Welcome to our Monday column, Analyst Angle. Every Monday, the industry’s leading analysts give their outlook on the hot topics in the wireless industry, from carriers to content to handsets to infrastructure.
The July 4th holiday is just behind us, and I’m still reveling in national pride (and searching for a column theme that isn’t about the iPhone). We can vote and debate without fear. We have one of the world’s strongest and most resilient economies and a history of innovation in technology, finance and marketing. We are free to worship as we please, to wear turbans or wimples or hand-made yarmulkas decorated with gadget icons. We have both high culture and Paris Hilton. But at every meeting with device vendors and non-U.S. operators I am told that the U S of A is waaaay behind every other country in the world when it comes to cellular technology. That’s certainly the conventional wisdom, but is it true?
The Case Against U.S. Mobile Device Market Relevance
Last I checked, U.S. consumers still sent fewer text messages (at least per capita) than Europeans, though I suspect we’re slowly catching up.
The U.S. has a lower percentage of handset penetration than many European countries, where multiple handsets per customer has artificially boosted the numbers beyond 100%.
The U.S. is clearly behind Japan and Korea in advanced service rollouts such as NFC (Near Field Communication) payments, mapping, MMMORGs (Mobile Massively Multiplayer Online Role-playing Games), broadcast TV, video sharing, and 10 MP cameraphones.
The “phone culture” is certainly not as developed in the U.S. as it is in Europe and Asia. Aside from the iPhone, the RAZR, and perhaps the Sidekick, few Americans can identify different handsets. In fact, Qualcomm reports that surveys show it is one of the most recognized handset manufacturers in the U.S., despite not having sold a handset in over seven years-that little sticker “Qualcomm 3G CDMA” on the back of CDMA phones from Motorola, Samsung, LG, and others is enough to throw off a significant portion of the populace. In Indonesia, Nokia’s large and powerful Communicator is considered a high-end business gift because it can nearly substitute for a notebook computer; in the U.S., my brand new super-sophisticated Nokia E90 was recently mistaken for a car phone from 1991.
The U.S. is a carrier-dominated market; unless your name is Steve Jobs, the carrier decides which technologies go into the handset. This has slowed the growth of Bluetooth, PC file and music transfers, Wi-Fi, VoIP, and more.
Carriers control service access, too, which arguably makes it harder to roll out new offerings (more on this later).
Consumers have been bribed by carriers to expect phones for free with contract-the low-end market is restricted to a relatively small prepaid base. With clamshell cameraphones selling for free and 3G musicphones selling for $49, the high end of the market basically doesn’t exist (aside from a few productivity-oriented smartphones and the iPhone). This has led to compressed pricing and margins.
Network technology and spectrum differences exacerbate the problem; vendors targeting the U.S. need to treat each carrier almost as a separate country. Obtaining economies of scale can be difficult.
Compared to almost anywhere else in the world, U.S. cellphone coverage is just awful. Things are so bad that one U.S. carrier actually launched a series of ads highlighting the fact that it doesn’t drop as many calls as its rivals do (also known as the “we suck less” campaign).
The Case For U.S. Mobile Device Market Relevance
I haven’t crunched the numbers recently, but last time I checked, Americans talk more than anyone else on the planet. A lot more. Whatever else you want to say about the U.S. mobile-phone market, by this metric we use our phones more than anyone else in the world. (It will be interesting to see if this leads to more durable handsets or just disposable ones.)
Americans use mobile e-mail more than anyone else in the world (except maybe Japan, depending on how you define “e-mail”). RIM claims 9.2 million BlackBerry users, and while the company doesn’t break down usage by geography, I’m confident that a majority of those are in North America.
The U.S. sets mobile device style trends followed around the world. Clamshell phones, super-thin phones, QWERTY devices, and all-touchscreen devices were either invented or popularized in the United States. Funny thing is, this bullet point didn’t come from me-it came from a Nokia presentation.
Americans pioneered PTT and probably still have more PTT subscribers than anywhere else in the world. Nextel had 15 million subscribers when it sold itself to Sprint.
It always seems to surprise the critics (most of whom come to the U.S. and roam on T-Mobile), but the U.S. actually has a tremendous variety of advanced 3G services (just none on T-Mobile). Sprint and Verizon Wireless each have nearly nationwide EV-DO Rev. A networks, with which they have launched streaming media, over-the-air song downloads, GPS navigation services, productivity applications, and 3D games. AT&T is following as it rolls out a full HSDPA network. Amp’d Mobile is a 3G content provider masquerading as a failing MVNO, while Helio is an MVNO dedicated in large part to 3G social networking. It’s true that in this area, the U.S. still lags Japan and South Korea, but, come on, everyone is behind Japan and Korea. Some of the wacky mobile applications in Japan just don’t translate off the island, and South Korea appears to be a country of 48 million early adopters. Even in Japan and Korea, though, the actual percentage take rates for their advanced handsets and services are much lower than you’d think by reading Engadget’s breathless coverage of the latest gewgaw.
The U.S. is still the largest consumer economy in the world. ASPs (Average selling prices) may be low, but that’s only because we’re spoiled with freebies. Give U.S. consumers a reason to pull out their credit cards and they will: Motorola sold 5 million RAZRs in the first nine months as a Cingular exclusive. Apple’s iPhone inventory sold out in just a few days; if the financial analyst estimates are to be believed, Apple has now sold more iPhones in a single weekend than Danger has sold Sidekicks over its entire 5-year run. Bottom line: if you’re looking for a place where you can sell a lot of high-margin product, follow the money.
The U.S. is home to Hollywood and Madison Avenue. Global brands are born (or burnished) here. I’ve been following product placement in music videos, and it’s amazing how many high-end phones show up in them, phones that aren’t even available in the U.S. market. American hip-hop and pop music is global, but the videos are shot here. The U.S. is also home to Wall Street and Sand Hill Road (venture capital); for example, 45% of Nokia stock is owned by U.S. shareholders. While it is true that you can build a brand and a stock without appealing to U.S. consumers, that may actually be doing things the hard way.
For such a “backwards” place, the U.S. is home to a surprisingly large number of mobile industry players. While you can find Internet innovation in many spots around the globe, if there’s a center for Web 2.0 development, it’s in Silicon Valley. In alphabetical order, the U.S. is home to: Analog Devices, Apple, Broadcom, Danger, Google, HP, Immersion, Microsoft, MontaVista, Motorola, Nuance/VoiceSignal, Palm, Qualcomm, Sun, Texas Instruments, Yahoo!, a few dozen companies I’ve missed, and a decent chunk of the Linux developer community. (RIM isn’t technically a U.S. company, but it is just over the border in Ontario.)
.and we got the iPhone first! (Couldn’t resist.)
Avi Greengart is the Principal Analyst, Mobile Devices at Current Analysis, Inc. For help navigating the unique U.S. mobile device landscape, or to complain that Avi left your company off his list, Avi can be reached at agreengart@currentanalysis.com
