After almost four great years as a member of the Nielsen Family, first as part of IAG Research, then Nielsen IAG, and lastly Nielsen’s Telecom Practice Group, I decided to leave the Nielsen Company at the end of the 2010 to pursue my entrepreneurial passion by launching Recon Analytics LLC. My new business email address is email@example.com.
Each carrier’s approach also speaks volumes about the personality of the different carriers – and yes, companies have personalities. Sprint has been the pioneer in mobile music in the United States. Its goal has been not just to drive music sales – a business that is marginal at best for every carrier involved – but to create a usage pattern that puts the mobile device in the center of consumers multi-media experience and therefore drive overall data usage. In that spirit, Sprint lowered it’s over-the-air (OTA) price per song from $2.50 to $0.99, when the record labels lowered their royalty demands, instead of improving razor thin profit margins. From an absolute profit contribution perspective, even the increased amount would have not yielded a meaningful impact on the business. Interestingly, from first glance it seems that consumer demand is inelastic, meaning that the reduction in price by 50% has yielded less than an off-setting amount of incremental business. I don’t think that Sprint is greatly disturbed by that short-term development and the overall goal of developing data as a macro-category. Considering that Sprint’s $12 CDMA data ARPU is about 50% above that the other wireless average, the strategy seems to be working.
Another area where Sprint is leading is in music discovery with the introduction of the Pandora service. Pandora asks the music preferences of consumers and builds a library of songs that are similar to the song or artist that the consumer finds appealing. This allows for cross selling opportunities with artists or songs that the consumer was not aware of. The apparent bottleneck is that Pandora’s input relies on the good judgment of about 50 expert musicians who break down each song into the components that the Pandora engine then uses to create the customized play list for each listener.
Another differentiator for Sprint is access to 50 national and 95 local radio stations streamed to the handset. This allows Sprint to package a music experience on the handset from stored songs on the phone, customized virtual radio stations from Pandora and the traditional stations that everyone is used to from tuning into the regular radio.
By being first to seize the opportunity and grabbing an early lead, Sprint is also working with first generation infrastructure. That means that Sprint, unlike Verizon Wireless, is right now not able to bundle ringtone, ringback tone, and full song downloads together. The bundling of these services is a major cross- and up-selling opportunity. I view the vanilla recommendation of another ringtone after I just purchased one the same way as I would view a restaurant that would offer me a main course of steak after I just had a main course of fish – offer me desert (or for that matter full song, ringback tone) and my chances of saying yes are much higher. I have no doubt that we will see this type of cross selling in the not so distant future. This is still early days…
And one more thing – the iPhone. All the expectations were fulfilled, well maybe not all of them. Yes, it is the Rolls-Royce of the wireless world with everything that comes with this moniker, even a $200 price cut has not changed this. For a change, there has been truth in advertising. The iPhone is one of the most beautiful and user friendly mobile devices. It is a terrific mobile devices – I deliberately do no call it a phone – for consumers who love data and data connectivity but do not truly need it. The aesthetic paramount of having a closed device with its sleek and elegant design, lead down the road to having no replaceable battery, which in turn causes insurmountable power constraints. This demanded to use the most power efficient air interface standard to be used – EDGE – which in turn makes accessing the internet less than “real.” If it would be a Ferrari, HSDPA would be the air interface with the trade-off that while going really fast, the gas tank would be perpetually empty. HSDPA would make the device would be even more infatuating and the battery would run out after an hour or two due to the high power demands of HSDPA, with consumers uttering and inventing expletives in an unprecedented fashion. So it was better to disappoint a little on the network side and please on the usability and design side. Is there room for improvement? Yes, of course like with every version 1.0 (or 1.02) device. I am convinced that Apple is working on an HSDPA device that will dramatically accelerate the air interface. Once HSDPA is in the device, I believe that the OTA iTunes that is now available on the just released iPods will also be released for the next generation iPhones. A more ubiquitous soft one step back-button and the outlook task list would be a nice start. The option of OTA synchronization of calendar and address book would be even better. Until there is Blackberry server or at least Exchange server support I would have a hard time recommending it as the only device for a business user. By the way, a 33% price cut infers to me that while the externally pronounced expectations might have been met, the internal expectations have probably been much higher. You don’t give up on $200 out of the goodness of your heart; you want to drive volume. The big question is if the price cut will actually increase demand or how many people are out there that had a $200 budget crunch to get a $600 device? In my opinion, if you are willing to spend $400 on a phone, the next $200 are not really a significant obstacle.
And as a footnote: The reactions to the FCC’s decision to mandate open access a few weeks ago was hilarious. The winners acted like the losers “We don’t really have anything to say about this,” and the losers acted like the winners “The Federal Communications Commission made real, if incomplete, progress for consumers this afternoon.” The wireless industry did not give up anything that it was not, grudgingly, willing to accept, whereas Google did not get the resale requirement it demanded in exchange for bidding. What is interesting is that this decision will shift innovation from the network to the device. Only time can tell how big the shift will be and if innovation is a zero sum game. The most important question is if Google will actually come to the floor and dance to the tune of more than $4.6 billion or if it will be pouting in Silicon Valley because it did not get everything it wanted. Well, the last thing Eric Schmidt said was “possibly.”
At the MMA Forum on June 6 and 7, 2007 in New York, several media agency executives commented that the current CPMs charged by wireless carriers for handset advertising was “really, really hard to justify” in comparison to search and directory CPMs (Cost per Thousand – the M stands for Mille in Latin which means Thousand) on the internet that are only one tenth of mobile handset ads. What this comment really tells me is not that mobile handset advertising is too expensive or that internet advertising is cheap. What it really tells me is that media buyers do not know how to value one type of advertising environment compared to another. Can I blame them? Not at all.
Traditionally, advertising has solely been priced based on how many people had the opportunity to see the ad – the CPM from the previous paragraph. This is still the case in most media. IAG Research has made significant inroads to change this by adding the dimension of impact to this relationship starting with the largest advertising medium – television. Do advertisers really care how many people saw an ad if nobody remembers it? I hope not. What advertisers really want to know and are willing to pay for is how many people remembered that ad a day after they have seen it. Why is remembering it a day later important? If the ad entered to medium to long term memory it impacts the viewer’s decision making process about purchasing the advertised products.
The vision of IAG is to measure the impact of advertising wherever advertisers are going. IAG is now expanding the universe of measured media to mobile handset and subsequently to mobile television – and that is only mentioning the initiatives in my sector. We are and will be answering the key questions of how engaging the various new media types are and are able to ascertain the impact of these ads – and most importantly tie it back to how advertising has performed on television as a reference point. If viewers are as impacted by the ads as much as on television then they should be priced like an ad on television. If the audience is impacted only fractionally or more impacted than on television, then the particular fraction or multiple would be the appropriate value of the ad.
This way all advertising can be valued in the relation to the true impact it has compared to the medium it is presented in – once you have this information it is “really, really easy to justify” the different, properly set CPMs and everyone advertisers and the advertising medium gets properly compensated.
Only a few weeks after Verizon launched their integrated music identifications (ID) service that lets music lovers buy songs they hear anywhere on the fly, the company has upped the ante again. Prince is exclusively providing his first single off the new album to Verizon Wireless customers who use their music ID service and ID the song that is playing on the site – and all of it free of charge. The initiative is supported by an integrated advertising campaign. This initiative gives consumers the incentive on a risk free basis to learn how to use the music ID, show them how to improve their music discovery experience, and keep a brand new song from a legendary musician on top of it.
If we take one step back, the significance of this announcement becomes quite considerable, especially when taken together with an announcement from early May 2007. Prince, a legendary music icon without a record label contract has found a new way of how to launch his new single and album, promote it and secure an additional distribution channel. This is actually the third event in a progressive development that will most likely lead to the record labels losing their most iconic artists. In 2000, rumor has it that Sting felt that his record label was not adequately supporting his new album Desert Rose. In a move that turned record merchandizing rules upside down, Sting licensed Desert Rose to Jaguar for the use in an automobile commercial. Typically, artists frown upon being used in advertising and it is only used as a last step to extract the final value from a popular tune. Sting instead used the ubiquity of the Jaguar commercial as a music discovery tool and made it to the Number 1 spot of Billboard’s Hot Dance Music Charts and Number 17 of Billboard’s Top 100 – and that was seven years before an integrated music ID service. The second event was the launch of Shakira’s Hips Don’t Lie single and album exclusively with Verizon Wireless before a general release to the public. The success of the Shakira’s single and album by limiting distribution to just one outlet confounded common wisdom in the music industry. The single was the smash hit of 2006, having built significant momentum during the period of limited distribution. While Sting and Shakira remain within the construct of his record label relationship, Prince is a completely free agent. If Prince’s new single “Guitar” is even moderately successful I can imagine that he will earn more money for himself than if he would have had a mega-hit with a record label.
In early May 2007, Verizon announced a partnership with Fergie around her VIP concert tour that eliminates paper tickets. This takes the development that started in 2006 with a Fugees concert to the next level, where a barcode that was sent wirelessly to the handset was one of the ways to get into the concert. In the case of Fergie’s VIP tour, with the exclusion of winners of various contest and lotteries, the only way concert goers can attend Fergie’s concert is through the barcode that is sent to a Verizon Wireless phone. At first glance one can see the cost reduction of no longer needing to print and send paper tickets, elimination of fraud and marketing potential for the associated wireless service provider, but the puzzle pieces of a concurrently evolutionary and revolutionary development are starting to come together.
The combination of music discovery though advertising and radio with music ID, the subsequent immediate monetization of the identified song and album (with or without the associated DRM), and the cross selling opportunity ranging from song, album, ring tone, ringback tone, to concert tickets all within minutes hearing the tune for the very first time. If record labels are not going to adjust their business model to this shift they are risking of becoming merely optional. If you thought online music was a shock to the music ecosystem, think again what the wireless industry is going to do to revolutionize the industry and to bring music to more people than ever in a completely new and direct way.
The likely success of the Prince Guitar/Planet Earth campaign with huge cross-over appeal combined with Fergie’s concert tour will lead other superstars to question if they will actually need a label as it operates today to promote and distribute their music. Their new songs featured on television advertising, combined with an integrated music ID service that lets people buy the song or album on the spot will create enough of an interest to get radio play, which drives again revenue through integrated music ID discovery and regular record sales. This development will lead to the superstars needing record labels less and less as they exist today. At the same time, television commercials become will become the preferred outlet of brand new music.
How can other wireless service providers benefit from this development? Be a fast follower. The barcode initiative that allows concert tickets to be displayed is within the reach of every wireless carrier. On the music side Sprint has it probably the easiest. They have the same basic capabilities as Verizon and can put it together the same fashion. Service providers that do not have the same integrated music store capability such at AT&T and T-Mobile still have music ID features available to their customers today. They have to work with selected music portals ranging from iTunes to Napster to name just a few to connect the music ID discovery mode with actionable purchase decision. For example (not having seen the iPhone), I would expect the iPhone to have a music identification function. I hope that once somebody has identified a song with the iPhone, it gives the user the option to purchase the song with iTunes. Once they get home, the song has already been downloaded onto their computer and is ready for side loading.
I have long held the belief that mobile handsets have a lot more room to go to extremes than what we have seen even today. The fundamental question is do we want or need a converged device and then what parts of the device are converging different modes and devices. Just force fitting more and more functionality into the same old candy bar, clam shell or slider is only yielding marginal improvements – and often that “improvement” is received by most users with a reaction that ranges from ignorance to disdain. Touch screen phones such as the LG KE850 (Prada phone) or the iPhone are taking data centric devices to the next level (or at least we hope so.) What is happening on the voice centric side? Not much from what I can see. Maybe here’s a suggestion.
Develop a voice centric, voice controlled mobile phone. First split the microphone from the main device. Use a Bluetooth headset as the only communications mode to the device. The body of the phone houses the radio transmitter, the electronics and battery of the device. Have a small screen for caller ID or mobile applications – and last but not least eliminate the keyboard. Both the headset and body should have a mini-USB for as combined power/data interface with the capability to charge one with the other and to daisy-chain them to charge with one USB port/charger. A device like than can surely get below 3 ounces and be easily places in pant pockets or a purse.
So how do you use this device? You talk to it! Voice activated dialing and voice activated controls for the navigation of the various functions of the phone are finally at the stage where they are working well enough for the mainstream user. Call Jack, activate music player, play songlist two, give me directions from here to the following address – and the device will execute the command and provide the information in voice form. Even mobile web pages can be read to you, for the pictures or reference one can use the screen. For more complicated data entry/transfer give the backup option use a computer with USB connection to transfer the information, such as a phone/address book or transfer music to the device.
The only downside to a device like this is that you give up on mobile games and that you may have to scramble for your Bluetooth headset when the phone rings.
The tale of two companies – Motorola and Sprint – is also the tale of the approach of two activist shareholders, Carl Icahn and Ralph Whitworth. While Mr. Icahn’s approach to unlock shareholder value might be threatening to the status quo, his approach has also the longer term health of the company in mind. Mr. Icahn has simply asked that the roughly $12 billion cash mountain should be returned to the shareholders through a stock buy back. When it became apparent that the company has to work through its current operational difficulties, he even announced that the company should not buy back stocks until these problems have been corrected. He has offered his help and insight, but has not demanded (yet?) the company to change course, divest business units, or make any other radical changes. An approach like Mr. Icahn’s has truly the long-term health of the company and therefore the maximum benefit of investors in mind.
Mr. Whitworth on the other side, is according to the Wall Street Journal more interested in changing the course of the company such as a reduction in capital investment, sale of its fiber-optic network or long-distance operation. While there have been certainly made mistakes before, during, and after the merger of Sprint and Nextel, all the above mentioned options would surely be only beneficial in the short term and disastrous in the long term.
Reduction in capital investment: Sprint is already lagging behind the other wireless carriers in perceived wireless call quality, while having two wireless networks and greater geographical coverage than the other carriers. Spending less money on network will only widen the gap and make perception, which is sometimes correct, a certainty. I was present at the bell ringing ceremony at the New York Stock Exchange when the new Sprint was for the first time publicly traded. In the following press conference I asked what Sprint’s plans were in terms of capital expenditure and Paul Saleh, CFO, replied that the company would reduce its capital expenditure because it thought it was not a wise use of shareholder money. I just replied that the last guy who said that to me was John Zeglis and we all know how that story ended. A few months later, Sprint, in my opinion, correctly changed its attitude and increased capital expenditure. This is a critical investment in the future of Sprint and the company cannot afford to let Verizon and AT&T outspend them on the wireless network and increase the gap in perception and subsequently in net subscriber additions. All the cool phones and services are worth nothing if the call doesn’t go through.
Sale of the fiber-optic and long-distance network: Sprint is backhauling the vast majority of its own traffic over its own network. This is a core asset that helps to lower its operating cost. While it is true that there is a glut of fiber available in the major routes between most hubs, there is a relative scarcity in the smaller markets. Selling off these assets would only provide a short term boost to profitability but most likely put Sprint at an disadvantage when at the same time their two larger competitors can rely on their own fiber-optic and long-distance networks they either had already in territory or acquired when they purchased the old AT&T and MCI respectively.
On April 9, 2007, Nextwave announced that it would purchase IP Wireless for up to $235 million – the stress is on “up to” not on “$235 million.” If you look under the hood of the deal, IP Wireless investors who put in $200 in cash are getting back $25 million in cash, $75 million in Nextwave stock – which may go up or down – and the hope to get another $135 million if certain revenue milestones are being met. Well, well, well…
Lets look at this from the perspective of the investors in IP Wireless: So the investors basically sold the company for half of what they put in. You usually don’t do that because you are a firm believer in the prospects of the company. It also means that the chances of hitting the $135 million revenue accelerator are rather slim. This is a cut and run move in my opinion.
From Nextwave’s perspective this makes very little sense whatsoever. Nextwave has turned into a WiMax shop with a trunk full of dubious superfluous technologies. Nextwave needs a technology with economies of scale or at least the potential of economies of scale to reduce the cost of the RAN and CPE equipment. The quote from Roy Berger, EVP of Marketing and Communications in FierceWireless is a gem: “The mission at Nextwave is to develop technology and products that meet the needs of our customers: We’re customer driven. Different customers have different needs, and while we are totally committed to WiMAX technology, we went out and acquired GoNetworks for its mobile WIFi product and now we’ve acquired IPWireless with its TD-CDMA. From our perspective, this acquisition allows us to be even more customer-driven, by fulfilling every potential customer need.” This sounds all and good, but lets face it, IP Wireless did not sell because it had many customers, it has extremely few and lost in every major beauty contest. The customers have driven away from the technology – well, a completely new way of thinking of being customer driven and hence that “potential” is rather small. (I am sure if someone from Nextwave reads this they will contact me and protest that its all different.) On one hand they are completely committed to WiMax but then they buy a technology very few people seem to want for a bargain price that replicates what they are completely committed to. That’s like a husband who proclaims that he is completely committed to his wife after he told his friends that he just got a new girlfriend on the side… On the bright side, Nextwave still sits on a boat load of money and they can afford to spend it on little hobbies like that. It just doesn’t help the investors who own the stock.
It was nice being back in Orlando, the convention city where taxi drivers charge more to drive you around than anywhere else and complain that there is too much business. The show this year was busy but did not have the same exuberance as the last two shows. Maybe the exuberance was all expended in Barcelona a few weeks earlier at 3GSM, which was jam-packed with big announcements.
Maybe it’s just my new angle from looking at things, but the big themes were as expected mobile television and content in general combined with advertising. To be honest, what else is there? Plain old voice or the next esoteric wireless abbreviation technology does not really excite that much after all. Consumers are completely technology agnostic but want this device to eliminate the last bit of white space from their lives – may it be through increased efficiency or through entertainment. Just go into a meeting five minutes early and you will see half of the people checking their email and the other half either listening to music on their device or playing a game. Someone will satisfy this almost pathological need and either it is going to be the carrier or a third-party content provider. The wireless carrier is better positioned to exploit this opportunity than anybody else due to their existing business relationship, established billing system and the legal hurdles around the sharing of customer information.
Some interesting observations:
Verizon Wireless – The well-oiled machine is continuing to run on all cylinders and now with television. The two handset models that were given to selected journalists and analysts worked well. Picture quality was good, despite some forgivable coverage glitches here and there. The LG VX 9400 has very impressive battery life significantly in excess of the four hours I was told. On the other hand, this device is another proof that Korean usage patterns are not very different to US usage patters. The device was originally launched in Korea as a DMB (another mobile television standard) phone and consumers were logging the same complaints as Americans that you cannot dial a number without swiveling the screen. Gee, really Sherlock? The device makes it very easy to channel surf, which consumers and Verizon Wireless who wants to sell the subscription service delights. The flip side is that it might negatively impact advertising viewing, which is one of the revenue streams for MediaFlo. It’s early and we’ll see how that is going.
Has anyone realized during the changing of the guard at Verizon Wireless the South Area won big time? Jack Plating, new COO, ran the South Area, Mike Lanman, new CMO, ran the Florida region, Joe Saracino who is now overseeing both advertising and online was in a former life VP of Marketing for the South Area. The pre-existing familiarity of these new key decision makers will ensure that there is nothing falling between the cracks during this period of change.
Sprint – Finally an iconic device for Sprint. Combined with the new ad agency that was announced after the show, the Upstage should give Sprint some nice buzz and pick-up. Some of the critical reviews of the device comparing it to a Nano are quite unfair because they are focusing on the Nano’s strength while completely ignoring that the Nano is an abysmal mobile phone. I cannot tell you how hard it is to get decent coverage with the Nano. I’ve given up by now. After the umpteenth delay, the cable JV should go live pretty soon now too since they picked Pivot as a brand name – let’s hope they will not get dizzy from all the pivoting, especially since the FCC put a lot tighter restrictions of customer information sharing between JV partners.
AT&T – The two big news items at the show were mobile banking and mobile video sharing. I can see the value of checking your checking account balance on the phone, but this can only be the first step of turning your mobile device into a payment system – anything else is falling way short of what it should become. Also, while I am sure that there are going to be many uplifting experiences to be shared with Video Share, I can see already some of the less than savory headlines. Just imagine the average American college campus with two male friends sharing their sexual exploits with each other live while the third participant is not even aware that their tender loving moments have become a live show. You know it will happen and you know when the involuntary video star finds out there will be a law suit and someone will make some sleazy comment about “raising the bar.”
What is a bit more concerning is the apparent adjustment issues that Cingular is going through now that it is becoming AT&T. While the preparations have been on-going to structure the company in the AT&T way, the full impact of changing a wide array of business practices is just now hitting home. In addition to new practices, a number of departures of key individuals either switching over to AT&T such as Ralph de la Vega, former COO of Cingular or into retirement such as Ed Reynolds, former President of Network Operations, combined with many effective middle managers leaving the firm, is slowing down internal operations. It remains to be seen how long this internal adjustment process will last and how it will impact customer facing operations and thereby the quarterly numbers. On the positive side, promotions such as Kris Rinne’s to oversee all technology development for the combined AT&T will certainly reap long-term rewards.
On a personal note, it was nice having two Presidents as the opening act to your panel. President George H. Bush and President Bill Clinton ended their keynote right before my 11am panel and I was really impressed with the turnout to our panel. The room was more than two-thirds full which is quite amazing when you consider that we were the last panel standing between the attendees and the airport.
Professor Tim Wu, a Professor from Columbia University, who popularized the concept of Net Neutrality recently wrote a paper called Wireless Net Neutrality (http://www.Professor Wuwu.org/log/), a catchy but ultimately misleading name. Just as a preliminary disclaimer, I am a general supporter of the Net Neutrality principles articulated by the FCC, but not of the concepts as laid out in Professor Wu’s Wireless Net Neutrality paper.
Professor Wu discusses four areas that he describers as warranting attention:
1. Network Attachment
2. Product Design and Feature Crippling
3. Discriminatory Broadband Services
4. Application Stall
While Professor Wu’s concepts are sexy, popular and well intended, there are serious flaws in both his facts and his analysis, which make his recommendations difficult or even counterproductive to implement in the real world. Due to the space constrain of this column I will discuss just the first two areas of Network Attachment and Product Design of Professor Wu’s paper.
Professor Wu proposes that any wireless device should freely attach itself to any network. There are several holes in his argument. He criticizes that wireless carriers are locking their devices and make it impossible to get the phone to work on a different network. What Professor Wu here conveniently downplays that wireless carriers are subsidizing handsets to a significant degree and that American consumers are benefiting substantially through this practice. Mobile handsets are not being made by little elves on the North Pole and come for free. Typically, handset subsidies are between $80 and $200. These subsidies make it possible for Americans to get a phone that they would otherwise not purchase. Also, please note that when you go into a store it typically gives you three prices: No contract, one year contract, and two year contracts. If the consumer chooses the no contract price, s/he can have the phone immediately unlocked. When the customer chooses a subsidized cost, the carrier, in my opinion rightfully, expects a term of exclusivity to recoup that subsidy. Otherwise, as many prepaid carriers experience, criminal gangs purchase the phones at subsidized prices and resell it overseas for a handsome profit. Especially in the prepaid market, which significantly caters to the least wealthy Americans, handset subsidies open up the world of wireless telecommunications to a segment of the population that would find a $100 handset simply unaffordable. But also on the top end the same is valid. Just as an illustration, the Apple iPhone Professor Wu mentions will sell for $500 and $600 with a two year contract from Cingular. By accident, Amazon.com had an unlocked version up for offer for a day – and the price on that page was 999 Euro or $1,300. So Cingular is here the bad guy? I don’t get it… Professor Wu also laments that consumers are choosing the subsidized phones and thereby distort the market place. How could they? I always thought choice was good and that the consumer was ultimately right. Maybe Adam Smith was wrong after all. Also, please note Apple chose not to build the phone with a landline modem or any other technology. Thank goodness, they chose to design a phone at all – lets just hope it works as advertised.
Furthermore, Professor Wu would like to see a Carterphone. Well, in the standards-based GSM voice ecosphere, we have that already. If you have an unlocked phone, its voice capability will work on every GSM network. Professor Wu complains that consumers do not know they can get their phones unlocked, but a simple search on Google or Yahoo entering terms like “gsm phone different carrier” gives you the answer to how to get your phone unlocked. If people have no initiative to find a solution for their problems, then why complain that they have none. Initiative goes a long way.
In the rest of the US wireless ecosphere, things look a bit different. While CDMA is a radio air interface standard, its actual implementation has significant variations that make each CDMA implementation the equivalent of a cockney slang or southern twang. The basics are there but you have trouble understanding unless you have an ear for it.
In the wireless data world, every carrier exercised their entrepreneurial right to differentiate their approach of how for providing data service to their customer base, one unfortunate side effect each company’s approach is different. The only remedy for that would have been state intervention akin to planned economy – and we all know how that usually ends.
Professor Wu furthermore complains that while Nokia launches more than 50 phones in a given year, US wireless carriers have only chosen to offer a handful. The average wireless carrier “only” offers around 25 handsets at any given Professor Wu. Why do they do that? Limited shelf space, just like in a supermarket where you get 25 different detergents. Wait! I don’t get 25 different detergents in my supermarket, but maybe 10 – and they are the same in virtually all competing supermarkets. Why should wireless carriers be held to a higher standard than supermarkets?
What Professor Wu also did not mention is that there are Nokia stores in this country. One of them, just around the corner from Columbia University is on East 57th and 5th. He can’t even get all 50 phones at Nokia’s own store – even though many phones are there that are not sold by US carriers and will work on a US carrier’s network – and when someone wants to buy one he will get sticker shock- $350 and up for a phone, because its unsubsidized and Nokia needs to make a profit in order to stay in business and make all these handsets Americans don’t have enough of. I am sure if Nokia would see a major business in selling its phones this way in the US, it would open more stores that just two – the one in New York and one in Chicago.
Coercive product design – yeah right. I asked one of the three largest carriers a few weeks ago, why a given phone manufacturer had changed their charging interface again and if they could get the handset manufacture to standardize on just one interchangable charger. Wouldn’t that be sweet? The response was that the handset manufacturers do what they want to do and that the carrier has the choice to take it as-is or wait six months and be late to market compared to the carrier that chooses the standard design. How coercive is that? I have wireless service from almost a dozen wireless service providers and change handsets frequently and I can tell you that all of them have the supposedly missing call timers of how long I am on the call. Also, there is a nifty little feature called *MIN or *BAL that I can choose to get my minutes consumed. Just read the “friendly” manual.
The next complaint about paying $60 to $240 a year to be able to download pictures is flat out wrong. From day one I was able to send pictures directly to an email account for no extra charge. You just paid for the cost to send the picture, not for three plans. The reason why with some carriers picture sizes are restricted is that wireless bandwidth costs a lot more than wireline bandwidth. The megabyte costs the carrier somewhere between 5 cents and 20 cents depending on where the customer is. Rural areas are more expensive, urban areas are cheaper due to the overhead cost of the T-1s. Isn’t it natural that carriers want to avoid incurring losses on wireless picture mail? The reason why carriers pushed WAP (and by the way WAP is crap or at least in the early versions) is bandwidth constraints. A 20 kps (GPRS) or even 80 kps (1xRTT) connection will give you a really bad HTML experience. If the customer is always right, as I am told they are, carriers need to avoid giving a customer a bad experience. Only now that networks can do 400 kps+ HTML can picture mail on a phone be a decent experience.
Then there is the ubiquitously mentioned “evil” Verizon decision to cripple Bluetooth. Outrageous! Well, here is the reason: Both the data card for the laptop and the phone download at the same speed. The average laptop user consumes around 100 MB a month, the average phone user around 40 MB per month. The data card costs $60 to $80 per month, the access to the web via the phone $40. If I can connect my phone via Bluetooth to the laptop, I save $20 and use 2 ½ times as much bandwidth without having to pay for it. How evil of Verizon to expect to be paid for the service they provide according to the expected usage profile. I want to pay for a gallon of gas, but get the whole tank full, too. Hmmm, that gets me back to that whole central planned economy thing…
Last, but not least Professor Wu goes on about WiFi phones or the lack thereof and how this cheats consumers. I guess T-Mobile’s trial – and somewhat lackluster feedback of the implementation – should refute that. Unless you believe that T-Mobile is in the business of selling sabotaged devices to deliberately disgruntle their customers. WiFi is just not ready yet for cell phones – and power consumption of WiFi is one major reason for it. WiFi was not designed with the power constraints of a cell phone in mind. You are trying to force a square peg into a round hole. Over time and with enough force you might succeed.
Professor Wu’s paper goes on a while further with more debatable points, but the space allotted for this column is more than exhausted.
This article first appeared in RCR Wireless News on February 20, 2007.
Santa was good to several wireless executives this year – they are doing now more than just wireless. During the month of December, first Verizon announced that Denny Strigl, formerly CEO of Verizon Wireless, was now COO in charge of Verizon Wireless, Verizon Telecom, and Verizon Business. John Stratton, who was CMO for Verizon Wireless had similarly expanded his portfolio to be now CMO for the entire Verizon Communications portfolio. Just a few weeks later, with the close of the AT&T acquisition of Bell South, Ralph de la Vega, COO of Cingular, was promoted to Group President, Regional Wireline Properties, making him the master of the most local lines in the country.
All of these appointments are well deserved. From the early days of Bell Atlantic Mobile (BAM), Denny had a vision of creating a nationwide carrier that excelled in network performance. The first tag line I remember from BAM was “The Difference is in the Network” – as you can see things haven’t changed that much in the last 15 years. Through several acquisitions the small regional BAM made quite the bang as Verizon Wireless. What most people don’t realize the bang was much louder on the inside than the outside. Network quality, company performance, and execution at the acquired companies were not up to the exacting standards of what Denny was used to be. Quickly, quarterly reviews involving Area and Regional Presidents were expanded to incorporate the whole organization. For a full day every quarter, the 24 highest sales and marketing executives, with the assistance of just one aide, of the company were peppered by the company leadership why their area and region was performing well or not well, what the reasons were and how the company can perform better. A former Regional President described to me that these top level executives cram like college students for these quarterly reviews where literally a second “I don’t know” answer can cost them their job. Denny’s people are expected to be at the top of their game and the results show the wisdom of these exacting standards.
John Stratton transformed a previously understated and performance driven Verizon Wireless into one of the leading marketers in the telecommunications industry. Under John’s leadership, stars like P. Diddy and Christina Aguilera have promoted Verizon Wireless’ products and signature products like the Chocolate have been signed. But what I would consider the true hall mark of a great CMO is that Verizon Wireless has both the leading unaided advertising recall rate in the industry but more importantly the leading unaided recall rate per dollar spent as well. He does not only get the message out, but does it cost efficiently.
Before Ralph de la Vega joined a decrepit wireless operator sometimes jokingly called “Bubba Wireless” he had already quite the illustrious career as turnaround specialist behind him. First fixing BellSouth’s underperforming DSL business, and then taking over Bell South’s Latin American organization. From 2001 to 2004 he turned Bell South’s worst performing group into the company’s best performing group. Cingular at the time was, at best, an also ran wireless carrier plagued by centralism that paralyzed the organization. A good indicator for how much things went awry was that Cingular was regularly unable to deliver in time the necessary signage and documentation into stores for the promotions that the company was running in newspapers and on television. Under Ralph’s leadership, the organization was quickly decentralized with VP-GMs running each region as well as new marketing talent was hired with Marc Lefar as CMO. Furthermore, Cingular put its money where its mouth is and spent significantly on improving its wireless network and was able to acquire AT&T Wireless, which did not live up to the same standards. Only one executive from AT&T Wireless survived the acquisition, the President of the Business Markets Group, Kent Mathy. The same high standards were and are being applied to their top regional managers, the VP-GMs. Performance was emphasized and judging from quarterly press release congratulating a new VP-GM to his or her position, the tolerance for non-performance is low.
Why do I tell you all of this? Well, these guys, who used to run the fastest moving organization of their companies, are now in charge of the slowest moving organizations of the respective companies. Their employees and even more so competitors are in for a massive shock. New high standards and procedures that were developed and honed in the ultra-competitive wireless market will be unleashed on the workforce in a fashion that will create a culture shock, but one that is sorely needed. These executives will shake up their companies, figure out who can perform and who not, and create top notch competitors out of these sleeping beauties that until now have largely played dead against the threat of the cable companies. The employees should take this as an opportunity to shine, and I mean really shine.
If convergence ever has a chance – and to be honest I am not perfectly sure if it’s not a solution looking for a problem – Ralph and Denny can make it a reality and if necessary through their sheer force of will and drive. My recommendation to the cable companies would be to keep the warm clothes that have been so handy during the current ice storms close by. You will need them. Two more relentless forces of nature have been unleashed upon you.
This article originally appeared in RCR Wireless News on January 29, 2007