos are in order to Apple's corporate media planners on a job well done. But will we stop? No way. The clicks are insanely great. And besides, when it comes to Apple, you all can't ever seem to get your fill. Or do I have that wrong? (Before answering, check out this snapshot of Techmeme from earlier in the day.)
All Apple, all the time
(Credit: Techmeme)
Apple fan boys (and girls) are counting down the days before Worldwide Developers Conference on Monday. Everyone and their mother-in-law expects Steve Jobs to use his keynote at the event introduce new iPhones, including new 3G models and a less expensive refresh of the 2.5G version.
Microsoft marked the occasion with a reminder to Windows Mobile partners that the company "will sell nearly 20 million Windows Mobile smartphone licenses."
In an e-mail, Andy Lees Sr., the company's vice president of Mobile Communications, heralded this as a "milestone" adding that year-over-year Q1 unit growth in Windows Mobile "was greater than sales of Apple's iPhone."
But not so fast. The reliably excellent Todd Bishop at Seattlepi.com spotted this little scooplet:
Microsoft said it expected to sell "more than 20 million" Windows Mobile licenses in the current fiscal year, which concludes at the end of this month. In today's letter, Microsoft's Andy Lees instead says the company "will sell nearly 20 million Windows Mobile smartphone licenses."
He's right. On February 10, Microsoft issued a press release where the company offered that prediction for fiscal 2008.
Scott Rockfeld, group product manager in the Mobile Communications business, downplayed the apparent contradiction.
"The way to look at this was that this was definitely a casual reference in a thank you letter," he said. "It shouldn't be seen as anything more significant. We've always said we'd be at 20 million. That's our goal. If it comes up short, it really, truly is a rounding error."
"Ultimately," he continued, "it's just a great time to reach out to our partners...there's a lot of misinformation out there. The reality is that when you look at the numbers, we're outselling RIM and significantly outselling Apple...it was just time to reach out and say, 'Hey guys, we've done amazing things the last six years and there's going to be no ceasing of our innovation in the future.'"
Update at 8:35 a.m. PDT: More details have been added throughout.
For some reason, this hasn't drawn a ton of attention. But AT&T is edging closer to completing a 3G upgrade just in time in for the rumored release of a 3G iPhone next month.
On Wednesday, the company announced that it is only six cities away from reaching its goal of faster 3G uploads in 275 cities. AT&T has already deployed faster 3G download technology in these cities, and by the end of June, these markets will also have the faster upload speeds using a technology called HSUPA, or High Speed Uplink Packet Access. This means that AT&T wireless data subscribers will be able to get downloads of 1.4 megabits per second and uploads of between 500 kilobits per second and 800 kilobits per second.
But AT&T isn't stopping with 275 markets. By year's end, it expects to reach 350 cities with these faster upload and download speeds. And as future releases of the HSPA (High Speed Packet Access) 3G wireless technology become available, even faster speeds are expected in 2009.
AT&T has been adding new 3G handsets to its retail lineup to take advantage of the new supercharged network. The company, which is Apple's U.S. mobile carrier, had this to say:
"Equally as important as the network is the device through which a customer experiences it. AT&T's handset portfolio in company-owned stores is more than 75 percent 3G-capable--and will be even more enticing with the addition of more 3G-enabled smartphones in the summer and fall of 2008. Additionally, AT&T also has the most compelling set of 3G services, such as AT&T Video ShareSM, which allows users to share live video over wireless phones while on a voice call."
No mention of the iPhone in AT&T's press release, but that's going to be Steve Jobs' task at the company's Worldwide Developers Conference in a few weeks--or at least that's the rumor.
CNET News.com's Marguerite Reardon contributed to this report.
Forgive my flippancy, but I'm trying hard not to bust into giggles after reading about Rich Miner's prediction that sales of Android-based devices will outstrip sales of the iPhone.
Know where this guy can score an iPhone?
(Credit: Dan Farber/CNET News.com)"Once you have devices out there from Motorola, HTC, Samsung, and so on, there's a much larger potential market on Android than for the iPhone," he said during a conference held at the Computer History Museum in Mountain View, Calif. He later added, "There are things I saw people doing with the first version of the Android SDK that it seems like you can't do with the iPhone at least at the moment."
All of which may be true and yet totally beside the point.
Let's call Google on what this really is: Considering how there are currently ZERO Android devices in the market, Miner is engaging in (pardon the pun) major trash talking. Maybe Microsoft became such an easy target that Eric Schmidt decided it was the right time to pump up the volume at Apple's expense. I don't think Steve Jobs is sweating any. Down the corridor from me, my colleague Dan Farber recalled correctly that Apple's following the same playbook that's served it quite well in its other markets.
It's the same dilemma Apple has faced over the years. Should the Mac OS be licensed to any reasonably qualified manufacturer? Clearly, (Jobs) has proven that he can create a great PC business with 5 percent market share.
The first crop of phones resulting from Google's Open Handset Alliance aren't expected until the second half of the year. And yes, Android will not be tied to a specific device and thus the potential for monster sales exists--at least on paper.
But I understand why Google's drawing invidious comparisons with the iPhone. Apple may yet screw this up but there's powerful momentum behind the device. One week after announcing an iPhone software development kit, Apple's registered more than 100,000 downloads.
Android may offer the more open architecture, but Apple's decision to allow third-party developers to build applications is just the fillip the iPhone needs to win converts in the business world. So if you're Google, I suppose it comes down to a matter of "why not?" A little bit of FUD at this juncture doesn't come at a cost. But words alone won't turn Android into the success its creators envision.
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