Wireless

Smartphones will capture 37 percent of the worldwide cell phone market by 2014, a leap from 16 percent in 2009, predicts a new report from Pyramid Research.

The report, released late last week, sees much of the growth coming from outside the U.S., notably in emerging markets. Across the globe, China is likely to outpace the U.S. as the largest smartphone market next year. Latin America will be the fastest-growing region over the next five years, with a compound annual growth rate (CAGR) of 48 percent for smartphone sales, forecasts Pyramid.

Top 10 most popular cell phones of 2009 (photos)

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"Pyramid expects China to capture the No. 1 position in 2010, driven by operators' aggressive promotion of smartphones using wider portfolios, more attractive pricing for services, and new initiatives," Omar Salvador, senior analyst at Pyramid Research, said in a statement. "Brazil, India, Turkey, and Nigeria will be the fastest growing markets over the next five years with CAGRs of 43 percent, 39 percent, 37 percent, and 34 percent, respectively. Latin America will be the fastest growing region at a compound annual growth rate of 48 percent, followed by Africa and the Middle East with a 39 percent CAGR."

With Pyramid forecasting sales of 1.8 billion smartphones over the next five years, the market looks like a huge opportunity for handset makers and wireless carriers. However, the report notes that growth in mobile subscriptions has been slowing, putting pressure on the industry to enhance data services and applications, which are seen as two primary drivers for smartphone purchases. Pyramid believes that handset makers and carriers will need to work together more closely to capitalize on the huge sales potential of smartphones, especially in emerging markets.

But a unified smartphone strategy has proven challenging for the industry, the report notes, due to differences in payment methods, subsidies, and the levels of competition.

In countries like the U.S. where there is no limit on subsidies and there is higher level of competition, operators such as AT&T use aggressive subsidies, unlimited data plans, and specific smartphones models--i.e., Apple's iPhone--with exclusive distribution to woo customers. By contrast, Russia prevents handset subsidies and focuses more on value-added services, lower prices, and free initial test periods for smartphone consumers.

"Understanding local conditions will be vital for operators, smartphone vendors, and OS developers, as operator strategies differ substantively across markets based on the method of payment (postpaid or prepaid), the prevalence of subsidies, the level of competition, as well as the market shares of operating systems," Salvador said.

Many people I know are frightfully attached to their iPhones. They treat them as if they were a peculiar and exotic lover, one they can hardly believe they have managed to seduce.

The finely calibrated minds at Strand Consult have taken this analysis to a particularly simple conclusion: iPhone users are, the consultants say, really quite nuts.

The Strand thinkers released an opinion entitled "How will psychologists describe the iPhone syndrome in the future?." It focuses on the sorts of people who buy into Apple's great success.

Here's a flavor of the somewhat-skeptical nature of Strand's feelings: "Apple has launched a beautiful phone with a fantastic user interface that has had a number of technological shortcomings that many iPhone users have accepted and defended, despite those shortcomings resulting in limitations in iPhone users' daily lives."

The consultants' likening of iPhone buyers to kidnapped hostages may raise more than the eyebrows of many an Apple fanboy (fanperson?). Indeed, it already has the Mac world aflutter.

Is this evidence of an iPhone hypnotising a user?

(Credit: CC Gonzalo Baeza Hernandez/Flickr)

"When we examine the iPhone users' arguments defending the iPhone, it reminds us of the famous Stockholm Syndrome--a term invented by psychologists after a hostage drama in Stockholm. Here, hostages reacted to the psychological pressure they were experiencing by defending the people that had held them hostage for six days," Strand declared.

The implication is surely that Apple has mugged millions of people with its beauty, dragged them off to a very dark cellar in some barren land, turned them into slightly bonkers Barbarellas, and then recruited them as soldiers for the cause.

This is the sort of thing of which the Church of Scientology is normally accused. But for some strange reason, it's a rather chilling but pleasant shower to read something that isn't mere worship.

Strand claims that it closely analyzes the financials of mobile operators. And if you also happen to order its wonderfully free report "The Moment of Truth, a portrait of the iPhone," you will discover the 10 great myths about the iPhone. Here are just two: it doesn't attract new business for operators, and it is not a technologically advanced mobile phone.

I know you'll be rushing to read these fine tracts, and I feel sure that a couple of you might wish to drop Strand Consult a note. To encourage you a little, I'll warn you that Strand also seems to believe that some of you Apple customers are, well, liars.

The consultants put it quite sweetly: "In reality, the iPhone is surrounded by a multitude of people, media, and companies that are happy to bend the truth to defend the product they have purchased from Apple."

Apple customers are liars? The media too? Surely not.

WASHINGTON, D.C.--The Federal Communications Commission got a slap on the wrist Thursday from federal auditors for not doing enough to protect wireless subscribers.

The Government Accountability Office issued a report Thursday that said the FCC needs to improve oversight of the wireless industry to protect consumers. The agency said the FCC needs to do a better job enforcing consumer protection rules and educating the public about how they can submit complaints when they have experienced problems with their carriers.

The report was requested by Rep. Edward Markey (D-Mass.) when he was chairman of the House Subcommittee on Telecommunications and the Internet.

The survey of more than 1,100 cell phone users found that the vast majority of wireless subscribers, 84 percent to be exact, are satisfied with their mobile phone service, which is good news for the industry. But for the millions of wireless consumers who are dissatisfied, the report determined that the FCC is not doing enough to help them resolve their problems or protect their interests.

One of the biggest issues uncovered in the report is the fact that carrier early termination fees are preventing dissatisfied consumers from switching carriers. The report found that among consumers who wanted to switch carriers but did not, about 42 percent said they didn't switch because of the early termination fees that carriers charge customers when they end their contracts early. These fees apply to consumers who sign up for carrier contracts and buy a subsidized device. The fees can cost anywhere between $150 and $350.

The industry argues that the fees are set so that carriers can cover the cost of subsidizing the phones. Congress and the FCC have questioned this practice and now all four major U.S. wireless carriers prorate their early termination fees.

The GAO report also found that the FCC is not providing enough oversight in how carriers resolve complaints. The FCC receives about 20,000 complaints from consumers per year, and it forwards these complaints to carriers. But the GAO said the agency does not provide enough oversight to make sure those issues are resolved.

"FCC also lacks goals and measures that clearly identify the intended outcomes of its complaint processing efforts," the report said. "Consequently, FCC cannot demonstrate the effectiveness of its efforts to process complaints."

Other issues cited in the report include billing problems. According to the report, about 34 percent of mobile-phone customers received unexpected charges on their bills. And roughly 31 percent had difficulty understanding their bill.

CTIA, the trade group that represents the mobile phone industry, pointed to the positive aspects of the report that found that 84 percent of customers were satisfied with their service.

"In this fiercely competitive industry, our members work very hard for each customer to provide them with the best products and services," Steve Largent, CTIA's president and CEO, said in a statement.

The GAO report suggests the FCC develop goals for handling consumer complaints. And it recommends that the agency analyze the complaints to identify trends and to see if carriers are actually complying with existing rules. The report also suggests the FCC come up with better ways to communicate with state officials to address some of these problems.

"The FCC can--and must--do more to make sure consumer concerns are resolved by wireless carriers and oversee the wireless industry with a greater focus on consumer protection," Senate Commerce Committee Chairman John Jay Rockefeller (D-W. Va.), said in a statement. "It is time for the agency to take real action to better protect wireless consumers."

At the telecommunications and policy summit here on Thursday, Ruth Milkman, chief of the wireless telecommunications bureau at the FCC, said the agency is already addressing some of these issues. Last week it opened an inquiry into Verizon's recent early termination fee hike. Verizon Wireless raised the fee for terminating a contract for a smartphone to $350 from $175.

In a formal response to the GAO report, the FCC said it has already launched three proceedings examining mobile-phone practices. And the FCC also noted that it's developing a new system for tracking complaints.

Nokia, the world's largest maker of mobile handsets, said Thursday that it plans to close two flagship stores in the U.S. as it refines its sales strategy and struggles to get a bigger foothold in the North American market.

Nokia also said it plans to close one of two stores in London. And it will look for a new location for its Sao Paolo store.

The U.S. Nokia stores that will be closed are in New York and Chicago. Nokia has 12 stores worldwide. It opened the first store in Moscow in 2005. Nokia said closing the stores is part of a new retail strategy that includes more cooperation with operators and other retailers.

Nokia's shift in strategy comes as the company indicates it plans to focus more on services and applications through its online Ovi store. Last month, the company said it plans to limit the number of devices it will launch as hardware has become less important to consumers and services and applications have become more important.

It's hardly a surprise that Nokia would shut down the U.S. stores as it refines its retail strategy, since this is one of the company's weakest markets. While Nokia still dominates the worldwide cell phone market with about 37 percent market share, the company's market share in the U.S. is only in the single digits. For years, the company has said that it plans to focus on the North American market, particularly the U.S. But little progress has been made.

Nokia executives say that the company is developing new products for the U.S. market and that it's working with wireless operators to get Nokia devices on those networks. This is important for Nokia since about 90 percent of all cell phones sold in the U.S. are sold through an operator. And most are subsidized. Nokia doesn't offer many products through carriers in the U.S., a fact that has hurt the company in the U.S. market.

But Nokia is making some progress. Earlier this year, it launched its E71x smartphone on AT&T's network. That said, other high-end devices, such as the N97, are still not offered by a U.S. operator.

Meanwhile, Nokia's competitors, namely Apple and Research In Motion, have taken advantage of forming relationships with carriers and their devices are offered with hefty subsidies. As a result, Apple and RIM have much higher market penetration than Nokia with respect to smartphones.

Apple, which makes the popular iPhone, has also been far more successful with its retail strategy than Nokia. The company now has 279 stores that it's opened in the past eight years since it opened the first Apple store in 2001. These stores have become a big revenue driver for the company, generating about $6.6 billion of the company's $29.9 billion in revenue in fiscal 2009.

Apple's flagship stores, or as the company calls them "significant stores," are especially designed to draw in visitors with eye-catching design and architecture. Some of the stores, such as the Fifth Avenue store in Manhattan, which sits below a glass cube across the street from the Plaza Hotel, have become tourist destinations. Worldwide some 170 million visitors entered an Apple store in fiscal 2009.

Apple plans to open between 40 and 50 new retail stores in 2010. More than half of these new stores are expected to be outside the U.S. Some of the countries where Apple will open new stores include the United Kingdom, Canada, Australia, Italy, Switzerland, Germany, France, and China.

In these modern times, when people hear the word "beard," they sometimes think of someone being used, perhaps unknowingly, to cover up the sexual orientation of a friend.

However, once anyone under 20 sees this series of public-service announcements from LG, in which James Lipton from "Inside the Actor's Studio" attempts to be a good companion to troubled teens, they will, hopefully, think "beard" before sending a text featuring a picture of their private parts.

You see, LG did a little research and discovered that nasty or sexually explicit texts weren't being sent so much by bullies, but by "tabloid teens." You know, those who might have helped Yahoo's business enormously by trying to find every last piece of information about Tiger Woods' alleged missteps with various misses.

Such teens believe that gossip is their source of influence and social power, but it doesn't necessarily yield the finest of results. Which is why LG would like the rapidly typing youth to "give it a ponder" before they send, as Lipton so sweetly describes it in one of the spots, "a pic of your junk."

In an attempt to help, Lipton gives them his beard for them to stroke. On their own faces, you understand.

The spots have a tough task, as they are asking kids to don Lipton's famously ephemeral facial hair in order to adopt a little temporary maturity at a moment of some excitement.

But LG is still determined to knock a little sense into these people wherever it can get to them.

The rather lovely Give It A Ponder Facebook page has delightful entries from, for example, a lady called Lynn Hood who says, "Oh, that I had a beard this magnificent to stroke while I ponder." And, the GiveItAPonder.com site offers even more amusement.

U.S. teens together apparently send 20,000 texts per second, so one can only hope that this delightful campaign puts at least a tiny dent into their craniums.

Once it makes some intelligent inroads with teens, perhaps LG might try to influence the poor judgment of politicians. Perhaps, indeed, LG could get the folks on Capitol Hill to text us their thoughts and receive our approval before they ever articulate a single word in public. Just a thought.

Perhaps you have already become used to Verizon's Droid tossing names at the iPhone like an 8-year-old boy behind his teacher's back.

However, the latest ill feelings directed at Apple's little cutey seem beyond even anything heard in an elementary school.

In a new TV spot, Droid asks an important question: "Should a phone be pretty?" To which many sane people would say "yes," and many emotionally challenged beings made of metal would say, "Huh? What?"

Its answer--the latest in its presentation of the Droid as a robotphone--is to hurl metallic-tasting custard pies as if the Apple store was a state fair.

"Should it be a tiara-wearing digitally clueless beauty pageant queen?" belches the ad's rhetoric, clearly referencing the iPhone, while wrapping the pie in a question.

I know many Socratically-inclined Apple fanpersons will object to the notion that beauty is only skin deep. But they will surely rail against the mere suggestion that the iPhone is digitally clueless.

Of course, this ad implicitly suggests that the Droid is, well, one of Cinderella's sisters, which might well affect its abilities to entice certain sectors of the populace.

Actually, the suggestion is more than implicit, for the deeply hirsute voice declares: "Is it a precious porcelain figurine of a phone? In truth, no."

So do you wait for a design that is pretty and is, as this ad so elegantly puts it, "racehorse duct-taped to a Scud missile fast" or do you have to compromise?

I know they say you can't have everything in life, but surely there must be some very attractive engineer out there who can give us everything in a few square inches of cell phone.

This Roamobi handset is smaller than a credit card.

(Credit: Roamobi)

Correction at 10:01 a.m. PDT December 7: VMSP licenses will be sold at $41,200.

How will demand for mobile technology play out in developing countries? Mike Kellett and Joe Morgan are tackling this issue as they prepare to launch their global mobile platform at CES 2010.

Although their joint venture, IP2, isn't the first company to address the need for low-cost international cellular service, it's taking a different approach. "We have a system that doesn't depend on government intervention," says Mike Kellett, co-founder of IP2, based in the U.K.

IP2 will launch a cellular service based on the concept of VMSP, or virtual mobile service provider. Anyone can start a VMSP and sell services and handsets. Usually, a license to operate as a local mobile service provider can cost up to $5 million, but IP2 will be selling VMSP licenses for only $41,200.

The handsets provided by IP2, which are smaller than a credit card, will ... Read the full post at CNET's CES 2010 blog

Finally, some good news from Nokia.

On Wednesday, the world's largest maker of cell phones said it expects sales volumes of mobile handsets to increase 10 percent in 2010 from 2009, as the market rebounds from a worldwide recession.

"Going into 2010, the overall mobile-devices market is stabilizing, and it is growing more in the areas where Nokia has competitive advantages," Nokia's new chief financial officer, Timo Ihamuotila, said in a statement.

Nokia said its worldwide market share of 38 percent would remain unchanged next year but that the company would increase revenue by focusing on stabilizing pricing on handsets. The average selling price of Nokia's phones had slipped over the past year. In the third quarter of 2009, the company's average price for a handset was 62 euros, or about $94. That was price was stable, compared with the previous quarter, but it was down from 72 euros during the same quarter a year ago.

This past year has been a tough one for Nokia and the rest of the cell phone industry. Nokia was hit hard by the economic downturn, as consumers put the brakes on spending. And for the fourth quarter of 2008, it saw sales drop 19 percent during the quarter, compared with the same quarter in 2007. And the company's profit fell about 69 percent.

Nokia slashed its annual forecast for 2009. And to cope with the deteriorating economic situation, it also announced that it would reduce about $905 million from its budget. Much of the cuts resulted in thousands of workers losing their jobs.

Besides the economic downturn, Nokia has been facing increasing competition from companies such as Apple, with its iPhone, and Research In Motion, with its BlackBerry devices. And now the company is facing even more competition in the smartphone market from Google Android phones, which will hit the market en masse in 2010.

Even though Nokia launched a new smartphone in 2009, the N97, the company still managed to lose market share in the high-end smartphone category.

Nokia says it's made improvements to the Symbian operating system that is used to power its high-end phones. But as the market gets more crowded with devices, it won't be easy to compete against popular iconic devices such as the iPhone. What's more, Nokia still hasn't managed to crack the U.S. market, the fastest-growing one for high-end handsets.

Today only a couple of Nokia's higher-end smartphones are subsidized and sold through U.S. carriers. This is a major problem, considering that the vast majority of American cell phone users buy subsidized devices in exchange for service contracts. The iPhone is currently selling for as little as $99 with a two-year contract from AT&T. Meanwhile, the Nokia N97 costs more than $500 at full retail.

Nokia has also been focusing a lot of effort on building up its services business. The company is building a marketplace and selling services through its Ovi online portal, which enables cell phone consumers to buy music, videos, and navigational maps.

The company is expecting to generate 2 billion euros in sales next year from its services unit. And it expects to grow this number in 2011, when it's expected to have more than 300 million active Ovi users. It plans to maintain a focus on applications for its phones, targeting net sales from its services unit of 2 billion euros or more in 2011 from an expected 300 million active users by the end of 2011.

Meanwhile, Nokia's joint venture with Siemens to sell telecommunications equipment has also been struggling. In October, the company was hit with a 908 million euro goodwill write-down on the business unit.

But Nokia now believes that the Nokia Siemens venture will also gain market share in 2010, even as the communications infrastructure market is expected to be flat in euro terms from the previous year, Nokia said.

(Credit: Phandroid)

Oh, you knew someone was going to do this. So let's just get it over with. And though some might think of this as a battle between the Droid and the iPhone for the nation's morality, let's be open-source about it: someone's trying to make a lot of money from cell phone porn.

A company with the obtusely childlike name MiKandi has launched a mobile app store that will exclusively cater to adults whose brain food consists of content that reflects their age. Yes, the sort of stuff some prefer to refer to as porn.

MiKandi's publicity material naturally avoids this term, referring to the more PC phrase "adult only." However, there is a little kink in its offering. According to Android fanperson site, Phandroid, the MiKandi Market apps only work with Android phones and not with Apple's more morally minded handsets.

Cupertino steadfastly sticks to its policy of refusing to allow apps filled purely with adult content, though some might dispute whether its definition of "adult" isn't occasionally a little idiosyncratic.

Not for a moment would one suggest that Verizon or Motorola or the deities at Google are necessarily in favor of porn apps. However, MiKandi is attempting to take advantage of the fact that the Android system is more open than the iPhone's.

So while the Android Market itself doesn't offer porn, nothing on your Droid phone prevents you from using MiKandi's services. The wise people at Phandroid do, however, offer stern warnings about MiKandi's workings.

Despite attempting to use MiKandi's services, purely for scientific purposes, Phandroid failed to actually secure access to any mature content. Remember, children, this sort of thing will always be a somewhat risky business.