At CTIA in San Francisco last week, away from the fanfare around LTE rollouts and the next dozen tablet devices (ok, I exaggerate a little), Sprint had an announcement which will have significantly higher impact on mobile broadband adoption and revenues: Sprint ID. 

Sprint ID promises to up the ante on personalization and ease current feature phone users into the smart phone ranks.

Sprint ID offers instant personalization along key themes/packs where the operator has done the heavy lifting of identifying and group related applications of interest to different persona from wallpaper to ringtones to apps. While the one click marketing line is not quite matched by reality given pesky little things like accepting terms and conditions etc, Sprint ID is a significant breakthrough in my opinion as:

• it broadens the market appeal of Smart phones to current feature phones users with a simple to understand offer in a range of device price points including the critical $49 and $99 levels.
• it tackles one of the biggest weakness of all app stores: discoverability of content and simple personalization.

Three handsets were featured at launch of Sprint ID: Sanyo Zio™, Samsung Transform™, LG Optimus S™. These three devices cover key price points in the Sprint portfolio and provide customers with a range of form factors, industrial design and brand to meet their tastes. Interesting to note that both LG and Sanyo retain the right to put their own packs on their handsets as well. This is a big win for LG as its Optimus S™ will be available for under $50 with contract giving the vendor a much needed boost in the smartphone space. Samsung meanwhile continues to shine at Sprint occupying the lucrative $149 spot with its Transform™. All three devices of course require a Sprint Everything Data plan.

However, for me the more significant impact is that operators and oems are finally realizing that customers don’t buy phones or services or apps… what they really want are positive experiences

… be that socially connected, sports, education, health and fitness, fashion etc. This is something that our User Experience team has been evangelizing for the last 7+ years. Whether its 80k apps on Android or 250k on Apple store or 10K on RIM, one common experience has been exasperation at the huge waste of time, energy and emotions in finding ANYTHING!!! Which happens first, eyes glazing over or fingers cramping with so much scrolling? Either way the net result is often a disappointing experience which the early smart phone coolaid drinkers have learned to live with.

Newbies to the smart phone arena, will certainly have less tolerance and spend less time to personalize their device and enable applications. Sprint ID is well tailored to the next wave who are taking tentative steps into the smart phone space

 

David Kerr

dkerr@strategyanalytics.com

Yesterday in Paris, Orange unveiled its new five-year strategic plan, Conquests 2015. The plan covers four strategic priorities:

    The conquest of employee pride – to re-build its reputation as an employer;
    The conquest of networks – covering fibre-optic build in France, LTE deployments, the monetization of mobile data traffic (read: no unlimited data plans) and green networks;
    The conquest of customers – delivering a superior customer experience and helping customers navigate through their connected/digital lives;
    The conquest of international development – targeting 2x growth in revenues from emerging markets, with total customers growing from today’s 200m to 300m by 2015.

We published a report profiling the world’s 20 largest mobile operators last week, providing a SWOT and overview of strategic directions. We knew a new Orange vision was on the way, but there are only so many events that can postpone a report’s publication. It is with relief that I can say that, in terms of the key elements of this new strategic plan, enough had been discussed in the past to allow us to predict this quite accurately.

In this report, we looked at two key differentiators for operator performance: footprint (scale) and unification (both in the sense of integrated/converged networks and the provision of integrated services). The more profitable global mobile operators have strengths in these areas and it is good to see they form the basis of Orange’s new strategy.

Orange is very much committed to improving the value of its footprint, both in terms of growing its business in Africa and the Middle East (it is suggesting roughly three-quarters of its emerging market revenue growth could come from M&A here), but also in terms of its mature market footprint, where further consolidation (after the Orange / T-Mobile UK deal) can be expected.

In terms of unification, the next-gen network upgrades are a key building block there, as well as layering in services in areas such as health, education and payments. One of the more interesting statements in this strategy launch was that “Orange must become a multimedia coach for its customers by working alongside them to make their digital life easier”, with Orange’s CEO Stéphane Richard adding that Orange “are trying to be activists for an open world”. That trusted partner role has taken over from the own-branded services/content role as a priority for telcos and it is encouraging that Orange is focusing on its key strengths there.

 

 

 

The inevitable movement to tiered pricing which started with Verizon Wireless acknowledging its plans to do so for LTE and has been accelerated with the much anticipated data plan announcement by AT&T this week.  So, what next?

• Will we see significant priced based competition for mobile data among the top US operators?
• Will we see significant movement in share of adds for AT&T as iPhone wannabees are tempted by a plan of only $15?
• What impact will lower data plans for smartphones have on AT&T’s Quick Messaging Devices and Verizon Wireless equivalent?
• How long before we see family data plans and shared usage across multiple devices?

The move by AT&T is a smart play to extend the smartphone momentum as the low hanging fruit of Apple aficionados, multimedia techies and style seekers willing to pay top dollar has been significantly penetrated.

There is no doubt that the iPhone remains the coolest device on the marketplace and the end to end user experience remains easily the best in class. So, reducing the TCO to attract the next 20% of customers to a paid data plans while educating customers about data usage levels and managing the traffic risk is very smart business in my opinion.

The lower price points will help AT&T maintain its current leading share of smartphone users and may be attractive to casual social networkers

• Although the 50 photos allowance is not exactly generous! For casual messenger, and social network status checking and moderate email the new DataPlus plan is quite attractive overall and will likely attract a portion of customers who would otherwise opt for a Quick Messaging Device from AT&T or a competitive offering from Verizon Wireless.

I do expect to see some modest price competition among the big operators

• with T-Mobile most likely to drive prices lower given their need for scale and to protect their predominantly youth centric customer base. but also expect an increasingly strong Verizon Wireless handset line up to compete strongly.

The impact on Quick Messaging Devices is in my opinion likely to be modest

• as a traditional qwerty remains overwhelmingly the input of choice for heavy messengers in the US although there is definitely room for lowering the $10 mandatory data plan on featurephones

Family data plans and data plans which allow access across multiple devices are in the pipeline

• but will probably not make an appearance until 2012+ as part of LTE offerings.

From a device vendor perspective, the move to lower priced iPhone plans is likely to put further pressure on vendors like LG who have yet to make a credible offer in this space as well as RIM who will find more competition in the consumer space.

The lower pricing on data plans will be music to the ears of ambitious new entrants like Huawei, ZTE who plan to bring mass market priced devices to the US & Europe. The lower TCO of smartphones as a result of downward pressure on service prices boost their addressable market.

 

May you live in interesting times as the old Chinese proverb goes. Well in the information, communication and entertainment industry we certainly do. Some very interesting questions face our industry whether we look at:

• the outcome of much delayed Indian 3G auction or
• the battlegrounds around HSPA+ and LTE or
• the surging Android ecosystem vs. weakening Symbian or
• the upside potential for WebOS under it new owners
• the potential disruption caused by mobile cloud phones and device

Every major technology advancement has lead to a massive disruption in the handset and infrastructure vendor community.

• In 3G, Motorola’s slim myopia led to its near ruin and has provided huge growth for Samsung and a foothold in international markets for LG and SEMC.
• On the infrastructure side 3G was expertly grasped by Huawei and ZTE leading to a new wave of M & A and a new world order which counts Nortel as a victim and seriously challenges ALU.

So how will the migration to 4G change the playing field?

• Who will benefit most on the operator/service provider side?
• Will Cloud Phones be disruptive in LTE?
• Will operators find a path to realign the traffic/revenue mix with mobile broadband devices?

I would welcome your thoughts on these key questions. Also don’t forget to join our client webinar on Thursday May 27.

 

David

The bids in Germany’s current spectrum auctions are starting to add up. With a range of spectrum on the table (800MHz, 1800MHz, 2GHz and 2.6GHz), it is the digital dividend 800MHz spectrum that is dominating proceedings – at the end of round 94 the bids totalled €1.9 billion, with nearly 90% of this bid on the 800MHz spectrum. Although there is still some way to go, the auction is already pricing the 800MHz spectrum at more than 30x higher than the 2.6GHz spectrum. The need for denser LTE networks in higher frequency bands will come, but for now 800MHz is much more valuable as it is the most cost effective for delivery of next generation coverage. However, in this instance the government isn’t leaving that to chance as it strives to close the broadband coverage gap in rural areas. Winning bidders have to cover smaller towns before they can move on to larger cities. That is a nice touch by the government. The next few years of spectrum auctions in Europe are unlikely to raise the kind of sums seen in the 2.1GHz 3G auctions of 1999-2001. So getting some public good (other than money for the public purse) out of the auctions makes sense. Building in licence rules to make sure 800MHz spectrum really is used to close the digital divide is logical as 3G/4G mobile broadband adoption soars. So if you live in a rural community that has yet to be touched by DSL/cable and are fed up waiting for a decent 3G mobile broadband signal, the sale of 800MHz spectrum for mobile services and they way coverage is being prioritized in the legislation is good news (provided you can wait a little longer for the spectrum to be cleared of analogue TV). But for the rest of the population in Germany at least, this is probably all very dull. There are only four bidders in this auction (the four existing mobile operators), so it will do nothing for competition and probably nothing for pricing either. Many operators we speak to have a similar view to TeliaSonera and will position LTE as a premium mobile broadband product as they try to pull back from what has often been quite intensive price competition in this fledgling sector.

Returning from CTIA in Las Vegas last week and with only 2 days before going off on vacation to Florida, I found myself reflecting that two of the most interesting meetings I had at the show were with mobile operators.

During CTIA I spent some time with AT&T emerging devices and T-Mobile M2M teams and was impressed with how both these units had managed to cut (or at least untie) the cord to the mother ship and avoid having innovation stifled by the Borg up at Corporate.

• AT&T’s efforts to encourage a broad range of new applications and devices has definitely paid dividends with Mr. Lurie and his team adding an impressive 1M users in Q409 as a result of new device categories (mostly PND and EBR).
• T-Mobile revealed a somewhat unheralded pedigree in M2M.

Partnership is the order of the day.

AT&T highlighted partner applications ranging from location enabled pet collars (Apisphere) to glow cap bottles to aid compliance with medication schedules (Vitality) to a very cool new tablet from Openpeak which is very different to the announced but apparently supply side challenged iPad.  Verizon Wireless and Sprint are of course also praying at the alter of open development but perhaps with less public presence.

When I think of enterprise mobility, AT&T and Verizon Wireless are top of mind but T-Mobile has in fact quietly been developing strong competency in the M2M space over the last 7-8 years.

T-Mobile offers four different SIM form factors to suit specific applications and have enjoyed triple digit growth for the last four years. T-Mobile US has quietly activated “hundreds” of different device types on its network with only a handful of devices being rejected or pulled due to network unfriendly characteristics. These devices span Telematics, Connected Energy, Telemedicine and several other applications.

So what is the common DNA of two very different operators that has allowed them to innovate and focus on new opportunities? Separation and operational autonomy to facilitate and open funnel approach to partners and speed of execution not normally associated with US carriers.

In the case of AT&T, the Emerging Devices group was chartered with developing a new space and freed from the legacy of voice & data consumer tariffs and prepaid/postpaid categories which just don’t cut it in the new connected reality where users will have multiple devices connected but used in very different ways. Mr. Lurie and his team have been able to streamline device certification and experiment across the spectrum of business models for new connected applications.

For T-Mobile, speed of certification (days not months) and the independence of being a self-contained unit (own engineers, own sales although linked to broader enterprise group) reporting to Finance & Strategy have allowed them to pursue their “easiest to do business with” approach to the M2M markets.

So, the takeaway? Innovation is alive and well at US operators but separation from the collective corporate mind is essential.

David Kerr

Softbank Japan will be switching off its 2G mobile network next month, one of the first WCDMA operators in the world to do so. In its financial results on Tuesday it said this would result in a small correction in subscriber numbers, though the revenue impact will be minimal - in Q4 2009, 3.6% of its customers were still on the 2G network, but they contributed just 1.7% of revenues. More importantly, terminating the 2G network is going to contribute to profit growth, so it’s all good news. For Softbank, that is. That’s just over eight years to move from launching a 3G network to closing down the 2G network. Unfortunately, no other operator is going to be running on those timelines, even NTT DoCoMo is going to see 10 years lapse between its 3G launch and 2G closure (down for March 2011).

• Many operators in developed economies are now 6-7 years into their 3G lives and nowhere near the subscriber/revenue ratios seen in Japan in that timescale – most have yet to even get 40% of their subscribers onto 3G.

We spend a large amount of time in our forecast models looking at adoption curves for new technologies, predicting an inflection point for LTE is the latest to tax us. I have just run a speed test on my HTC Hero and (with the wind blowing in the right direction) I am getting 3Mbps down and almost 1Mbps up on a 7.2Mbps HSPA network. It’s hard to sit here today and decide at what point in the future I am going to find that performance completely unacceptable. New technologies are fun, but what is equally interesting for us is looking at the other end of the technology life cycle:

• How should mobile operators manage the retirement of legacy technologies as they transition from 2G to 3G, or from circuit to packet voice?
• At what point is it worth investing more in 3G subsidies for 2G users in order to save money by shutting down the old network?

The analogue to digital switch-over involved migrating a peak of 93 million analogue connections and even that has taken well over a decade to complete – this time around, there will be 4 billion 2G connections to migrate. While Softbank looks forward to lower network operating costs from April, very few other operators will reach that point even by 2015. We see huge promise in LTE and other mobile broadband technologies attracting users away from 2G services, but as vendors fight it out to have the fastest 4G demo at MWC this year it will be interesting to see how much space is devoted to technology co-existence. As regulators move towards technology-agnostic spectrum licensing, there will be a real skill in managing resources across 2G, 3G and 4G technologies and great opportunities for vendors to help operators make the transition away from 2G as painless as possible. Phil Kendall