Tag wireless

iPhone, Verizon, Android, and the Carrier Model

Verizon iPhone on Flickr
Photo: jfingas on Flickr

Tomorrow, the wireless arm of Verizon will announce at a press conference in New York City that they will begin a CDMA version of Apple’s iPhone 4. This will end forty-two months of exclusivity in the US the device has had with AT&T Mobility. It will mean that Verizon is able to stem customer defection to AT&T for those wanting iPhone, will increase ARPU and data adoption, and cost AT&T in subscriber growth and post-paid customer churn. But that’s not what makes this announcement interesting. iPhone is important for many reasons, but it unique insofar as it has revealed quite a bit about the carrier relationship with subscribers and handset makers that was never a point of focus when the market was filled with dime-a-dozen flip phones and clunky email devices.

It’s rumored that when Apple first set out to partner with a US mobile carrier for its first foray into making a phone, it went to Verizon Wireless. This partnership was, of course, not to be — but why? It’s a story of control. Both Apple and Verizon are notorious for their need for control. Verizon has never seen itself as one to be a dumb pipe or merely a service provider. Nearly every device that has been released for use on their network has been branded and customized through and through to offer an experience that puts its services from and center (e.g., VCAST media stores, branded LBS products, mobile web), often at the expense of ODM (original device manufacturer) provided functionality. Even basic messaging products were rebranded to fall in line with their TXT/PIX/FLIX unified branding strategy. Smartphones were no different, and even presently sold handsets have undergone the same treatment where devices include the Verizon suite of “value-added” products that lead back into its walled content garden. iPhone, in all its iterations with AT&T and across the globe, are not this way. Software update schedules and functionality are managed by Apple and the carrier interference ends at the network backend for things like Visual Voicemail.

But it’s unfair to place Verizon under such scrutiny for how they managed their phone lineup and the device software. AT&T is in many ways the same with their Media Mall/AppCenter and similarly branded services. Sprint and T-Mobile too. But on iPhone, this wasn’t the case. Even when AT&T brought some of their services like its cobranded TeleNav offering to iOS and Family Map, the devices weren’t permitted to be preloaded on the device, but rather had to be downloaded from the App Store.

The phone is pristine from the consumer perspective, as though it managed to make it out of the wild without any battle scars from the carriers. iPhone bears no carrier marking on it to mar the clean design, and the software is all Apple. And it is this that defines the experience that smartphone buyers allude to when they express interest in iPhone by brand rather than fully articulating what about it is better. It has been doubly vexing for competing carriers to fully counter the demands by subscribers for why it isn’t available on their network. That is, because Apple has marketed it in a way that is carrier independent. They promoted an experience that customer’s could expect but didn’t tie it to their launch partner. It’s a phone that happened to be on AT&T, but it wasn’t an AT&T iPhone. For most, they thought it was like an iPod in that sense. CDMA, GSM, EV-DO Rev. A and HSPA+ are not things the average consumer worries about, and they shouldn’t have to.

In that sense, iPhone was a revelation about how Americans bought phones and how they carrier model was subject to change. Before this device, customers didn’t take the time or ever need to know that the BlackBerry 8310 was an AT&T exclusive with GPS but the 8320 had WiFi on T-Mobile, and that Verizon had the 8330 which had an unlocked location radio. They just walked into their carrier’s retail location when their two year was up and saw a BlackBerry there and were satisfied. It was around the time of the iPhone debut that phone exclusivity because a big deal in the US. Verizon scrambled to find something that would appease customers; this ended up being the colossal dud known as the BlackBerry Storm and Storm2, both exclusives to them in the US. AT&T currently holds an exclusive on the BlackBerry Torch for the time being.

And then there’s Android. While this deserves an article in and of itself, it’s necessary to briefly touch upon it. After the failure of the BlackBerry Storm to satisfy customers wanting a touch screen device on Verizon, they bet the farm on Android, Google’s iOS competitor that had been first commercially released in the G1 on T-Mobile. In October of 2009, Verizon, Motorola and Google announced the Droid A855, the first successful Android based handset to fall into consumers’ pockets. It was fully featured at the time, had strong branding licensed from LucasFilm, and an healthy advertising budget. Droid from Verizon was truly the first device that was at least 70% as good as iPhone, and for most people that was enough. But the interesting data point from here relevant to the carrier discussion is how Droid for Verizon was introduced in marketed.

DROID. When you read that, you knew it meant Android but you thought Verizon. And that’s how the story gets interesting. On marketing material and ads, you see the device but you’re shown it as though it was a Verizon product. It’s not the Motorola A855 Droid. It’s Droid on Verizon (from Motorola). And it was smart, because the Droid branding was not for just one device, it was for an entire class of phone that evolved with a new model every three months. But Android as an OS and concept became popularized as Droid even if it wasn’t on Verizon. And better yet, it worked because if you were to poll a random sampling of the public, a significant percentage would tell you that Android is a Verizon product. It’s epitomized by the launch event for the original Droid device in which the corporate logos were arranged, from left to right: Verizon, Motorola, Google.

You can’t count on that happening this time around. iPhone is not a Verizon property, it’s an Apple device that will run on Verizon’s voice and 3G data network. It will not be an LTE-capable device. It will not carry a Verizon logo, a checkmark, or a red and black splash screen before boot. Verizon knows this, and it’s why they’ve spent so much to differentiate themselves through marketing to position themselves as the market leader in reliability and overall coverage because the differentiation will not be on the device level. Even when it was taking on AT&T and its most popular device, it never sought to convey that the iPhone was a bad product (save for the ill-fated iDont ad), it was that it was on a sub-par and over-saturated network. That will change tomorrow.

And things just got a whole lot more interesting for Android ODMs that were relying on people who won’t or can’t leave Verizon, who now can get the device they actually wanted.

This Was Supposed to Be the Future. Make with the Jetpacks.

Not quite a personal jetpack, but still pretty neat. Ten years ago, if someone had told you that in the near future, your shoes would talk to your mobile phone as you run and that your phone would connect wirelessly with a pair of stereo headphones for music, all the while allowing you to play Scrabble with a friend who lives three thousand miles away in New York — you would have probably told them to leave some cocaine for the rest of us.

What’s even more shocking is that it all works together flawlessly, links to an online service to share and compete with others and is completely reasonable in price. It may not be a personal jetpack or teleportation, but sometimes you have to take what you can get. With respect to Apple in this scenario, it’s a testament to the restraint to adopt and innovate new and existing technologies to make complex ideas into simple and compelling features for the end-user. It’s not about being first to market or designing a device that wins on a spec sheet alone; it’s about offering features that translate into¬†practical usability.

And speaking of usable futuristic technology gone mainstream, how about that iPhone 4 FaceTime ad? Or Face/OffTime, if you will.

The Sad Tale of Palm and webOS – Part 1: Business and Marketing

Palm Pre Plus - App Image
Palm holds a soft spot in every gadget geek’s heart. I’ve been a fan since my first Palm device, the Palm III — perhaps the first device that showed me where things were headed and the potential of mobile computing. It was followed with a Sony Clie (a palm licensee), a Treo 600 and a few others. But Palm faced a problem in that the operating system was stagnating. While Windows Mobile, albeit less user friendly, was innovating at a solid clip and was the software powering some of the most compelling mobile devices of the mid-2000s, Palm was finding any way they could deliver rehashes of the same device running Palm OS 5. That version, which powered the Treo 600, 650, 700p, 755p and the Centro, a device that up until last year was still sold by the major US carriers, was introduced in 2002.

The company had many challenges ahead of it as BlackBerry hit the big time, securing not only the enterprise and SMB markets but also achieving success in the consumer space with the Curve and Pearl models, and Apple who released the iPhone in 2007 which spelled doom for last generation touch devices like the Treo.

In January 2009, Palm announced its answer to the competition and placed its future in the hands of its new webOS software. Early adopters and investors seemed impressed but unfortunately it failed. Palm was acquired by HP (HPQ) on April 28th, 2010. The failure is three fold: business and marketing, software, and lastly hardware. In this post, I’ll cover the business aspects of the situation.

Palm chose Sprint Nextel as their launch partner of the device in 2009. The exclusive launch partner. It made sense, somewhat. Sprint was still hemorrhaging customers because of its divided attention after the Nextel acquisition, lackluster customer service, and deficit of focus. Palm expected that it could divide marketing costs with Sprint, receive more prominent placement in stores and have the Palm Pre, the first webOS device, serve as the flagship device for Sprint’s rebranding campaign. Having announced the device five months before it would actually ship, the hype machine was in full force and many were hopeful for its resurgence. Palm was trading at $1.42 as of December 8th, 2008 on the NASDAQ and by the launch of the device, it was at $13.01 in early June.

The single carrier exclusivity strategy was ill-fated. It limited the audience of the Pre to just too few consumers. In the quarter leading up to the release of the device, Sprint reported that it had lost 1,250,000 postpaid customers, 531,000 from the Sprint CDMA side of the business. That meant that at launch time, Palm had an possible embedded sales base of just 25.3 million customers, because remember, even though Sprint had 49.3 million subscribers, only a little over half are on post-paid CDMA contracts. Sprint led the industry in the worst way possible with 2.25% postpaid subscriber churn. Sprint bet, and most likely made concessions for the exclusivity, to draw in and keep high-ARPU smartphone users who would want the Palm Pre.

Yet Palm, even riding the wave of pre-CES hype in 2009, didn’t have a magical and lust-worthy device like the iPhone which would lead to customers ditching their old wireless providers in droves. Apple didn’t have that problem; even though they were new to the phone business, they picked a huge carrier and had a built in audience that would pay an early termination fee just because Steve Jobs blinked in their general direction. Palm had no such luxury, and they blew it. It wasn’t until the following CES in January 2010 when Palm announced the device would land on its second US carrier, Verizon Wireless, which would prove to be too little too late as the momentum in the smartphone space had shifted to Android and BlackBerry for other carriers and to iPhone for AT&T.