Editor’s Note: Welcome to our weekly Reality Check column. We’ve gathered a group of visionaries and veterans in the mobile industry to give their insights into the marketplace.
We quickly forgot the Consumer Electronics Show by last Tuesday (talk about a short news cycle) with the announcement of the Verizon Wireless iPhone. Many of have asked me to opine on the loss of iPhone exclusivity, and spell out the winners and losers. Briefly, here’s my take on who wins:
1. Apple Inc. Of course, Apple wins. But it’s not just from the sale of more iPhone 4 devices. It wins because iTunes is becoming the “docking station” for all of mobile. It wins because it significantly expands the applications addressable market in the United States and abroad. And it wins because it’s Verizon Wireless and therefore not AT&T Mobility. Apple now has an equity market value in excess of $320 billion. Apple is winning, and winning big.
2. Apple App Store developers. Those who wanted a solution that could cross carriers, that could create greater “mobile symmetry” than Android, now have a way. Businesses devoted to Verizon Wireless or who split their traffic between Verizon Wireless and AT&T Mobility now have a single solution. And, with exclusivity off the table, and the head of T-Mobile USA Inc., Phillip Humm, having launched the iPhone in Germany, the addressable market is about to increase – again. That’s a good thing for developers.
3. LTE. The new 4G standard gets a boost from this. Some will argue that the magnitude is small, but when the iPhone goes LTE, the applications on the iPhone also go LTE, and the world goes LTE. Getting a WiMAX chipset in an iPhone looks like a near impossibility – bad news for the current Clearwire Corp. network.
4. Bandwidth providers. Verizon Wireless has a very strong access engineering staff (many of them worked for me when I ran Access Management for Sprint Corp.). I would hate to be the person who had precisely to determine the impact to backhaul requirements of the iPhone launch (on top of LTE). But the winners here are the providers that connect the cell towers to the Verizon IP backbone network. On the East Coast, that’s Verizon Communications Inc.’s Telecom unit. In major cities outside of the Verizon footprint, it’ll be backhaul providers like Zayo and Fibertower (see note below). Cable providers, especially Time Warner Cable, may also benefit from their existing relationships with Verizon in the Midwest and the Southeast.
5. Distributors. Stores will be packed on Feb. 10, and they won’t be shopping for the current provider of the iPhone. In a Verizon Wireless store (or exclusive distributor), they will now have a broad-based strategy: iPhone, Android, and BlackBerry in all screen sizes. It’ll still be a 3G story, with LTE focused on PC/data consumption until the summer. But the stores have a terrific opportunity to extend the brand and the network message.
There are more winners – the folks who recycle your current phone (such as eRecycling Corps, or ERC, in Kansas City) will see an increase in available inventory. Phone insurance take rates will go up. There’s even a halo effect on the iPad. While there are many winners, the losers are also numerous:
1. Research In Motion Ltd. With the AT&T Mobility version of the iPhone 3GS now at $49, free cannot be far behind. Couple that with free Android and Windows 7 devices and improvements in corporate e-mail and RIM’s BlackBerry very quickly becomes the Chrysler of the mobile phone operating systems.
2. Feature phone handset providers. There aren’t many left, but Sony Ericsson and Nokia Corp. need to make a faster transition to the smart phone world. It all rolls downhill – something has to give in the “sea of free” and I wouldn’t be surprised if Verizon Wireless cuts back to ten or less feature phones by the end of 2011.
3. Home phone service. Consumer disposable income is not invented, and it must grow as our economy recovers. Until that recovery occurs, consumers make tradeoffs. Here is a summary of recent cord-cutting figures released by the Centers For Disease Control:
a. Twenty-seven percent of all households (representing 25% of all adults and 29% of all children) are wireless only (no landline phone whatsoever);
b. Thirty-five percent of all Latino adults are wireless only;
c. Forty percent of all adults aged 18-24 and 30-34 are wireless only; 51% of all adults aged 25-29 are wireless only;
d. Twenty-eight percent of all adults in the Midwest and 29% of all adults in the Southeast are wireless only;
e. An additional 18% of adults are wireless mostly (wireless is their primary means of communication but they still own a home phone). Combining wireless only and wireless mostly results in 55% of all Latino adults are wireless only or wireless mostly; 62% of all adults aged 18-24, 69% of all adults aged 25-29, and 62% of all adults aged 30-34 are wireless only or wireless mostly; 46% of all adults in the Midwest and 47% of all adults in the Southeast are wireless only or wireless mostly.
Need an additional $30 per month to cover that data payment on your iPhone? Cutting out the home phone (or downgrading your data speed on your home PC) seems like a better decision.
There are more (I’ve got to think that Verizon Wireless has enough on its plate, for example, to delay Palm Inc. and Microsoft Corp. Windows launches to the second half of 2011). And I don’t think the iPhone is devastating to AT&T Mobility or Google Inc. – more like a neutral to slightly negative.
Jim Patterson is CEO and co-founder of Mobile Symmetry, a start-up created for carriers to solve the problems of an increasingly mobile-only society. Patterson was most recently President – Wholesale Services for Sprint and has a career that spans over eighteen years in telecom and technology. Patterson welcomes your [email protected].
