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September 13, 2012

Thought Leadership for the Wireless Industry
Hello all,

Just as there's "Shark Week", or "Fashion Week", this has been "device week" for the wireless industry. Samsung, Motorola, Nokia, Amazon, and Apple all introduced major new devices. You've doubtless read reviews and commentary from the media and bloggers. My contribution with this Lens is to put things in context. See below.  


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"Device Week": What Does it All Mean? The Broader Context

 Actually it has been Wireless Fortnight, dating back to Samsung's announcement on August 29 of the Ativ S (Windows Phone 8) and the Galaxy Note II. To recap:

  • Samsung announced the Ativ S (Windows Phone 8) and the Galaxy Note II "phablet".
  • Motorola introduced the first new devices under Google's ownership - a trio of Droid Razr smartphones that will be sold by Verizon Wireless.
  • Nokia introduced its first Windows Phone 8 devices, the Lumia 920 and the Lumia 820.
  • Amazon unveiled a new family of Kindle devices, including the 4G LTE Kindle Fire HD, 7-inch and 8.9-inch versions of the Kindle Fire HD, 3G and Wi-Fi versions of the new Kindle PaperWeight, and a cheaper version of Kindle with Offers.
  • Apple announced the iPhone 5.
  • HTC is hosting a press event September 19, where it is expected to announce Windows Phone 8 devices.
  • Microsoft is planning a Windows Phone 8 event on October 29.

Out of breath? What to make of all this? Some of the commentary, such as today's Wall Street Journal assessment of the iPhone 5, is that none of these devices is "revolutionary". But what would "revolutionary" be, anyway? None of the manufacturers has provided a completely new paradigm for how one uses a phone, such as Kinnect-like gesture recognition. Screen size? Really it's more a matter of personal choice. Some of the Android devices boast 4.8 inch screens, which in my view push the envelope of what comfortably lies in one hand or can be used as a "phone".


The bottom line is that all of the devices announced over the past couple of weeks, and pretty much anything available today, are pretty great phones. They can all do just about anything you need to do with a personal portable computing device that still serves as a phone. After that it's really a matter of personal preference - OS, form factor, price. And for the vast majority of people who have a smartphone right now, the decision is whether and when to "upgrade", which might mean penalties and surcharges, depending on where they are with their contract.


The Larger Context: Some Themes 


The larger context is that the lineup looks pretty set for the fourth quarter selling season. A few key themes to take away from this bevvy of announcements:

  • The playing field is level with respect to LTE. Having the latest, greatest smartphone means having an LTE smartphone. It is significantly faster than 3G and other "4G" services. At this moment, however, there are significant differences in LTE availability, with Verizon Wireless significantly ahead. It's not a slam dunk decision vs. AT&T however, because AT&T's HSPA is faster than Verizon's EVDO and there is still the simultaneous voice and data issue. A year from now, the LTE delta among the major U.S. operators will be less pronounced.
  • Broadband Wireless: The elephant in the room. These phones are not just portable computers, but with LTE they are portable broadband terminals. Thing is, LTE pricing does not encourage significant data usage. It does not take long to get to 2 GB or even 5 GB across a slew of devices. People think streaming video and so on, but as an example, one issue of Vanity Fair is 670 MB.
  • Do not expect major share shifts. The iPhone 5 will do great. Apple will sell a gazillion of them. But I don't think it's game changing enough to convince most Android device users to switch, especially if they would have to pay a contract penalty to do so. I do think that among existing Apple users, the percentage who will early upgrade to the iPhone 5 will over-index those who did to the iPhone 4 or 4s. Apple will also gain from new smartphone users - both because of the now inexpensive iPhone 4 and 4s, and those who are coming off Blackberry choose iPhone by nearly 2/3.
  • Windows Phone 8 will be a contender. Support is building for Windows Phone 8. Samsung announced the Ativ and HTC is expected to "go big" on WP 8. The Nokia Lumia 920 and 820 devices introduced last week are really good phones. They've actually rolled the dice on a different UI paradigm more than just about anyone else. And I think the they've made the right "bets" on imaging and location as key differentiators. And they are state-of-the-art.

    So there is a strong WP8 ecosystem building, and the operators are starting to throw their support behind it, because they want a third viable ecosystem to counter the incredible market power of Apple and Google.

    Here's the thing with WP8, and it was evident at the Nokia event. This does not sound like a coordinated ecosystem between Microsoft and its partners. Ballmer appeared at the Nokia event and said, basically, nothing. No MFN status for Nokia, apparently. Microsoft needs a clear message for WP8, as part of the broader Windows 8 rollout over the coming months. And it needs to coordinate with and support its OEM partners on the go-to-market, the key points of differentiation, and why one should have a WP device compared to an iPhone or Android device.

    Finally on Windows Phone - and OEMs take note here - I think lack of enterprise focus is a big miss. Enterprise adoption of Android under-indexes compared to iOS, and with millions steadily coming off Blackberry there is significant opportunity here. Plus, with Microsoft's position in the enterprise, wouldn't this be the market to go after for Windows Phone, building the ultimate personal productivity ecosystem - PC, tablet, phone?     
  • Apple. It's really becoming an ecosystem play. The iPhone 5 is gorgeous, and boasts improvements in nearly every respect. Some had expected more of a "redesign" of the user interface and the static icons, but at the end of the day, Android's customizable home screen and NokiaSoft's "live tiles" aren't in and of themselves stealing market share. So Apple decided to be conservative here. Key, however, is that the playing field is now level with respect to LTE. Even with Apple's incredible growth there were "gotchas": no Verizon, till last year, and no LTE, till yesterday. Well, that era is over.

    But even if there are elements of the iPhone that are not state of the art - really, will people not buy it because it doesn't have NFC - I think buying an iPhone is becoming, increasingly, a commitment to the Apple "ecosystem". The percentage of iPhone users who have another Apple device in their world is huge. And it all works together. iCloud, and the tight integration between Apple's phone and computer OSs, makes this even more so. The fact that this all comes from one company - store experience, devices, software & apps, customer support - is incredibly appealing to the average consumer. In Google and Microsoft land, you are largely on your own. Or you have to pay for help.
  • New business models are being tested. As I have written about extensively, we are starting to see new experiments with respect to business models. This is especially clear with Amazon, wits its data plan and ad-supported versions of Kindle. This is required in order to support the Kindle's aggressive pricing. Plus, just as Google is in the mobile game to primarily sell more screens upon which ads will appear, Amazon is in the mobile game to sell stuff.

    The operators are experimenting here to. Not just with the move to tiered data pricing, but the sharing plans introduced by Verizon and AT&T this summer. And it will be interesting to see how Sprint's Unlimited plans hold in an LTE iPhone world, once their coverage gets to critical mass. T-Mobile is experimenting with the push of unlocked iPhones, at attractive device and service prices, so as not to be completely left out of the party, and to reinvigorate its position as the "value" operator among the Big Four. And the MVNOs/pre/advanced pay operators continue to entice the "next 50%" of smartphone users with aggressive data pricing.
  • Upgrades will be a thing to watch. This is the toughest thing to predict with respect to the iPhone 5. There are so many smartphone users who are at a point in their contract where they would have to pay extra money or a penalty to switch or upgrade early. And the operators, wary of ASPs and the impact of subsidies, are making it tougher and more expensive to upgrade early. There is a chance that this will slightly dampen shipments of iconic new devices such as the iPhone 5 in geographies where the majority of users are on a subsidized device.

    A related and increasingly important dynamic here is the significant market for pre-owned phones and "hand me downs". This is something the operators are getting into seriously. Also, I can see increasing scenario where the Grand Poobah of the household upgrades to the latest greatest, and hands down their current device to another member of the household. This is goodness for the operators, as they gain another data plan subscriber without having to incur a subsidy.
  • Still A Play in the Enterprise. Microsoft should go all-in. All of these device announcements are fantastic but it is amazing to me that they are almost entirely focused on the consumer. Yes, I know we are now in BYOD-land where everyone expects their company to support their smartphone of choice. But as I said earlier, Android still significantly under-indexes in the enterprise and with the gap being left by RIM, Apple is gaining disproportionate share. This, to me, is the big opening for Microsoft to make an impact. Maybe we'll here more about this in late October, but all the WP8 activity so far has been consumer-y.

    I believe there is a significant opportunity for Microsoft to combine its Windows 8 and Windows Phone 8 story into a significant enterprise play. Become the "Apple" of the enterprise (geez, they're already in so many companies) by positioning W8 PCs, tablets, and phones as the ultimate business productivity tools. Work closely with the OEMs in designing iconic enterprise class devices that support Microsoft's suite of software for the touch/cloud-based post-PC era. Buy the parts of RIM that they need in order to accomplish this.

Would love your comments. Send me an email.  





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