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.
Holiday weekends are usually quiet ones overall for business, and especially in the telecom world. Not this year. Between Leap’s iPhone announcement, Randall Stephenson’s wide-ranging discussion at the Sanford C. Bernstein conference, Sprint Nextel’s invitation to the iDEN funeral as well as their release of the latest HTC Evo over the weekend, and yesterday’s coordinated Samsung Galaxy III blockbuster release date, the week was not light on news.
About three years ago, a few of us began to track trends in the smartphone industry, specifically the movement from feature phones to smartphones and the movement from specific operating systems to others within the smartphone category. We have updated our findings to reflect the smartphone situation immediately prior to the Samsung III release.
smartphone comparison as of June 2
A few notes prior to the analysis. We used the two year contract price as a baseline, as it is the advertised price used by most of the carriers. In addition, we used the prices available on each carrier’s website, with the caveat that Wal-Mart, Radio Shack, Amazon, or others might be promoting specific phones at lower prices than those shown in the analysis. Our analysis also shows smartphone pricing in bands with “premium” defined as devices with advertised prices above $199, and the “economy” band as those with pricing below $99. It’s likely that we will need to include a “free” band in our October update as there are many 3G smartphones (and a few 4G devices) that are free with a two-year contract.
We chose June and October as our review points because they reflect the back to school and holiday selling seasons. It’s hard to believe that just two years ago we were experiencing iPhone 4 mania in June. It’s really hard to believe that we are quickly approaching the five-year anniversary of the iPhone launch (June 29, 2007). The pace of change over the past two years has been astounding and the use of the smartphone (and tablet) as the primary means of information retrieval is upon us.
The thesis from previous analysis was that “what’s stocked sells,” regardless of what is hyped at a trade show or on-line publication. If the store representative does not have an enthusiastic response to the device or the operating system, it will not be a success. We added the “rule of two/three” to the aforementioned thesis last year, meaning that there must be a compelling consumer reason (e.g., increased compensation) to recommend an operating system other than iOS or Android to customers. Neither BlackBerry nor Windows has made that case broadly (across all carriers) to date, and the “glory days” of 2008 and 2009 when BlackBerry could dictate store placement of their Curve, Tour and Storm models is over.
Not surprisingly, the smartphone list has grown over the past nine months for AT&T Mobility as they have moved to diversify from Apple exclusivity. The HTC One X launch has been (and needed to be) a screaming success. The Nokia Lumia 900 launch during Easter weekend was not as big, but it’s still a “top 10” device on Amazon.com’s best seller list. In one year, AT&T Mobility has expanded its lineup to include an additional eight smartphone devices, and 10 more devices now are Android. Again, quantity of devices (either total or change) does not indicate more sales of any specific device, but AT&T Mobility’s Apple legacy is clearly being challenged by the processing power and selection from a range of new Android devices. The addition of the Samsung III this summer and the continued iconic success of the Samsung Note will continue to attract new users (but only a few converts).
This does not bode well for Nokia and Microsoft. Yes, AT&T Mobility has made a substantial in-store and national marketing push to introduce a third solution for applications (meaning BlackBerry has been relegated to third in business only – ouch). But the current of new processors, prices and applications means that the selling process (both new to smartphones as well as converting from Apple and Google) just got really difficult. Consider a new college graduate who is struggling with the decision to move from an Apple 3GS to the Nokia/Windows platform. What’s the 30-second pitch for someone who has at least two years invested in the iTunes platform? Is it really worth $100 to move? Multiply this experience by 10 to 20 per store per day during the summer, and by August Windows/Nokia is either free or dead. You cannot break multi-year habits without significant incentives. Free is a good incentive.
On to Verizon Wireless, where the lineup continues to improve. When we left Verizon Wireless in October, the iPhone 4S launch was imminent, but that did not stop their new lineup of “4G” phones from making a big splash. True to form, Verizon Wireless announced that over 9% of their total post-paid base had already made the move to LTE by the end of the first quarter. This number will grow to 15% or more in the second quarter and likely 30% by the end of 2012, and the latest smartphone chart backs this up. Even with a few free (or nearly free) devices in the lineup, the chances of a non-Apple LTE device finding its way into consumer hands this summer is high. Sure, there will be unlimited plan members hanging on for their last puff of the 3G network, but with “double data” and “family data” plans on the horizon, faster data will replace unlimited quantities.
BlackBerry, Palm (really?) and Windows devices aside, it’s a two horse race in most Verizon Wireless retail outlets. To the right, we have the serenity of Apple (including the iPad), and to the left the power of Droid. Take your pick, or have a look at the feature phones and BlackBerry devices in the back of the store.
As mentioned earlier, Sprint Nextel is overhanging their LTE network rollout with the HTC Evo, LG Viper and upcoming Samsung Galaxy III device launches. Given the minimum revenue requirements from Apple, it’s no secret what will be featured within most Sprint Nextel stores, but it should be noted that Sprint Nextel’s Android device selection has tripled at the low end in just under a year. This may bode well for the few WiMAX devices remaining in the Sprint Nextel lineup (free and fast). While Sprint Nextel is in transition (as is T-Mobile USA) this summer, it’s clearly placing a big bet on the HTC Evo (they need a repeat of the 2010 banner year especially in LTE-launched markets). If the Evo is a flop or the LTE launches are substantially delayed, there’s not much to fall back on at Sprint Nextel and postpaid net additions will be at risk.
That leaves T-Mobile USA who has always been focused on a couple of devices (usually Google sponsored) in the postpaid market. Leading with the Samsung Galaxy S III is a safe strategy, and the HTC One S and T-Mobile USA’s own MyTouch device should help. Network improvements to the tune of $4 billion should also help reignite the T-Mobile USA brand and stem the tide of postpaid losses.
Like the summer movie season, a few blockbusters can really ring the wireless carrier’s registers. This will be the summer of Samsung and HTC, who are well positioned at the high end with each service provider. It will also be the summer of Apple even without a new launch because of the revenue requirements for each of the carriers, particularly for Sprint Nextel. Most importantly, we will see speed sell, led by aggressive marketing efforts at Verizon Wireless and the launch of additional LTE networks at AT&T Mobility and Sprint Nextel. It’s a partly sunny summer for Android, seasonably mild with very little chance of rain – just the way Google likes it.
Jim Patterson is the CEO of the Patterson Advisory Group, a consultancy focused on specific phases of start-up growth. He was a co-founder of Mobile Symmetry, an applications development company, which was sold to Infotel Broadband Services Ltd. of India in 2011. Prior to that, Jim was the President – Wholesale Services at Sprint where he led the launch of the first Whispernet (Kindle) platform, launched the first VoIP platform services for cable companies, and contributed to Sprint’s machine-to-machine strategies. His career spans 20 years and crosses nearly all functions of the wireless and wireline telecom marketplace. You can follow him on Twitter @Pattersonadvice or e-mail him at [email protected].
