Tech Untangled

The US Wireless market is reaching maturity fast and market penetration or saturation levels of mobile devices are above 70%, a pretty high level. Of course, some European countries have market penetration rates of more than 100%, but that’s because some people have more than 1 mobile phone and these countries generally have smaller populations, are smaller countries, or have limited wireline penetration. It is expected that when penetration levels reach 80%, the U.S. market will generally be saturated.

At this level, one could expect the service provider landscape to consolidate, as service providers look to maintain profit levels through cost cutting and by leveraging the economies of scale. Consolidation, or if you prefer to call it Mergers & Acquisitions, is a great way to increase economies of scale, especially in industries with high fixed costs.

In fact, we already see consolidations of sorts happening - recently AT&T Mobility acquired Dobson Communications for about $2.8 billion, T-Mobile has reached a deal to buy SunCom Wireless Holdings for $2.4 billion, and Verizon Wireless is acquring Rural Cellular Corp that has 700,000-plus customers.

In the meantime, here are the top 10 wireless providers in the US. The list does not include Mobile Virtual Network Operators (MVNO), who don’t own a wireless networks

Verizon Wireless has confirmed plans to use Long Term Evolution (LTE) technology as its 4th Generation (4G) technology. Today, Verizon Wireless uses CDMA2000 technology and most of the rest of the world (including Verizon Wireless’ European half-parent Vodafone Group Plc.) uses W-CDMA (also called UMTS) for 3G services. These two technologies are similar but are not compatible.

With this move, Verizon Wireless will have a cellular technology compatibility with Vodafone, thus facilitating better operational synergies for the two companies as well as making it much easier and cheaper for subscribers that travel Internationally between the US, where Verizon Wireless operates, and Vodafones coverage areas in Europe and Asia.

Also, this move could be a blow to Qualcomm, the developer of the CDMA2000 technology, because Qualcomm has a very strong position in CDMA2000 as the primary (only?) chip vendor and holder of the majority of Intellectual Property but has a much less Intellectual Property and marketshare as a potential chip vendor in LTE.

Qualcomm has been working on a rival next generation technology known as Ultra Mobile Broadband, but 3GPP, one of the main standards bodies developing 3rd and 4th Generation technologies, recently selected LTE as its 4G migration path. According to the CDG, there are 400 million CDMA2000 and 21 million CDMAOne (IS-95) subscribers worldwide. Verizon Wireless currently has 64 million subs (mostly CDMA2000) or about 15% of the worldwide base. Losing 15% of the market in the future is significant but even more significant because it may compel other wireless operators to ditch the CDMA2000 4G migration path in favor of LTE. This move also could be a blow to WiMax, a rival 3G technology supported by Sprint Nextel that was recently designated as a 3G technology.

The Verizon Wireless and Vodafone will begin testing LTE technology in 2008 with equipment suppliers Alcatel-Lucent, Ericsson, Motorola Inc., Nokia- Siemens, and Nortel Networks.

It is estimated that LTE would be commercially available in 2010 or 2011 and Verizon Wireless and Vodafone may have a common platform by around 2015 (Note: Telecom doesn’t move that fast!)

The Mobile Virtual Network Operator (MVNO) business in the U.S. is hardly making any headlines these days. That’s because some of the biggest MVNO’s have lately kicked the bucket. First, there was Amp’d Mobile where the management engineered a spectacular demise by burning cash and providing service to those who didn’t pay (a cellular sub-prime gamble of sorts). Then there is ESPN Mobile, which bit the dust after several agonizing months of trying to sell a high priced sports-oriented offer that not even loyal fans would bite. These are just two examples that sealed the fate (see related article on Why U.S. MVNO’s will find it hard to survive) of the traditional MVNO model. However, all hope is not lost. The MVNO business can still be successful - for the right innovator.

In steps Amazon into the picture. Amazon has shown time and again that they can come up with a feasible business model or two that users find compelling and easy to use. For example, Amazon revolutionized selling books online and then made is super easy with features such as 1-click checkout. Then there’s that elastic computing cloud, which I think has a lot of potential.

And now, Amazon has come up with its next innovation - an electronic book reader called Kindle that sells for $399 and makes it easy to read and easy to download e-books anywhere, anytime. Kindle can view, select, purchase, and download electronic books over a high-speed cellular network. Users can also purchase a newspaper or subscribe to daily newspapers, magazines, and blogs for a monthly fee. Newspapers are delivered overnight and blogs are updated several times a day.

Amazon isn’t the first to sell an electronic book reader, but its the first to have an electronic book with the following features:

1. Easy-on-the-eyes E-Ink. The Kindle, like the Sony Reader, has an electrophoretic display from E-Ink that is designed to look like paper. An LCD screen, a popular choice for e-readers and smartphones, causes more eyestrain.
2. Download e-books anytime, anywhere using a wireless broadband speeds (no need to look for a hotspot)
3. No need for a wireless subscription (no contracts, no bills, no worries)

What’s interesting here is that there is no wireless/cellular subscription required. Imagine a wireless device that can connect to a high speed cellular network but doesn’t need a subscription? This is just what Amazon has done and perhaps may have opened up a whole new use for mobile data networks. This contrasts in many ways with the iPhone, which requires a cellular contract, a subscription to cellular Broadband service called EDGE, but doesn’t even allow wireless downloading of songs (except via WiFi hot-spots).

The Kindle operates on Sprint Nextel’s 3G cellular network. But user will not see a bill for wireless service - it’s included in the price of the content. The Kindle is “always-on”, that is always connected to Sprint’s 3G EV-DO network (slides down to the slower 1x network when EV-DO is not available). Interestingly, since Sprint EV-DO network was recently upgraded to Rev A, where users typically get download speeds of about 800 Kbytes, e-books should download quickly. My guess is that the device will not roaming on other networks. Users can also turn the radio off, which will come in handy in airplanes, and will extend the battery life from about two days to one week.

Users can also “sideload” purchased e-books onto the Kindle. In any case, every book purchased is backed up on Amazon along with any bookmarks or notes added by the user. I know that sometimes devices can go bad, so this is one of the most important features for me. I’ve always wanted the backup feature with iTunes, but I guess Apple sees things very differently, and they also have to grapple with a messed up Digital Rights Management (DRM) system.

E-books cost about $9.99, while newspaper subscriptions start at $5.99 per month. There is a small music player on the device for background music while reading, but Amazon isn’t selling music over EV-DO, so users will have to sideload their own songs. This is not a great choice (perhaps it will be added later), because Verizon Wireless claims that 95% of song downloads from its VCAST music service is over-the-air (and its priced higher than for sideloading)

I think Amazon has another great idea with Kindle. It has already sold out in the first 5.5 hours. This is going to be another great product and a good boost for Wireless Broadband services.

Skype and UK-based cellular service provider “3” have launched the 3 Skypephone, a mobile phone that allows users to make free Skype calls via the Internet. The 3 Skypephone could also send free Skype Instant Messages (IM). Right now, SkypeOut calls, SkypeIn calls, and voicemails are not available, but the phone makes conventional calls.

The phone is being launched in nine markets including the United Kingdom, Australia, Italy, Hong Kong, Sweden, Denmark, Austria, and the Republic of Ireland. In Britain, the phones will be available for sale in 3’s UK stores on Friday November 2, 2007. It costs 49.99 pounds ($102.6) with pay-as-you-go service, and free with a contract. The company hopes to sell “several hundred thousand” units worldwide in the fourth quarter of this year.

Skype acting CEO Michael van Swaaij expects the launch to boost the group’s 246 million-strong registered user base because “the service was now available to people without computers”. I doubt that the skyphone will make a dent in Skype’s customer base for the following reasons:

1. 3 subscribers are likely to have access to a computer. In other words, many of the users of the 3 Skypephone will be current Skype users.
2. “3” is a relatively new company and doesn’t have a large subscriber base.

The 3 Skypephone does not work in the U.S. spectrum bands, so Skype enthusiasts in the U.S. will have to wait!

I wrote an article recently on “4 Reasons you won’t have Skype on Cell phones anytime soon”. Interestingly, “3” is the first operator to open up its network to Skype. For “3” it makes sense as an upstart 3G/UMTS operator, but I highly doubt that the major cellular operators will open up their network (hey, they have to protect their primary revenues) anytime soon.

Qualcomm launched on a Wednesday a dual-3G chip with EV-DO and HSPA (High Speed Packet Access) for laptops. This will enable laptop makers to embed a WWAN chip that can handle any of the two most dominant cellular broadband technologies in the world.

Currently, laptops are available with embedded chips that work with either AT&T’s HSPA or Verizon Wireless’ or Sprint Nextel’s or Alltel’s EV-DO network, but no laptop can work with both HSPA or EV-DO networks. Different parts of the world have different broadband networks – the US, Asia (China, India, and Japan) and Australia have both EV-DO and HSPA, Europe is predominantly HSPA (HSDPA and HSUPA), while Korea is EV-DO, making it difficult for laptop users that travel internationally to use the laptop with Wireless Broadband.

Here are the biggest benefits of the dual-3G chipset for laptops:

1. Qualcomm’s new Gobi chip can connect to either type of network, so the well-traveled users will have a laptop that will work pretty much anywhere in the world. This would also be a good selling point for wireless service providers.
2. Rather than make two separate laptops for EV-DO and HSPA, laptop manufacturers can manufacture a single laptop with both. Each chipset will cost more because it packs more punch, thus the dual-3G laptop will be more expensive, but costs can be lowered through volume manufacturing, and reduced marketing, distribution and inventory costs, and simpler sales process.
3. Customers with multiple subscriptions have the ability to choose the best coverage in a given area without having to lug around multiple laptops or multiple USB or PCMCIA WWAN cards, as well as decide on the lowest cost (especially when roaming).

The Gobi chips are available immediately, and Qualcomm expects them to appear in laptops in the second quarter of next year.

Still, the Gobi chip is limited to EV-DO and HSPA, and does not support WiMAX. Wireless carriers are still rolling out WiMAX (the first rollout in the U.S. will be in 2008), and WiMAX will be an important consideration for laptops.

Fixed-mobile convergence (FMC) and the quest to make quick, smooth hand-offs between cellular and WiFi got a shot in the arm when Agito Networks formally launched this week. Agito Networks is founded in 2006 by Pejman Roshan (VeeP of marketing) and Timothy Olson (CTO), both formerly of Cisco’s Wireless Networking Business Unit, and backed by $9 million in investments led by Battery Ventures.

FMC is one solution to spotty cellular RF coverage within buildings (another answer is Femtocells, which Sprint Nextel launched recently). Furthermore, FMC helps leverage the increasing number of WiFi networks in offices and hotspots to make low-cost VoIP calls.

So why jump into a pit with hundreds of FMC players such as Tecore, T-Mobile HotSpot@Home, Kineto Wireless, LongBoard, and Motorola? Turns out that no-one has adequately solved the problem of transitioning from cellular to WiFi quickly and smoothly.

Agito Networks claims to achieve sub-second handover between WiFi and cellular RF networks through a patent-pending location-aware technology that utilizes RF to tell when an individual is approaching “predefined points at an enterprises WiFi coverage edge” after which a mobile-based client cooperates with a RoamAnywhere router (which integrates with the company’s IP PBXs) in order to hand the call over.

Agito Networks’ is targeting its products at medium-to-large businesses looking to save on cell phone bills – Agito claims a 60% reduction in phone charges by routing in-building calls over dedicated IP infrastructure and connecting outgoing calls originating indoors over VoIP.

Agito plans to introduce models ranging from $9,995 to $24,995 in the US later this year. The RoamAnywhere 2000 series Router is designed for small to medium deployments and scales to 100 simultaneous users per appliance, while the 4000 series, designed for medium to large deployments, can handle up to 1000 simultaneous users..

Agito also provides “Zero touch” client deployment which helps administrators to pre-provision groups. In addition, the location-aware policy engine enables users and administrators to create and enforce corporate-wide mobile policies. The Network/IT Admin can even set up RoutePoints and instruct calls to be directed to voicemail when users are off duty.

Seems like an interesting approach – but the FMC space is still at the early stages and feasibility cannot be assessed until products/trials are available.

Wow, just several days ago, I wrote that Sprint will launch Femtocells this year. Well, they didn’t wait that long did they?

Sprint Nextel has quietly started selling the AIRRAVE femtocell product in parts of Denver and Indianapolis to provide better cellular coverage and flat-rate calling at home. Sprint Nextel plans to start selling the Airave all across Denver and Indianapolis, as well as in Nashville, Tennessee, by year’s end, and plans to offer it nationwide in 2008. The Airave is made by Samsung Electronics and costs US$49.99. It is designed for plug-and-play so that people can install it themselves by plugging it into a broadband Internet connection (DSL or Cable Internet service required). For a flat monthly rate of $15 for an individual and $30 for a family, one gets unlimited local and nationwide long-distance calls while at home (or whereever the AIRAVE femtocell is).

The Airave works with any Sprint handset, and can support up to 3 handsets simultaneously. When a subscriber leaves home (i.e. goes out of the femtocell coverage area), the handset will automatically shift to the outside Sprint cellular network.

A femtocell is a small cellular base station that provides service specifically inside a building (e.g. a subscriber’s home). Femtocells are seen as competition to WiFi, where some cellular carriers such as T-Mobile use a dual-mode handset that can switch between cellular and WiFi (with WiFi providing the in-building coverage wherever applicable).Femtocells get the name from “femto,” which denotes a small order of size in physics. The idea has been around a long time but until recently was held up by size and cost concerns. While helping subscribers get good service, the devices save carriers from deploying more expensive base stations on towers to get to hard-to-reach pockets.

Sprint is just the first major U.S. carrier to offer femtocells. Expect to hear more about femtocells in the coming future.

Qualcomm got a breather now, and so did a number of its key customers. The Ban on the importation of new 3G handsets containing Qualcomm chips is stayed while an appeals court reviews the merits of the case. The United States International Trade Commission had imposed the ban in June as a remedy to its finding that Qualcomm infringed on a Broadcom patent for power management. While this may be buying time for Qualcomm, it is buying a very important time, because wireless service providers such as Sprint Nextel and Verizon Wireless typically sell a significant portion of handsets in the holiday season starting October.

Besides Qualcomm, handset manufacturers such as Samsung, Motorola, Sanyo, Kyocera, and LG will benefit by being able to sell 3G new handsets (the ban was limited to new models of 3G handsets). Cellular carriers such as Sprint Nextel and to a lesser extent AT&T will benefit. Verizon Wireless Struck a Deal with Broadcom by paying $6 to Broadcom per handset to avoid the ban, so it’s not bound by the ban on importation of 3G handsets (or the stay of the ban). Sprint Nextel was also relying on handsets that had a “workaround” from Qualcomm that avoided using Broadcom’s patent, although Broadcom was expected to challenge the workaround in court.

The Court of Appeals for the Federal Circuit believes that the ban would unjustly harm  Qualcomm customers. The stay of the ban is a major psychological boost after the company’s recent setbacks on the patent infringement case with Broadcom. This will give Qualcomm a much needed breather before seeking a complete reversal of the original infringement finding and the ban.

Diebold and NCR Corporation, leading players in the automated teller machines market, are developing technologies to enable cell phones or PDA’s/Smartphones to transact with an ATM. NCR has been developing technology for linking hand-held communications devices with ATMs since 2001. NCR already uses such technology in Denmark and Singapore.

Over the past 18 months, Diebold has won five U.S. patents for applications that enable mobile devices to interact directly with bank ATMs. The patents involve allowing banking consumers to use their mobile devices to locate and get directions to the nearest ATM, order cash withdrawals remotely, generate electronic checks, transmit wireless payments, and generate various other transactions by linking to an ATM. Diebold claims the technology underlying these patents exceed current mobile banking practices, namely online transactions.

One patent allows mobile phones to interact directly with ATMs and bank systems for cash withdrawals, with protection against card-skimming or personal identification number surfing at ATMs. Another patent allows mobiles to work at checkouts or banks to pay payments via secure electronic checks. A third patent allows bank networks to receive wireless communications from mobile phones for account information. The fourth allows bank ATMs to communicate with mobile devices through a cellular network or other wireless methods. The fifth patent allows users to interact with ATMs through the wireless device’s display and keypad instead of the display and keypad on the ATM.

For one, those not comfortable with entering a PIN code in a public place (ATM) can use a mobile device to enter the PIN. Here’s how it works: First, the mobile device user would receive a one-time code, which would then be entered when arriving at a specified ATM. The user could insert an ATM card and the one-time code, and the ATM would then know to complete the transaction.

A study last year found that people in the United States conduct about 8 billion ATM transactions annually. The Dove 2006 ATM Deployer Study shows that ATMs dispense about $600 billion in cash each year. With close to 200 million handsets in use in the United States, it’s easy to see that there may be a significant overlap between ATM users and mobile phone users.

Diebold has estimated such applications will be widely available within three to five years. I doubt anything mainstream in terms of accessing ATMs from mobile phones will happen soon. But, look out for banks to start testing some of these services, mainly out of security concerns.

Sprint is planning to formally announce a femtocell product by the end of the year, according to Manish Mangal, the company’s Director of Signaling and Control Technology Development.

A femtocell is a low-power, low-cost cellular base station that plugs into a broadband connection for backhaul into the cellular network (looks like a WiFi Access Point). Femtocells will allow Service providers to cost-effectively extend cellular coverage into homes and office buildings, where sometimes it has been difficult to get good cellular coverage. Femtocells operate on the cellular frequencies, so only wireless service providers such as Sprint and Verizon Wireless are authorized to operate them (or operate under approval from the wireless service providers).

Femtocells are much like WiFi hotspots and are seen as competing technologies. WiFi for cellular requires a special mobile phone with dual-mode technology (i.e. with both cellular and WiFi transceivers in the handset), but dual-mode devices have failed to catch on in the U.S., in part due to higher price. Furthermore, dual-mode phones have shorter battery time due to operating on two frequencies. Also, Voice over WiFi is still shaky, primarily because 802.11-n technology that provides Quality of Service (QoS) is still not commercial and because WiFi networks haven’t been optimized for voice. Also, because WiFi operates on spectrum used by other device, it is subject to interference.

Femtocells have their own issues as well: because there are different cellular technologies, and each wireless service provider has its own flavor, customers can get locked onto a cellular carrier. Also, large enterprises typically have service from more than one wireless carrier, further complicating the femtocell picture.

Nonetheless, femtocells have a bright future and Sprint seems to be taking the lead on it. In fact, Google recently entered the space by investing into Ubiquisys, a leading femtocell provider.