Smartphones Overtake Feature Phones in US by 2011

Just consider the title of this post: Smartphones will overtake feature phones in the US in a little more than 18 months. That is a truly impressive prediction.

Roger Entner, the SVP of Research with Nielsen's telecom practice recently posted an article explaining why the research company believes that the US market is rapidly moving to smartphones.

What makes this statistic even more impressive is that today (Q2 2010), Nielsen concedes that just 21% of US consumers have smartphones. They are projecting a 30 percentage point swing in phone ownership in the next 18 months.

Personally, I completely believe it. I have likened the jump from feature phone to smartphone in my life to the jump I made from dial-up to DSL 10+ years ago. I remember thinking "Dialup is fine, I don't really do that much on the computer." People would gush about how wornderful DSL was, but concrete benefits (beyond "it's faster") were hard to come by. But once I moved to DSL, I knew at that moment I would never go back to dial-up.

I think it's the same with smartphones. I can never go back to a feature phone. I was at a little soiree this weekend talking with a fried who works at Cisco. He never seems to be at the office.

He whipped out his iPhone and showed me why. Cisco has an internal instant messaging application with an iPhone client. He opened the client, changed his status, and suddenly he was 'working' to his contacts wtihin the company. Then he showed me the WebEx client for the iPhone. He can listen to the conference call while viewing the slides, all from his iPhone. Unless someone walked by his cube, no one would know he wasn't in the office.

The implications are staggering on many dimensions, but since this is a blog about smart Wi-Fi, I'll circle back to the need for coverage, capacity and offload. To actually work from your iPhone, a subscriber needs a strong signal for voice and good throughput for data apps like WebEx .

The cellular network is already straining with 21% of the population using smartphones. Imagine when we get to 50% penetration 18 months from now. Smart Wi-Fi is a critical technology for making the smartphone vision come true.

Growth of Mobile traffic by OS

This week Gizmodo published the latest data from Admob. [Ed note: It seems that Admod has become the de facto tracker for mobile data]. The chart, from Admob, is very telling:

First, this is traffic in the US. So the iPhone chart is particularly impressive because it's one device on one operator's network. Look out when the iPhone goes CDMA...

Second, I think the spike in Android tracks tothe launch of the Droid phone on Verizon in Q4 2009. Certainly growth in Android traffic was trending up nicely through the first three quarters of 2009, based primarily on the MyTouch from T-Mobile, but there is a definite acceleration of traffic in Q4.

Third, I think it's a bit depressing to see the RIM, webOS and WinMo numbers. These are all good products/technologies, but I think it highlights the emerging split between 'smartphone' and 'web phone'.

Finally, while this is an absolute market share chart, it doesn't capture the overall market growth in traffic. At what rate are these number accelerating? AT&T said traffic on their network was up 5,000% over the last three years. While Android is gaining absolute market share, data traffic in general is skyrocketing and will certainly become an issue for every mobile operator.

Breathe Easy with Wi-Fi

“I use my nose to breathe, but when I am feeling aggressive or excited, I need to use my mouth to breathe as well. Wi-Fi is the mouth – it helps you breathe better.” So said SoftBank Mobile Corp.'s Chairman and CEO Masayoshi Son (pictured below) in a keynote speech at the Mobile Asia Congress. (As quoted in Telecoms Europe.)

“Over 50% of our data traffic happens at home during peak hours, and smartphones have driven our data traffic up ten times,” he said. “We need Wi-Fi to serve that traffic and give our customers a rich media experience.”

And so he says LTE isn’t fast enough for SoftBank. Other highlights of his presentation, as per Telecoms Europe:

• Mobile data usage in Japan is already generating enough ARPUs to offset voice ARPU declines. But current HSPA connectivity isn’t enough bandwidth to serve existing usage, and migrating to LTE alone won’t help.


• Softbank intends to migrate to LTE, but it’s not good enough to support customers when they use mobile Internet at home.


• By 2024, he claims smartphone-like devices will hold 32TB of storage capacity.

Softbank is already selling a line of Wi-Fi enabled handsets, including the iPhone and owns a fixed broadband network that would supply the backhaul for home Wi-Fi users.

This past summer, ABI Research reported Wi-Fi in smartphones will grow from a 45% attach rate in 2009 to a 90% attach rate in 2014. In-Stat recently forecast the percent of handsets with embedded Wi-Fi will more than double during the next two years and said there were 121 models of cellular/Wi-Fi handsets introduced in the first half of 2009, almost as many as were introduced in all of 2008.

Clearly, there are lots of powerful Wi-Fi proponents. The question is, how will operators respond and stay ahead of the curve?

Bringing U-Verse to the iPhone

Here's an issue I’ve been puzzling over for some time.

U-Verse, AT&T’s slick new IP TV service, is available in my neighborhood. Unfortunately, I’m too far from the distribution point to get it at my house. But many of my neighbors have and love it.

And like in many suburban neighborhoods, iPhones are sprouting up like crazy.

So, I have often puzzled: why can’t one watch U-Verse TV on one's iPhone?

This is the one mobile TV service that makes sense to me. Not random programming at random times, and not 'video shorts;' actual content I select, available to me, when I want.

Let’s look at the problems and what the answers might be.

First, if there ever was a phone for watching TV, it’s the iPhone. It’s got a great screen with brilliant colors, and the landscape display with 16:9 aspect ratio is ideal for HD TV.

Next, if there ever was a service provider to deliver on the ‘three screen’ vision, it’s AT&T. They are the sole quad-play provider in my neighborhood, delivering voice, broadband, mobile and now TV via U-Verse. And it’s not just any TV. It’s a full streaming IP TV service.

AT&T is particularly proud of its ‘whole house’ DVR, where a single box can stream video to different TVs throughout the home. Surely with this advanced capability, it would be possible to stream the shows stored on the DVR to a ‘third screen’ (e.g. an iPhone).

So what’s the hold up?

I don’t work for Apple or AT&T, so I have no inside knowledge. But clearly the iPhone is capable of displaying a TV service. So perhaps the problem is getting the service to the iPhone. I refer to a paragraph in this article on Digital Trends:

“AT&T does say that, due to network congestion concerns, it does not want television signals traversing its cellular network to iPhones…”

Given the trouble AT&T has had with network congestion, this makes a lot of sense. But this is a paid TV service, not YouTube. There is distinct value in bringing the three screen vision to life for AT&T subscribers.

So what if the U-Verse service was delivered to the iPhone over Wi-Fi?

The U-Verse controller has built-in Wi-Fi, so by definition, homes with U-Verse are homes with Wi-Fi. Plus, using Wi-Fi would keep the TV congestion off the 3G network. Finally, people are likely to watch TV when they are stationary (at least in the US), so that covers places like the home, office and hotspots.

It’s probably more complicated that simply ‘streaming U-Verse over Wi-Fi.’ So what are some of the likely requirements for AT&T to deliver the U-Verse service over Wi-Fi?

• User authentication. Just setting a ‘user name/password’ over the Wi-Fi network doesn’t provide enough authentication for a service as valuable as streaming TV. An ideal solution would validate the user based on the SIM credentials of the iPhone against AT&T’s database of U-Verse subscribers to ensure that members of a specific U-Verse household are actually the ones accessing the service.
• Security. Delivering U-Verse over Wi-Fi means delivering it over the public Internet. Therefore, a true security solution must be employed.
• Location. Undoubtedly there are would be location restrictions on where a user could actually watch their U-Verse service, probably within the US. Thus the service must be able to accurately identify the iPhone’s location (not too hard).

Well, as you might have guessed, there is already a 3GPP approved specification for solving this problem. The GAN specification was designed by mobile operators specifically to address the problems associated with delivering services over the public internet.

The 3GPP GAN standard provides:

• SIM-based user authentication over Wi-Fi. A GAN client in the iPhone would use the iPhone’s SIM credentials to authenticate the device against AT&T’s HLR and establish a secure connection over the Internet (nice transition …).

• IPSec VPN secure tunnel. GAN transports voice and packet (U-Verse) services between the iPhone and the AT&T network encapsulated in an IPSec VPN to ensure a secure connection.

• Operator managed location access. With the iPhone, there are many ways to access and monitor the location, via cellular, Wi-Fi and GPS. When establishing the GAN connection, the operator (AT&T) is presented with all the data needed to decide to enable (or reject) service based on the current location of the handset.

There are so many datapoints, it’s absolutely a no-brainer for AT&T to add GAN to the iPhone.

There is no doubt that other operators with iPhones and their own streaming IP TV service (actually nearly any incumbent mobile/video provider) would benefit as well. If we get started now, maybe we can have it in time for Christmas.

PS - I blatantly copied an image and imitated prose from Dr. Suess's "How the Grinch Stole Christmas." This is one of my family's favorite Christmas books. I can identify with it because I often find that "...my puzzler is sore..." too.

A UMA-Enabled iPhone?!

Someone is making a compelling case for a UMA-enabled iPhone, and, surprisingly, it’s not me.

In a recent article in PC World, IT Manager Michael Scalisi writes that he likes the new iPhone 3GS; Apple did a good job. However, it doesn’t quite cut it for business users.

"...However, the lack of a keyboard, UMA and better battery features allows the competition an edge with business users.”

Michael proposes the 3GS ‘B’ – another version of the much-loved iPhone. The B stands for business. That, he says, is what will cut into RIM’s ‘remaining share of the smartphone pie.” And, it’s a good business decision for Apple.

Michael makes a compelling case. It’s what I’ve been dreaming of for quite some time.

The argument is simple and a win-win for Apple and business users. Michael sums it up:

“A business model iPhone with a full QWERTY keyboard, UMA and a longer battery life would eliminate some of the last reasons for BlackBerry users to abstain from switching to an iPhone.”

AT&T continues to roll with Wi-Fi

One of my favorite topics is AT&T and their Wi-Fi opportunity. AT&T has quickly become the largest Wi-Fi provider in the US. Today was another story.

FierceWireless reported that AT&T’s connections at its 20,000+ hotspot network were 10.5m for Q1 2009. That’s up from 3.4 million connections in Q1 2008.

Where are all these new connections coming from? Laptops? Maybe, AT&T does offer free Wi-Fi hotspot access to AT&T DSL subscribers as well as 3G/HSPA subscribers.

But more likely is that this was from iPhones, which now receive free Wi-Fi access hotspots.

It would be so easy to add UMA to all those Wi-Fi enabled devices…

A true story

I was out the other night with some buddies for drinks. One friend has an iPhone and LOVES it. Frankly, everyone I know with an iPhone loves it, but that’s another story.

We got into a disagreement about the directions to our next establishment. I suggested to my friend he pull up Google Maps to chart our course. It takes him a little while and I ask what’s taking so long:

“I just attached to a Wi-Fi access point,” he says.

“Why,” I ask, “that’s a 3G iPhone, right?”

“3G is too slow, it’s much faster to use Wi-Fi.”

iMS

The other day I was involved in an interesting discussion regarding IMS. Certainly the original vision of IMS as a platform for delivering new IP based services has been slow to materialize. Per it’s Wikipedia page, IMS is intended “to aid the access of multimedia and voice applications from wireless… terminals”.

This got us thinking… The concept sounds quite familiar. Isn’t there already a tool to aid the access of multimedia and voice applications from wireless terminals? It sounds a lot like Apple’s wildly successful AppStore.

Could AppStore actually be the new iMS?

Consider the idea for a minute. The vision of IMS was to develop a platform where new applications could be made available to users on their phones. Rather than monolithic systems which pushed out one or two new services a year, IMS was to unleash the power of millions of developers to create thousands of applications to address the ‘long tail’ of user interests.

Apple’s AppStore has thousands of applications and literally millions of downloads. Certainly very few of the applications relate directly to mobile phones, but that’s the point, right? Give users access to a world of new applications which make the mobile phone (or iPhone) indispensible.

There are actual telephony applications like Fring, and Truphone as well, along with dozens of social networking applications with presence and instant messaging.

Of course AppStore by itself isn't enough. The industry needed a handset that consumers wanted and provided a platform for developers to work from. In that iPhone has certainly succeeded.

Apple isn’t the only one. Nokia has Ovi which offers a similar experience to the AppStore.

Could it be that the future of IMS is actually iMS?

UMA spotted on an iPhone

Well, here it is. Apparently this is an undoctored photo of blogger Pat Phelan’s O2 iPhone used in the US. [Ed Note: my mistake, thought it was being used in the UK].

Check out the upper left corner where the network display reads UMA.

If I were to guess, I’d say that T-Mobile’s HotSpot network has a “UMA” SSID. The phone has attached to that Wi-Fi access point and is displaying the SSID.

But clearly the phone is ready, the Wi-Fi network is ready, now we just need to get the UMA protocol stack into the phone. Then people can get better coverage and lower cost calling when attached to Wi-Fi with their iPhone.

The 3G iPhone needs "...VoIP like T-Mobile..."

Dear Steve Jobs...

In an open video/letter to Apple, the Street's senior technology correspondent Gary Krakow makes a list of his requirements for the new 3G iPhone.

Top of the list: 3G (doesn't that go without saying?)
But #2 on the list: "...a VoIP feature like T-Mobile..."

I think he means UMA!





If there's a problem, here's the link:

http://link.brightcove.com/services/link/bcpid1078966384/bclid1137812485/bctid1564516136

Fierce Names Top 5 'Converged' Devices

FierceWireless released their list of top ‘converged’ devices. By converged I think they meant dual-mode devices, as each of the five devices on the list had Wi-Fi.

The list was:

1. BlackBerry 8820
2. BlackBerry 8320
3. HTC Mogul
4. HTC Tilt 8925
5. iPhone

Interestingly, two of the five are UMA-enabled. Given HTC is rumored to be bringing out UMA-enabled devices shortly, there’s a chance that next year’s list will be 4 out of 5 UMA-enabled.

As for the iPhone supporting UMA, it has been rumored in the past. But UMA in handsets is typically driven by operator requirements. Orange and Rogers both support dual-mode UMA service. Orange and Rogers also both sell the iPhone. Interesting…

PS – credit where credit is due: The image is from Gizmodo. I think choosing Mr. ROGERS to hold the iPhone is brilliant.

PPS – according to Wikipedia, the Mr. Rogers show was first developed in Toronto for CBC, making the reference doubly brilliant.

Is 3x Enough?

There is still some misunderstanding on the benefits of dual-mode handsets and home zone services. Operators are struggling to find services which offer some type of benefit, either increasing ARPU or reducing churn. I’m not sure what the market expects, but I think a service that reduces churn by 3x is not bad.

According to a slide deck used in France Telecom’s Investor Days (December, 2007):

“Homes equipped with UNIK churn 3 times less on their mobile contract than others” [slide 20, file: 5-France.pdf]

Is there any other service that reduces churn by 3x? Note this claim is from the actual operator who is realizing the benefit. It is unfiltered, unbiased, and objective information.

Maybe just keeping subscribers on your network isn’t enough...

How about a service that causes new subscribers to churn to your network? In today’s hyper-competitive market, subscriber numbers are a zero sum game, for you to win, someone needs to be losing.

T-Mobile recently announced that nearly 50% of the users taking their HotSpot @Home service are new to the operator.

Frankly that’s a staggering statistic. People are churning to T-Mobile to get a dual-mode handset service. To put it into perspective, an early article on AT&T about the iPhone said that “roughly 40% of iPhone subscribers were new AT&T customers.”

So DMH out-churns the iPhone!?!?! Crazy.

I know iPhone and HotSpot@Home are different, but both are bringing new subscribers to the operator’s network. I haven’t seen churn numbers on the iPhone, presumably because the users are still locked into their 2 year contracts, but 3x reduction on DMH services isn’t bad.

I guess the point of this post is: If you don’t have a UMA-based dual-mode handset service to sell, maybe the iPhone is the next best thing?

Apple vs Blackberry in the enterprise? RIM has the edge.

Last week Apple made noise about opening the iPhone up to developers to support more enterprise oriented applications.

UMA’s standard position on applications is “If they work over GSM, they’ll work better/faster/cheaper over Wi-Fi and UMA!” It’s a good (and easy) position to be in.

Given UMA technology is basically agnostic to applications running above it (even SIP), why would UMA Today weigh in on an enterprise applications battle between the Blackberry and Apple?

Frankly, it’s because UMA gives RIM an edge.

Let me explain.

These heavy duty devices are always struggling with power usage. One of the banes of ‘smart phones’ with big screens and lots of features is battery performance, and it’s here, deep inside these enterprise devices, that UMA gives RIM the edge.

Consider how UMA works:

When a UMA-enabled device moves within range of Wi-Fi, the handset establishes a direct IP tunnel to the mobile core network using the Wi-Fi radio. Once in place, all mobile services (voice, SMS, MMS, …) are tunneled to the phone over IP. Because the GSM/3G radio is no longer used, it is put into a hibernation mode. In effect, only one RAN radio is powered on concurrently with UMA. That’s pretty efficient.

Compare this with how an iPhone, or any non-UMA dual-mode phone (think Nokia E and N) works. When the iPhone moves into Wi-Fi coverage, the Wi-Fi radio powers on. But there is no connection from the Wi-Fi radio to the mobile core network. Therefore, for users to receive cellular services (ie 'a phone call'), the GSM radio must remain on, concurrently with the Wi-Fi radio.

That sucking sound you hear is the battery on the iPhone draining…

That’s not fair, it’s not specific to iPhones, it’s the same with any dual-mode E or N series from Nokia that doesn’t have UMA.

This is a fundament advantage over any non-UMA dual-mode handset. Any time you see or hear someone complaining about ‘Wi-Fi battery life’, you can be sure they are talking about a non-UMA device.

Wi-Fi: A 'feature' or a 'technology'?

A research company sent me the outline of a report on the global mobile device market. In it, they promoted the fact that they had a comprehensive list of market statistics that could be divided up by region, handset tier, by technology and by feature.

The ‘technologies’ listed included the usual RAN suspects: GSM, GPRS, EDGE, CDMA ..., HSxPA, WiMAX, LTE,...

The ‘features’ listed the same usual suspects: email, IM, camera, video, MP3, GPS, Bluetooth, and Wi-Fi.

This got me thinking: Is Wi-Fi a ‘feature’ or a ‘technology’?

For any non-UMA-enabled dual-mode phone, the answer is clear that Wi-Fi is a feature. The iPhone, any Nokia E series, or Wi-Fi enabled HTC devices all list Wi-Fi as a feature. This is because Wi-Fi is not essential to the operation of the device. These are essentially GSM mobile phones, and the addition of (or lack of) Wi-Fi does not impact the core capability of the device (the ability to make a phone call).

Sure, the iPhone has gotten close to ‘seamless integration’ of Wi-Fi as a *feature* on a device, but I’m sure there’s a large percentage of people who never use the Wi-Fi ‘feature’ or who only use it infrequently.

I contrast this with a UMA-enabled dual-mode Wi-Fi device. In this case, Wi-Fi is used every day. Any time the subscriber is at home or even in the office, the phone is connected to Wi-Fi. Not that the subscriber has to know or care, but Wi-Fi is actually rather essential to the operation of the device. When attached to Wi-Fi, voice services, SMS, MMS, all mobile services are delivered over the Wi-Fi radio.

Certainly for people who acquired a UMA-enabled device to ensure coverage in the home, this is a fundamental requirement and therefore is not just a ‘feature’, but more of a core ‘technology’ of the handset.

I think it’s fair to compare the operation of a UMA-enabled dual-mode phone with the operation of an equally ‘dual-mode’ phone: 3G. I say ‘dual-mode’ because all 3G phones come with 2G RAN technology as well. A subscriber using a 3G phone doesn’t spend too much timing thinking about whether the phone is connected to the 2G or 3G network. The phone just works. The subscriber doesn’t expect there to be any service interruption or disruption that comes from a 3G/2G device. Frankly, this is exactly how Wi-Fi/UMA works in a ‘dual-mode’ phone as well.

I know that T-Mobile with their HotSpot @Home service does not consider Wi-Fi to be a ‘feature’. For T-Mobile, Wi-Fi (with UMA) is a core RAN technology. It is literally a second RAN technology. T-Mobile has a nationwide 2.5G network, and by rolling out HotSpot @Home, they now have a second RAN technology.

Perhaps the definition is that Wi-Fi by itself is a ‘feature’, but UMA-enabled Wi-Fi is a RAN ‘technology’.

I think this gets down to a core issue that the market isn’t seeing. The operators who are doing UMA/Wi-FI aren’t doing it because it’s an interesting feature, they are doing it as a second (or third in the case of Orange) RAN technology.

We have always said “UMA is a parallel access network,” but it’s clear this message isn’t getting through.

I want my UMA!!!

But frankly, I couldn’t get it. They had sold out!

I went to my local T-Mobile store at noon on Wednesday. It was festive with balloons and all. You can see me with Jessica the helpful sales associate.

Jessica walked us to the HotSpot@Home display and showed us the phones and Wi-Fi routers.

We talked about the advantages and benefits. One thing T-Mobile certainly did right was to make this a feature which can be added to any other service plan.

There is no new ‘HotSpot@Home’ service plan. You can add @Home to any regular T-Mobile plan. Already have a "MyFaves" plan? Just add HotSpot@Home and get unlimited calling for $10/month. That's a great deal.

One other feature of @Home is improved coverage indoors. Buy a UMA-enabled HotSpot@Home phone to go with your existing calling plan and the Wi-Fi in your house improves coverage. You don't need the $10 package for this, just a dual-mode phone.

It’s such a great deal that our local store had already sold out their inventory of phones in just 2 hours!

Good luck trying to beat that, iPhone! (actually, it’s impossible. Apple probably made 5 million iPhones, and just selling that many in 2 hours is physically impossible...)

Anyhow, the word is out. I want my UMA! But apparently I’ll have to wait until a new shipment of phones comes in on Friday. That’s definitely a good sign.

Well, not actually 'dead'...

Interesting commentary from Philip Berne’s blog...the other day he posted a piece called “How to kill the iPhone”.

Now I don’t think anyone really wants the iPhone ‘dead’.

I’ve actually had several conversations with people who believe that live or die, the iPhone has already been successful in shaking up the status quo and gotten people to “think different” about phones.

But Philip’s post is interesting because it explores other ways to “think different” in the mobile community, ideas that could take some of the wind out of Apple’s sails.

While he throws out some great suggestions (Playstation phone, Vista phone, a ‘real’ N95), the one that is of the most interest here is the reference to T-Mobile’s HotSpot@Home service:

If you can't cut the price of the phone, cut the price of the service. UMA lets your cell phone hop from your carrier's network to your home or office's Wi-Fi, without cutting you off. Presumably, calls made on Wi-Fi will cost you less than those transmitted through your carrier's towers. T-Mobile has been sporadically vocal about this service, called T-Mobile @Home, and has been beta testing in the U.S., but has yet to announce an official rollout. Besides the iPhone's actual hardware cost, customers could be looking at mandatory, 2-year contracts with plans that will run $70 a month or more. A $100 cell phone plan for iPhone early adopters isn't inconceivable. Were T-Mobile to step in with a reasonably priced hardware setup and an even better monthly rate, perhaps lower than $30/month, including myFaves but not counting minutes used on Wi-Fi networks, they would be able to compete with the iPhone in a way no carrier has mentioned, at the mailbox instead of the storefront.

The service is coming. Be sure to register for it at their site: www.theonlyphoneyouneed.com

I was chatting with a rep at my local store who confirmed the service is very close, new handsets from Nokia and Samsung are on the way, and that they are quite excited about it. Start lining up at your local T-Mobile stores today!