Investment and demand in fiber to the home

There are a couple of threads that, juxtaposed, are interesting. First, Australia moved ahead with its ambitious fiber-based Internet project, and second, this report gives one pause as to whether it would make sense in the US.

So is the US foolish in not making larger investments in infrastructure like our trading parters, is it wise?

The answer is not so simple and certainly not obvious because of the enormous delay involved in rolling out infrastructure. AT&T witnessed this when it signed on as the exclusive carrier of Apple's ground-breaking iPhone. Indeed, they are arguably still trying to make the investments due to the runaway success of the device.

Would the same thing happen with some as-yet unknown device (Device X), except with end user bandwidth? We don't know if Device X exists, or, if it does, what the impact on existing networks would be. The iPhone has shown us that the potential exists, but how can carriers (and their shareholders) be convinced to make large investments based on revenue streams that are highly uncertain at best? Should the government take these risks?

iPhone usage and AT&T's network

This item over at GigaOm is interesting:

iPhone users tend to use their devices in the evening and on the weekends, reports Localytics, a Cambridge, MA-based start-up offering mobile analytics services. According to as study conducted by the company, the mobile app usage in the US peaks at around 9 pm EST on week days. Over the weekend, the usage is at its peek during afternoon and nights.

Since these time correspond (historically) with lower voice traffic, why are there so many complaints about AT&T's network? Could it be that their network is only part of the problem (see this earlier post)?

Smartphone statistics

This article from the financial blog "Seeking Alpha" does a good job of carefully analyzing smartphone market data. What Sidahmed shows in this article is that interpretation of results is very much in the eye of the beholder. While this is not news to people who have studied statistics, I think this article is a great example of how to do a more careful job in analysis.

Test of 3G networks in the US

Gizmodo recently ran a test of 3G networks in the US. The results are here. AT&T had the fastest average upload and down load speeds in the cities where the test was conducted. This is a bit of a surprise given the heat that the AT&T network has been taking recently from iPhone users. Gizmodo wonders whether it is the iPhone or some interaction between the iPhone and the AT&T network, and I can see why. These test results don't corroborate the belief that AT&T's network is (only) at fault.

iPhone Apps and economic networks

I have blogged around this subject before, so when this article in BusinessWeek showed up, my interest was piqued. When economists began looking at standards in IT in the 1980s, researchers like Joe Farrell, Garth Saloner, Carl Shapiro and Michael Katz began noting the importance of networks of tie-ins to the lock-in often associated with standards. They noted in particular the importance of software to the success of PCs vs. Macs (though this view was disputed by Margolis and others).

The BusinessWeek article is significant because it shows a weakening of the tie-ins to the iPhone, which would, according to the economic theories of standards, suggest that the durability of this platform in the face of other existing (and emerging platforms) is not particularly strong. Note that this is not unrelated to the "opaqueness" of the approval process by the Apple App Store and the relatively poor profitability of iPhone apps.

iPhone Apps and the war for the web

There are a couple of items that have come to my attention recently that suggest change is on the way for app stores (perhaps the iPhone app store in particular):  The first comes by way of Seeking Alpha.  In it, the author cites this item from Gizmodo, which argues that, in the not to distant future, apps will be very cheap or free.  This has been a significant profit center for Apple, but may not be in the future.  The second item, from GigaOm, discusses the opaque approval process for iPhone apps which can be frustrating for developers.

Taken in tandem, the second item suggests higher than necessary transaction costs for developers (since the approval process is uncertain) and the first item suggests lower prices (tending to $0) because of competition.  High transaction costs for no profit suggests that developers will seek to monetize their investment in other ways, through advertising or through other kinds of tie-ins (where price is not $0) that are outside of the control of the app store.

But as O'Reilly points out, there are limits to this too.  Apple is not shy about blocking apps that try to escape their business model.  The O'Reilly article is interesting in that it argues for the shape of competition to come and makes the case for the tendency toward market concentration that we see in the Internet.

End of handset contracts?

I found this item over at CNet interesting. Apparently, AT&T's profitability point in the iPhone contract occurs rather late in the two year contract cycle. Does this mean that the carriers will shift its strategy away from captive contracts for handsets? If it isn't particularly profitable for them to do this, then they would, presumably, stop (absent other benefits)?

iPhone and network capacity

This article, which describes how the iPhone is putting strains on AT&T's wireless network is interesting. It further illustrates the close relationship between carriers, content and network devices that I blogged about here. As the article shows, reducing handset prices increases network capacity (and revenues) and also increases the use of social networking applications. It seems likely that there is some revenue sharing going on to facilitate this ...

iPhone in Germany

You might find this item interesting. This is very similar to the situation in France, except it is ex post instead of ex ante, which is less favorable for Apple. The comments on the Gizmodo post are worth reading. Is this a precursor of what we will find throughout Europe?

Thoughts on the G-Phone

Google's much anticipated wireless strategy was finally publicly revealed this week, after much speculation and anticipation. Google's approach was inspired by Tim Wu's "Wireless Carterfone" proposal (which I have blogged about earlier). Unlike Apple's iPhone, Google is proposing an open software platform (Android) that is open and will run on a variety of hardware. The platform, which is based on the Linux kernel, will be developed and maintained by the Open Handset Alliance. According to OHA:

Android does not differentiate between the phone's core applications and third-party applications. They can all be built to have equal access to a phone's capabilities providing users with a broad spectrum of applications and services. With devices built on the Android Platform, users will be able to fully tailor the phone to their interests. They can swap out the phone's homescreen, the style of the dialer, or any of the applications. They can even instruct their phones to use their favorite photo viewing application to handle the viewing of all photos.

It is interesting to note that the carriers Sprint and T-mobile were quick to endorse this initiative. They are, after all, the smallest of the "big four" in the US. Is this an attempt to ride on Google's coat-tails (following the boost that AT&T's earnings had after their exclusive deal with the iPhone)?

The responses of industry analysts have been mixed:

• Om Malik wrote "This is one massive PR move, with nothing to show for it right now, and it seems like there are other unknown reasons (Facebook ad platform launch perhaps) for the motivation here. No phones till second half of 2008 — in our ADD culture that is a lifetime."
• Kent German wonders if T-Mobile and Sprint will hue to the spirit of openness once the phone ships.
• Scott Anthony concluded that this is not a disruptive innovation. He writes that "[c]arriers have already placed big bets in the anticipation of earning service revenues from advertising and other future applications, which appears to be Google's plan as well."


• According to this item, ""I have yet to be convinced that Google's mobile strategy will create a big dent in the industry," said RBC Capital Markets analyst Jordan Rohan, who added that Yahoo appears right to focus on distribution deals of its services instead."
  

It seems that Android is a platform that will compete in substantial ways with Microsoft Windows Mobile, Symbian, PalmOS, and the Blackberry operating platforms. So why would developers and phone manufacturers be interested? According to this article:

• "Unlike with other mobile-platform providers, developers working with Android pay no licensing or other fees. They also will be able to sell their applications through a Google-created online marketplace without sharing revenues with the search giant. Google will make money on the ads served through the phone's browser, according to Google."
• "By not having to pay licensing fees to Symbian or Microsoft, cell-phone companies will save about 10% of their costs, according to Google."

What about carriers?

• How will it help carriers be more profitable in a business that is rapidly commoditizing?
• Large carriers like Vodafone have already made it clear that they want to reduce the number of operating platforms that they support so that they can roll out applications and services more quickly. Does Android help them? Will this affect the other platforms?

Update (2007-11-13): This item contains some videos that show prototypes of a phone running Android.

Suit accuses Apple and AT&T of monopoly

Speaking of walled gardens ... you might find this story interesting. They NY Times says a little more about it in this article. This seems to get at the heart of the "wireless Carterfone" discussion that I have been blogging about. This seems to be an attempt to get from the courts what you (they) could not get from regulatory agencies. On the other hand, it is exactly what you could (and should) expect using ex post regulation.

Regulation and technology adoption

One of the recent discussions in the US telecom policy circles has been the idea of a "wireless Carterfone". Such a policy would basically uncouple handsets from wireless service providers. That is, buyers would be free to choose handsets and wireless service providers independently (much like today's unlocked GSM phones). Carriers tend to bundle handsets and services for several reasons, including:

• Lowering the barrier to entry (or use) by providing subsidized handsets
• Ensuring reliable services by testing feature sets on supported phones
• Strategic and economic purposes

This article suggests that the introduction of the iPhone in France may not happen because of regulations like this. Do you think that this is an example of regulation inhibiting innovation?

Update (2007-10-17): This article in Gizmodo is reporting that the iPhone will be on sale in France after all. Does this alter your opinion about this question? What does this say about bargaining among these titans?

iPhone Owners Denied Warranty Service

Some mad iPhone users are 'seeking respondents for possible class action lawsuit against Apple Inc. relating to refusal to service iPhones and related accessories under warranty.' Alexander Wolfen in his post analyzes reaction of users on Apple's claims to void any warranty services for unlocked or with third-party software or used as data-storage by some other software.
Apple once again repeats the same mistake (as it was with iPod). It was obvious from the very beginning, that a product with such an aggressive marketing and tremendous popularity will be eventually reverse engineered and unlocked. And now when it finally happened Apple is threating iPhone owners. We also remember that all these people are (or may be better to say 'were') Apple's clients and so threating is not good for business. Especially if scandal grows into suite case.
Initially, position of Apple about custom third-party software was not clear (pro, con). Now it is clear to everyone.

iPhone in Europe

It has been announced that the iPhone will make its (official) European debut in the UK on the O2 network ... with Germany to follow (see this) on T-Mobile's networks. But questions remain about whether it will be as successful there as it was in the US. According to this article:

But analysts say Apple may have a tougher time in Europe. They expressed disappointment that the iPhone to be sold in Europe was identical to the one in the United States, meaning that it would be unable to take advantage of faster European wireless networks for Web browsing and media downloads.

[snip]

Mr. Jobs said the iPhone would overcome this hurdle by relying heavily on Wi-Fi technology, which provides broadband Internet access for laptop computers and other devices, though only when they are stationary. When iPhones are on the move, they will shift to a mobile technology called Edge, which is also use by AT&T, Apple’s exclusive network partner in the United States.

[snip]

Also, 20 percent of British mobile users already have 3G-enabled phones, according to M:Metrics, a research firm. “There’s no doubt it’s going to be an obstacle for Apple,” said Paul Goode of M:Metrics. “You’re going to be asking people to downgrade in terms of capability.”

Apple is also going against the grain of the European mobile business by charging £269 ($538) for the phone in Britain, and locking customers in to 18-month contracts at monthly rates of £35 to £55 ($70 to $110). Typically, carriers discount even high-end cellphones in Europe.

Furthermore the carrier O2 has spotty EDGE coverage; the compensation will be free access to a network of WiFi hotspots, according to this article. Interestingly, this article has also raised the specter of competition between wifi and 3G, a topic that has been the subject of several academic studies (see this, for example).

To me, this highlights the potential difficulties firms face when transferring a technology that is successful in one commercial/social environment to another. Can you find other examples of telecom-related technologies that did not translate well? How are these different from technologies that did transfer well?