Verizon Wireless upped the market ante today by announcing an open network model to compliment its current retail model. The move will put pressure on AT&T, Sprint, T-Mobile - and possibly Google.
Google wanted the FCC's 700 MHz wireless broadband spectrum auction rules drafted to require a portion of the network to be open to any device, application or software. Google also recently created the Open Handset Alliance with the same goal.
Verizon Wireless has now joined the fray, so to speak.
Noting that the accelerating pace of innovation begs for a for a different business model, Verizon Wireless adopted the approach for its nationwide wireless network, and company officials outlined some ideas how it will work in a conference call today with analysts and reporters.
There are many questions: while Verizon Wireless today operates on the CDMA standard, so that a device maker, for example, would have to create handsets or gaming modules that operate using CDMA technology, it was not clear that this would be the standard of choice for Verizon's 4th generation network, or network of the future.
Predictably, many questions involved Apple's iPhone - which operates on a different technology (GSM), and which today is incompatible with Verizon's network.
In one scenario, a customer might walk out of the Apple store with an iPhone and walk over to Verizon Wireless and sign up as a usage-based customer. This scenario, however, requires Apple to build a CDMA-based iPhone.
One clear winner of the open network model is Verizon Wireless, which wins customers seeking to use their network by using either: 1) the current retail model - where someone buys a phone and signs a contract, just as they might today - or 2) by bringing their own device to the network, and then it's off to the races.
Another winner: device makers, particularly smaller outfits. If a tinkerer decides to make a limited batch of gizmos (many phone components are commoditized), and gets them tested by Verizon (a short testing procedure was sketched out on the call), then sells them or gives them away, they will now be able to do so, whereas the current Verizon only retail channel is essentially closed, given the high volumes required to get shelf space.
This is about more than just phones, though, and could include, say, a gaming module, or other peripheral device that can be networked, such as a utility meter reader that wakes up once a month to register usage of some commodity, or perhaps a health care device that monitors patient needs.
Verizon officials outlined a "developer's conference" to be held sometime in the first quarter of '08 to get more information from innovators about how to make the new arrangement work.
Verizon officials said that they were doing this in response to customer needs - one caller noted the high percentage of iPhones hacked to operate on other GSM networks (and which will be offered sans contract in Germany according to a court ruling last week) - and it looks like they have come up with the concept of a "sticky network."
It also looks like a friend's prediction that today's kids will never know what it's like to be not connected to a network, through some device, are perhaps one step closer to coming true.
Vodafone has challenged Apple and Deutsche Telekom's revenue sharing - and exclusive marketing arrangement - for the iPhone in Germany, according to a report from the Wall Street Journal yesterday.
Today, DT announced that it will offer the phone without a contract.
While the German court's ruling may not be exportable to other countries, unless similar consumer provisions apply, the news arrives against the backdrop of a drive to change the manner in which mobile devices are marketed, particularly in the US.
Google is mounting a challenge to the wireless business model as well.
Earlier this year, Skype petitioned the US telecommunications regulatory agency, the Federal Communications Commission, to change existing cell phone marketing practices in the US, so that devices may be untethered to any particular carrier, and to allow software to run on any network without interference from the carrier.
In the US, carriers provide what essentially is sole sales channel for handsets, which are heavily subsidized in exchange for customer contracts. Skype argues this gives carriers too much power over device functionality and that this restricts consumer choice.
Apple's exclusive arrangement in the US changed some dynamics of the typical carrier/device maker relationship: it involves revenue sharing between the carrier and the manfucturer, and Apple retained control over the design and function.
Google's recently announced Open Handset Alliance, comprised of some 34 companies around the globe, seeks to effectuate business model changes by creating a common software platform that will work on virtually any phone, where the phone is supported through advertising.
The alliance includes China Mobile, the world's largest carrier, with 350 million subscribers, making it larger than the entire US population. China Mobile is also reported to be working on a deal with Apple to market the iPhone.
Last week, according to the Financial Times, China Mobile's CEO warned wireless carriers that they need to change their business models to face threats from handset makers and Internet companies.
For those who may wonder what big development "follows" broadband, why not have more of it? Wherever you want it?
All the device, network and content threads are intertwined, and produce some interesting competitive effects, as business models both combine and collide, provided they can be digitized and marketed to some extent.
As Apple's iTunes popular music download service and iconic (and chronically crowded) retail stores have proved to be runaway hits with consumers, Nokia followed suit; Sony Ericsson joined the online club, and Canada's largest wireless provider BCE turned in some good numbers on the strength of web and music capable phones.
And if you think that it's just your phone that's morphing, it's not, the entire music industry is spinning like a top from changes in the underlying business.
Last week The Week reports how various artists are choosing alternate distribution partners (other than traditional music stores or labels), platforms (such as the web) or services for releasing their music.
Some of these numbers get kind of crazy: Apple sells 1.4 million iPhones, while generating 1.5 million articles, and lands itself on the cover of Time magazine as Invention of the Year.
On the other hand, Nokia sells 112 million mobile phones in the third quarter, and as Forbes observed, the company soon joins the rarified ranks of "billions served," which is no insignificant achievement, to say the least, with more on the way.
Some of these phones sold will be smart phones, essentially mini computers, with the intelligence riding on the edge of the network, as opposed to residing within the core.
Google's Android platform has the potential to turn just about any phone (of sufficient technological capabilities) into a computer or game device.
Mobility works: in Japan, more than 50% of consumers send e-mail and surf the web from mobile devices, other than their PCs, falling down the scale of desirability.
Then again, there really is nothing quite like an old, reliable, bulletproof model, that works just the way you like it.
I wonder when people will start collecting phones like these.
People already do: Retrobrick.
FCC Commissioner Deborah Taylor Tate's statement commending US wireless carriers Sprint and T-Mobile's for deciding earlier this week to pro-rate "early termination fees," which dramatically penalize consumers seeking to switch mobile providers. Sprint and T-Mobile thus join Verizon and AT&T in a big second guess on this matter, and its resonance with consumers, in exactly the wrong direction.
Several years ago, wireless number portability took what may be considered, in loosely analogous terms, a similar tumble from the ranks of "no-can-do;" last week the FCC imposed local number portability (LNP) rules on interconnected Voice over Internet Protocol, or VoIP providers. Wireline LNP provisions have been in place for a longer period of time.
Viewed from the top down, such lowering of hurdles to move makes it easier for consumers to exercise more control over their communications needs, which are the subject of intense competition from providers and manufacturers, content distributors - and maybe content creators, too.
Not completely out of the woods, yet, however: there may be some unresolved details about when the pro-rating terms take effect, and consumers will still have to pay some fee to switch.
FCC Chairman Kevin Martin comments favorably on the Open Handset Alliance's plan to introduce an open platform for mobile devices.
As discussed previously in these pages, the FCC's rules in the upcoming 700 MHz spectrum auctions include open access provisions (see page 3). The spectrum may be used to create a nationwide wireless broadband network.
Meanwhile, some companies may or may not feel left out, but remember that we're still in the early innings, with the phone itself probably a year away, more time for the Smart Phone industry to just Get Smart.
Incidentally, at the telecommunications vendor show NXTcomm held in Chicago this past June, NBC Universal's Bob Wright reminded keynote attendees about his company's signal role in founding the mobile phone industry, having given us Maxwell Smart's famous shoe phone - which was an rotary model, not touch screen job - with a very special thanks to Mel Brooks.
Google has been on a tear lately, handily extending an already dominant position in its core web search business, and adding or combining new lines to its portfolio, including social networking, and now wirelees ubiquity.
Later today, Monday, November 5, 2007, the company will provide details on a wireless partnership comprised of a wide array of carriers and vendors, including Deutsche Telekom's US-based T-Mobile (a GSM carrier), China Mobile, Motorola (which manufactures phones for both GSM and CDMA carriers in the US), CDMA design shop Qualcomm, Texas Instruments, Taiwan-based High Tech Computer, LG Electronics, and Korea's Samsung.
At the heart of the plan is to create an open wireless platform that works on multiple networks. As Barron's cover story last week on tech stated "[a]ll roads lead to the mobile Internet," which presumably also would include wireless broadband networks to be deployed under the FCC's upcoming 700 MHz spectrum auction.
This is just one of many an "also."
Recall, also, that Verizon Wireless quietly filed an appeal of the FCC's 700 MHz open access requirement - urged in part by Google - and subsequently dropped the suit, quietly, and consider also that US Number 3 mobile carrier Sprint (on some path towards Wi-Max deployment) is a member of the Open Handset Alliance, and I submit that everyone is sufficiently scattered all over the map to make this very, very interesting.
New mobile entrant Apple sold 1.4 million iPhones since its introduction in June, then recently estimated that some 250,000 of the expensive little beauties have been purchased expressly with the intention of taking them "off line," reset (or re-SIMed) to work on another carrier's network: a surprisingly high percentage, providing perhaps another "also" to guage where this market is bound.
The Senate Committee on Science, Commerce and Transportation passed the Community Broadband Act of 2007, which will prevent states from enacting laws that prohibit municipal broadband deployments. The bill was sponsored by New Jersey Senator Frank Lautenberg, a longtime champion of such efforts, and passed without amendment.
Currently, there are 13 states with laws on the books restricting or prohibiting public broadband deployments. Essentially, the legislation is a ban on bans for communities that decide to provide broadand for their citizens, and is very much a part of ongoing efforts to bring more broadband to more Americans, by knocking down barriers to deployment.
As a follow up to an earlier post, the Internet tax ban was signed into law by President Bush yesterday, October 31, 2007. The previous ban was due to expire today, November 1, 2007.
