It's Getting Chilly in Hades…

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Hey gang, hope your holiday break was relaxing and enjoyable. It certainly hasn’t been quiet in the mobile world recently. Let’s take a moment to recap the events of the last few weeks:

  1. Google Android: If it is just yet another operating system, or if it is a real step forward in open standards and allows developer to enhance their creativity remains to be seen. But here is my take on things. First, the operating software for any mobile device has rarely been the issue. There are notable exceptions, like older RIM products that can’t support streaming media. That was an OS issue that couldn’t be changed. Typically, the difficult issues have been around what parts of the phone functionality could be accessed. For instance, many carriers closed off streaming media through Java unless they were vending the application, and few carriers (if any) make location information available outside of tightly controlled carrier-supported applications. The upshot of the carrier control of the functionality is that the OS was compromised according to the business and network concerns of the carrier. Android, designed as an open OS from the start, should come into the world without those compromises. However, that remains to be seen. The real face of Android won’t be known until Android powered handsets come into carrier certification testing. Carriers may decide that certain features of functions of the OS provide access or functionality that are challenging for network or business reasons, and ask that those be closed before said handset is certified. Openness is, of course, only relative. It will be those brave handset manufacturers and carriers that will submit and certify fully open handsets that will make Android a real game changer. (That being said, a BREW handset with no limited features, or a Java handset with all functionality open would be a truly interesting experience as well.) So, Android has promise, and I suspect will be a real influencer of the idea of openness. I don’t, however, think that we will see a majority of handsets or even a significant minority of handsets powered by Android. However, more importantly, it will push ever increasing functionality and open access to features into all operating systems.
  2. Verizon Goes Open: This is a real shift. In essence, Verizon has said that beginning in 2008, and device that meets minimum technical specs and passes connectivity tests in Verizon’s testing labs will be allowed onto the Verizon network. From a consumer standpoint, this means that there will be a real shift to a BYO device concept, similar to the way the most of the world buys phones. So, you can go to your favorite retailer or manufacturer, buy your phone (sans subsidies, so phones purchased this way will likely be more expensive in the short term), log into some Verizon website, or call a toll-free number and activate your phone. This would be similar to the Apple/ATT iPhone purchase/activation experience. Why is this a good idea? This is a rare example where it seems everyone wins. For consumers it means that you choose your phone from all the certified devices, not just those that happen to be for sale from Also, it means that those devices that do pass the certification tests can be configured with features and functions that serve the user rather than the network. That is critical to the opening of truly advanced and meaningful mobile services. For VZW, this is just as critical a juncture, because it changes the way that customers think about Verizon and it transforms the role of the hardware manufacturer or retailer. No longer will Verizon be there to solve all of your problems with your hardware. No longer will Verizon provide warranty exchanges (unless, of course, you bought the phone from them), they will point you to the manufacturer. They will point you to the retailer. They will point you to the software maker. What does this mean? It means that Verizon dramatically reduces the level of service that they provide and they will point you to the folks who can really solve your problems. This makes your relationship with the device supplier more critical. This is key as Verizon leads the way into turning themselves into a service company and less of an end to end provider. Verizon wins because it lowers their cost, because no longer do they need to subsidize the cost of the device. Further, if they are pointing service calls to the folks that can actually solve the problems, i.e., the hardware and software vendors, Verizon’s service costs can drop. This means that Verizon can be more profitable, but more interestingly, it means that you, as a subscriber, have a much lower N number on your head. (The N number is the number of months that it takes the carrier to make back their investment into acquiring you as a customer until they start to make money. If there is a $200 handset subsidy, then that money needs to be made back for Verizon to start making money from you. If no subsidy, then lower N number.) The lower the N number, then potentially the lower the monthly service cost and lower contract termination fees!! Openness could save you money!
  3. Another Carrier (Not Verizon) Feels The Heat: I was in a meeting with a carrier this week. My contact there was talking about the true impact of the iPhone. (His company does not offer the iPhone.) From his perspective, the iPhone’s real impact is not in hardware design or converged services. The real impact of the iPhone is that consumers are suddenly significantly more aware of the availability of rich data services over their mobile device. The iPhone, for all of its game-changing touchscreens, lovely cover flow interface, awesome mobile browser and the like, the biggest takeaway competitors see is that it has alerted the end-consumer that there is a mobile web just waiting for them to discover! Their solution, in the short term, is to begin to get out of the way of developers and take a less active editorial role in WAP site and application promotion. To paraphrase, the $XXX millions that the carrier makes from data services (primarily premium wap and downloadable applications) are really a pittance compared to the tens of BILLIONS that they generate from calling and data plan revenues. Further, the cost and administration levels needed to generate the data services revenue are higher, so they’d like to get out of the value chain here and get back to basics and make money charging for voice and data plans, and not act as the gatekeeper to content. This kind of change won’t happen overnight, but his assertion was that the best way a carrier can acquire and retain customers is by providing a great network that performs as advertised and charges accordingly. Let the content owners and developers create amazing content and let them acquire an audience directly. The win for the carrier is that they get customers which have faith in their service provider’s network and begin to think of their mobile service as a primary channel of information and communication. For the content owners and the developers, it means an opportunity to create a direct relation
    ship with customers and have the carrier step out of the way!

This is an interesting time. While we won’t see any changes this year or maybe not even next, the change is coming. Imagine a time when you have the choice to buy whatever phone you wish. Use it on the network that you wish. Access the content that you wish from it. That sounds so futuristic!

Hey…wait a minute, that sounds just like the internet! I can choose to access the internet through Verizon, or Comcast, or Earthlink or AOL or whomever. I can access that internet from a Dell, or Apple, or Lenovo. And I can go anywhere on that internet I like. Imagine that…it seems like it’s getting chilly in Hades.

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