Out of the Blue

VZW iPhone -- Buy or Wait?

If there were few surprises in Tuesday's Verizon iPhone announcement, there certainly were several questions/issues raised, some of which include:

Product Cycle -- This is the same iPhone model that AT&T customers have been able to buy since last July (except the VZW iPhone doesn't offer simultaneous voice and data, international roaming and SIM-card ease.) The iPhone has been on an annual product cycle since introduction, refreshing every June/July. Since the current iPhone 4 was released on July 27, 2010, a new version is expected within 4-5 months. Will the VZW/CDMA version also refresh at the same time, or lag behind the GSM model? If both are on the same cycle, is the just-announced iPhone a little past its "Sell By" date? And if so, should VZW customers anxiously awaiting the iPhone, wait for the iPhone 5 this Summer rather than getting locked into a stale device for the next two years?

Exclusivity -- Verizon characterized the deal as non-exclusive, raising the possibility that iPhone availability at other operators (Sprint and T-Mobile) might be in the works. When Sprint, which like VZW also operates a CDMA network, issued a "no comment", the possibility that the iPhone might be available at any major US operator -- as it should be -- seemed more real. Soon you may be able to buy an iPhone on almost any major carrier, not just AT&T (which obviously already lost exclusivity) and VZW, which admits it doesn't have it.

Personal Hotspot -- The VZW iPhone was announced with Personal Hotspot capability, providing WiFi connectivity to up to five connected devices. When will the AT&T/GSM iPhone get this feature, and will it cost extra or be included in the unlimited data plan VZW said it will offer? The Personal Hotspot feature may be coming for all iPhones in the upcoming iOS update for iPhone 4 and 3GS (and iPad) devices. If that update happens on or before February 10, when the VZW iPhone becomes available, this will not be a differentiating feature. There is still potentially a rate plan question which to my knowledge has not yet been addressed by either AT&T or VZW.

4G/LTE -- When is the VZW iPhone going to be able to take advantage of its much-touted high-speed 4G/LTE network? Not in the VZW iPhone announced on Tuesday, which will use VZW's slower EV-DO network. Will VZW iPhone users be able to use the blazing 4G data speeds of LTE on the iPhone 5? You'll have to wait until the Summer (or later) to know.

Flaws -- Whether the iPhone as a device may be flawed, and specifically whether maddening dropped and call quality problems are caused by the phone or host network may finally be answered. Joe Nocera summarized well in the NYT: "[F]or all that it offers, the iPhone has always been plagued by serious drawbacks. The “phone” part of the iPhone has never worked very well, dropping calls with annoying regularity. Even when the phone works, the sound quality is often substandard. You would think in an age when fewer people are using landlines this would matter. Apparently not. Meanwhile, the iPhone’s lack of a raised keyboard makes it next to impossible to do serious e-mailing. And users have to worry constantly about battery life; if they’re not judicious, the iPhone’s battery can be drained by noon."

My Advice -- No matter how much you lust after the VZW's new iPhone, wait a few weeks to see if the dropped call and call quality issues are resolved or persist. If the problems persist, and you make a lot of calls, stay away or join the crowd of unhappy iPhone users who like to talk on the phone as well as play with apps. If you wait the requisite 2-3 weeks while others are the call quality guinea pigs, and it passes the dropped call test, then I would still wait for the NEW iPhone 5, which by then will be just 3-4 months away. If the dropped calls and quality persist, if you must have an iPhone, I'd stay with AT&T, especially if you travel outside the US, as the AT&T's GSM iPhone "roams" worldwide, while the VZW iPhone is pretty much a US-only handset. Power users will want simultaneous voice/data available on the AT&T/GSM version.

Disclosure: My current phones are the HTC Droid Incredible and iPhone 3GS. Over the past year, I have used the HTC Nexus One, Motorola Droid, Motorola Droid X, the second generation iPhone, and two BlackBerries, the Torch and Bold 2. (I had the iPhone 4 ordered and delivered, but returned it without opening the box after the antenna problems were reported.) Several clients develop applications for iOS, Android and BlackBerry, and I religiously use my clients' apps.

VZW iPhone Predictions

Invitations have been sent, a news conference will be held (at the Lincoln Center in NYC tomorrow at 11:00 am EST), and just about everyone expects that at long last, Verizon Wireless (VZW) will announce that it will carry the iPhone. But for those who just can't wait, here's my take on what will be announced:

VZW will carry the iPhone, which will be available in Apple Stores (and VZW Stores) in early February. Many believe the VZW iPhone will go on sale on February 3, based in part on the report that Apple is keeping Holiday staff for an extra couple of months and is not allowing vacations for retail staffers from February 3 through 6. (In the past, Apple has limited vacation for retail store employees around past new product releases, for both iPhone and iPad.

The VZW iPhone will be nearly identical to the current iPhone 4 which has been available from AT&T since last June, i.e., It will be an iPhone 4 with a different air interface that runs on VZW's CDMA network rather than AT&T's GSM network. (So you will not be able to bring your AT&T iPhone into a VZW store to switch carriers; you will need to buy a new VZW iPhone. And don't expect a Buy One, Get One Free anytime soon!)

Most believe that the iPhone will likely stay on an annual product cycle. The current iPhone 4 was released on June 24, 2010. Previous updates were in June 2009 and July 2008. This would suggest that the next iPhone (version 5) could come over Summer 2011.

WSJ has reported that the iPhone will be offered under existing VZW service plans, including unlimited data plans. (This is not surprising because many of AT&T's iPhone customers, which VZW would like to lure away or lure back, enjoy unlimited data plans.) Equally important, VZW wants to convey confidence in the quality and data capacity of its network.

This iPhone announced tomorrow will NOT be an LTE device, nor will this iPhone have NFC capabilities.

When the AT&T and VZW's iPhones are tested side by side, the VZW version will provide better call quality in most markets and under most conditions. Despite claims and counterclaims by the operators, in test after test, the VZW network performs better than AT&T.

Piper Jaffray has predicted VZW will sell 9 million iPhones this year, with AT&T selling 11 million iPhones, with Apple thus selling 20 million iPhones through their two US carrier channels this year. Adding Verizon to its US carrier channels gives Apple access to more than 60 percent of US mobile subscribers. Apple will definitely sell more iPhones with two carrier channels than with one.

Sprint's Prepaid Strategy

Since completing the Virgin Mobile acquisition last year, and bringing all of its prepaid efforts under the Sprint Prepaid Group, it's been known that Sprint was in the process of rationalizing, freshening and repositioning its prepaid lineup. The new focus and service offerings were announced today. In a nutshell, it is well-thought out and very well targeted strategy.

Sprint has logically segmented the market, and then gone after it with four very different offerings that address each segment. While others spend billions developing, then abandoning brands -- the Cingular brand comes immediately to mind -- Sprint clearly understands branding better than anyone in the industry today. Sprint's plan has something for everybody, in a good way, and seems to be a winner that will help the company's turnaround.

I was quoted in Light Reading today, described as "prepaid analyst." As those who work with me know, I help young companies develop strategies and land their first big deals. Every once in awhile, I work with big companies on new initiatives in the mobile space. I am not a consultant or analyst in the traditional sense, but more a hands-on, interim business development executive working with clients on projects or strategic deal efforts. Almost all of my work is in mobile applications and services. I have been working with one client on a new service geared to prepaid subscribers, and have thus been paying close attention to developments in the prepaid space. This has coincided with the accelerating growth of the prepaid segment in the US, which as the most competitive space in wireless, has been fun to watch.

Mobile Cannibalism Continues

A UK mobile phone comparison website interviewed more than a thousand mobile users and found that the phone is "eating" MP3 players, cameras and calculators, as reported in Mobile Entertainment.

This was my point two years ago, when I wrote a piece on the Mobile Juggernaut.

The power of mobile is reinforced by similar news items nearly every day. The list of products and services that mobile has profoundly effected (or sent to the museum) continues to grow. In telecoms alone, mobile has filled a graveyard: payphones, calling cards, domestic long distance (and the companies that offered LD), even landline phone service. Consider that over the last decade, the number of fixed telephone lines has been declining by 4-6% per year while mobile penetration has grown from 39% to 92% today, according to UBS. The crossover point, when mobile lines exceeded fixed in the US, was 2004.

That's just the telecoms industry. And it's not just MP3 players, cameras and calculators in the UK study that have been cannibalized by mobile. Handheld navigation devices, wristwatches, PDAs, TV, games, and soon wallets will be a thing of the past. And with the Kindle and soon iPad, don't forget books (not on my Juggernaut list two years ago) or laptops.

Why put anything else in your pocket?

Droid Mania

I arrived at the local Verizon Wireless Store a little early this morning to make sure I could get a Droid, VZW's first Android (Google) handset from Moto. At 9:15, 45 minutes before normal opening time, the doors were wide open, balloons hanging, and nearly a dozen Black Droid-shirted VZW employees greeted me. They opened at 7:00 am, already had sold 50-60 Droids, and the early rush had subsided. "You came at a good time," the VZW rep told me. (The Van Ness store was equally festive, with a table on the street with coffee, and the indoors buzzing with Black-shirts.)

These VZW employees were well-trained on the handset, and in a carefully scripted sequence, walked customers through phone set-up, first e-mail, then phone features, contacts, sending an email (to VZW, so they now have my e-mail address) and a test call. With Android users being the geekiest smartphone users, VZW apparently told reps in its training that some people will come in to buy a Droid, and not want any help setting it up, in which case the VZW reps quickly abandon the script, turn up the phone (and make sure it works), letting the customer go on their way.

I told the VZW rep, who was quite good and almost as enthusiastic as every Apple Store employee, that maybe VZW at last has a handset for customers walking through the doors who want an iPhone. They've been without a response since the iPhone launched. He said, "I hope so; do you really think this is true?" So after you've read all the others' reviews (Mossberg and Pogue) and iPhone comparisons, here are my first impressions with the Droid, which is being charged now.

Screen: Big, bright and scrolls almost as smoothly as iPhone. Surprisingly good, especially given previous lame iPhone wannabe's
Build: Solid, great feel (metal vs. plastic), thicker than iPhone but there's a keyboard, which slides open and closes like a Mercedes door
Keyboard: If you want a keyboard, get a BlackBerry. I found myself using the touchscreen, but at least there is a keyboard
Android: Takes some learning but this will be open OS of choice
Voice/Call Quality: Excellent, top-rated
Browsing Speed: Faster than iPhone

I will update this, but someone asked for a review. There are plenty of reviews for this exciting new phone. And it's quirks will become more apparent than Day 1 of handset lust.

OMG! Nevermind.

As I walked into my home office this morning at 6:30, my cellphone screen alerted me to a text message, which read: "Cops came everythings fine sorry if I worried you", time stamped at 1:35 am.

My curiosity peaked, with a sense of relief over an unknown crisis nevertheless thankfully averted, and for that matter, entirely missed, I checked the previous message, which read: "OMG dad, [roommate] in my room someones trying to get into our house [roommate's] calling 911", time stamped just 21 terrifying minutes earlier, at 1:14 am. It must have seemed like hours. (Too many episodes of Dragnet compel me to excise the name of the roommate to protect the innocent.)

I am in the Pacific time zone, but these text messages were frantically sent from the Mountain time zone, as my daughter is a Junior at University of Colorado in Boulder. This whole drama occurred while I slept peacefully, unaware of the attempted B&E in progress. No suspect was apprehended, as a friend had simply left her purse and cellphone at the house and didn't want to bother anyone by ringing the doorbell (and she couldn't text her friend to let her in.)

American teenagers sent and received an average of 2,272 text messages per month in the fourth quarter of 2008, according to the Nielsen Company — almost 80 messages a day, more than double the average of a year earlier, according to a recent New York Times story. And that's an average.

I'm glad my daughter texted me (rather than calling) at that hour. She surely felt that I was by her side during this crisis, and that's what a father's for, after all. She texts a lot, but she also calls. For all of this, and that the suspicious person turned out to be a friend, I am thankful.

An iPhone Photo is Published (and Improved)

I love my iPhone 3GS for so many reasons -- the 32GB capacity holds ALL my music, a movie for long plane rides, and lots of Apps, the new 3.0 OS (especially search and copy/paste), and the greatly improved 3.2 MP camera. While I have both a DSLR (a Nikon shooter for more than 40 years) and P&S camera (Canon G10), I always have my iPhone with me, and increasingly find myself shooting pictures with it. There are also some fun photography Apps, including CameraBag, that allow you to manipulate photos onboard quickly and easily.

Two of my photography buddies, Joe Eisner and Veit Irtenkauf, have a great site -- iPhone Photo Video -- and published one of my photos today. (My first picture published since a cover on Ski Racing magazine in 1974.) Joe manipulated my picture of the Sausalito waterfront in Aurora, and you can see the improvement. I like the way he lightened up and pinked the sky and sharpened the boats. Check out the story and let me know which version you like.

NOTE: I have written in the past about my dissatisfaction with my iPhone 3G, particularly the dropped calls. After several firmware updates last year, when the dropped call issue came to light, it is my opinion that Apple has done everything it can to optimize the telephony capabilities of the device, and that dropped calls are the problem of the AT&T network, which is especially challenged in the Bay Area. My BlackBerry Bold, which I also carried, has more dropped calls on the AT&T network than the iPhone. Where there is coverage, the iPhone's telephone really shines, especially for conference calls.

TracFone Joins the Unlimited Party

Not to be outdone by metroPCS, CricKet, Boost and Virgin, TracFone has unveiled an unlimited nationwide voice and text prepaid plan for $45/month under their Straight Talk brand. Now there are at least three carriers in every market, and four in metroPCS and CricKet markets (which for the most part, don't overlap), with competing unlimited plans in the $40-50 range.

Since these are non-contract plans, users can move around freely without early termination penalties. They simply buy a new handset while the new provider ports their number.

Interestingly, these plans are close to the Big Four operators' entry-level plans. The prepaid players are using these Unlimited Plans to boost (no pun intended) their ARPU (Average Revenue per User) to near that of the Big Four ($46-52), From a customer perspective, you can get an unlimited plan from Boost, Virgin, metroPCS, CricKet and now TracFone for the same price as a Big Four $39.95 "bucket" plan, e.g., Sprint, Verizon, and AT&T all offer 450 minute plan for $39.95, T-Mobile offers 1,000 minutes for the same $39.95. (Is it any surprise that T-Mobile subscribers average nearly 1,000 minutes a month, the highest of the Big Four?)

There remains a sizable market who cannot afford a $40-45/month plan whether prepaid or postpaid . This is a market TracFone knows better than anybody, and they have a 1,000 minute/month plan including 1,000 texts, for $30, enabled by the ground-breaking deal they did with Verizon Wireless. (The wholesale airtime cost of this deal had to be in the 1.5 cents/minute range.)

All the action is in prepaid, and competition in this hot space continues to heat up.

Flat Rate International Calling Changes Everything

Today, metroPCS announced unlimited international calling to more than 100 countries for an additional $5/month. If you sign up for metroPCS' extreme unlimited plan, at $50/month, you get unlimited local and domestic long distance calling, nationwide coverage, unlimited texts (domestic and international), unlimited web and e-mail access, unlimited navigator, MapQuest and premium directory assistance. For another $3, they throw in unlimited calling to Mexico, or $5 unlimited calling to more than 100 countries. That's $55 for everything. No one else comes close! So far, that is.

The impact of the unlimited international calling plan will be immediate and far reaching. I liken this to the announcement of AT&T's Digital One Plan, introduced in 1996, when AT&T offered "free" roaming and domestic long distance calling. This was the beginning of the end of the US long distance business, as users began using their mobile phones for "free" LD calls. And unlimited international calling plans, key to the prized ethnic market, will be very compelling. Heck, I think anybody that makes more than an occasional international call, will sign up for this plan, "just in case."

As with other calling plans, this latest move is another in the trend toward mobile operators providing flat-rate connectivity, for calling, text and web through the many unlimited plans, and now for the first time, unlimited flat-rate international calling. Flat-rate connectivity and open networks (where any device can be connected) are the Nirvana that so many are waiting for, and today we just took another important step in this direction.

metroPCS' move puts tremendous pressure on CricKet, Virgin and Boost, all of whom have been in near lock-stop rolling out competing unlimited plans and all of whom count the "ethnic market" as an important part of their base and target market. But this trend could bleed into the postpaid market. Consider that according to UBS analysts, prepaid services like those offered by metroPCS, CricKet, Virgin and Boost, will NET more than three times as many new subscribers as Postpaid net adds, and that was before this latest move, which can only improve the relative net adds. In fact, according to these UBS analysts, the unlimited prepaid segment represented 51% of industry net adds in the first quarter of this year.

As word of this new unlimited international calling plan spreads, competitors will need to move quickly. Remember, prepaid users have no contracts, so without the hefty early termination fees that go with Postpaid (Contract) services which comprise the bulk of Verizon, AT&T, Sprint and T-Mobile's subscriber bases, the shift could be on quickly.

Don't think that the Big Four national operators are immune from churn as a result of this plan, or can sit idly by. There is a reason so much growth is going on in the Prepaid segment: the economy and the value that these prepaid offerings provide are hard to ignore.

Competition is clearly heating up, and consumers will benefit.

Prepaid Rising

Prepaid wireless has come of age. It began in the US with TracFone nearly ten years ago, followed by Virgin and Boost. Then metroPCS and CricKet began offering pay-up-front low-cost monthly plans in a growing number of markets. Four years ago, new Prepaid customer additions were less than one-third of Postpaid adds. This year, the tables have turned, and for the first time, US mobile operators will add more Prepaid customers than Postpaid. Just today, Sprint reported losing 1.3 million Postpaid customers, while gaining 764,000 Prepaid customers with its Boost Unlimited offering.

Prepaid plans have evolved from pay-as-you-go minutes, to buying service for a day, week or month, to the current crop of unlimited voice, messaging and data plans. Prepaid prices have gone from being relatively expensive on a per minute basis to potentially great values, for low usage and especially for unlimited usage.

In fact, today Postpaid (or Contract) and Prepaid (No Contract) plans may be more aptly described as Premium and Value plans, respectively. Price checks over the weekend illustrate the point:

PREMIUM: Unlimited voice, messaging and data on Postpaid/Contract plans:

• AT&T and VZW:  $129.99/month
• T-Mobile, $109.98/month
• Sprint $99.99/month
• Contract “activation fees” plus early termination fees up to $200

VALUE: Unlimited voice, messaging and data on Prepaid/No Contract plans:

• Boost Unlimited: $50 (also includes “walkie-talkie”)
• CricKet: $50/month (includes 30 roaming mins)
• Virgin Mobile: $59.99/month (includes 50MB data)
• metroPCS: $45/month
• No contract activation and no early termination fees

From the customer’s perspective, for the Premium unlimited plans above, you pay an “activation fee” so that you can sign a two-year contract (with hefty early termination fees), and then you have the privilege of paying at least twice as much a month for service than you would without a contract. 

The biggest difference between the two offerings is the type of handsets available (and whether your first payment is at the beginning of the month or the end; after the first payment, you pay monthly either way.) If you don’t care whether you carry an iPhone, the latest BlackBerry or other smartphone, more and more people are turning to the value of Prepaid. (Interestingly, metroPCS is introducing a BlackBerry, CricKet offers PC data cards, and a great range of feature phones are offered by Prepaid providers so that any handset disparity is also disappearing.)

There are other Value services, to be sure, many offered by regional and independent operators who compete with National Operators in their local markets. And there are great services like Jitterbug that have attractive plans for lower-usage subscribers. Verizon, AT&T and T-Mobile have their own Prepaid offerings, but the Value service providers above offer very compelling plans.

I have written on unlimited plans and continue to believe that most people don’t need $100+ unlimited voice plans. Most will do better with lower-priced bucket plans, such as the typical entry-level $39.95/month plans that most Contract customers use.

A final thought:  The two largest National Operators — VZW (including ALLTEL) and AT&T — who together ended last year with nearly two-thirds of total subscribers on the National Operators’ networks, have the most expensive unlimited plans. This could change as those competing with VZW and AT&T are offering compelling alternatives.

NOTE: I took a few months off from my Blog, but am back. Thanks, Ian!

 

Tags: Sprint, Verizon, Boost, AT&T, TracFone, metroPCS, Cricket, prepaid, postpaid, T-Mobile, unlimited, mobile, messaging, data, contract