O2 Says iPhone is Share Changer

Three out of four buyers of the iPhone in Britain will be new O2 customers won from rival mobile networks, according to the new head of O2, which has an exclusive deal to sell the iPhone in the U.K. market.

"Over time, three out of four customers of the iPhone will be new O2 customers, because you can only get the iPhone by becoming a customer of O2," says Matthew Key, incoming O2 chief executive.

Google's Embrace of Failure

At the recent Stealth Communications Voice Peering Forum, a group of us were asked to speculate about where the telecom industry was headed. Panelist Rich Tehrani said Google was going to be a major factor. As part of a vigorous discussion that followed, one attendee argued the opposite position, that Google has pretty much failed at just about everything it has tried aside from search.

One point that wasn't made (as the moderator I had to let the panelists have at it) is an observation many observers have made about the process of innovation, and what is necessary to spur innovation inside just about any company.

And that point is that the rate of failure has to accelerate if truly significant innovations are to be discovered. Failure is an unavoidable part of the process of experimentation. And the issue, many observe, is that "failure" traditionally is not treated kindly inside most large organizations, including large telcos.

One reason many observers have little expectation that telcos will lead the innovative process is precisely the cultural aversion to failure. Telcos need to make big bets to get any meaningful revenue lift. That need to place big bets also acts as a brake on innovation, though.

What seems an insane culture at Google might actually be viewed as a deliberate attempt to "accelerate the rate of failure." The more failures, the more the organization learns. The more it learns, the more chance it can discover something really important.

Failure, in other words, is not the end. Failure is part of the process of figuring out what works and what doesn't. And Google is looking for large returns as much as any other major entity in the communications and media space. The difference is that Google is highly tolerant of experimentation and failure as a basic part of its attempt to "win big."

That isn't to say every idea Google tries to implement seems "logical" or even prudent. It does seem quite "messy," quite frequently. But there is a method to the madness, as they say.

That isn't to say Google is guaranteed success in its endeavors related to media and communications, going forward. It likely will fail in public ways in the future. That should not lead us to conclude Google really is overhyped as a force in the communications business because it fails so often.

I will be more concerned when Google stops failing so much. Because that will be the signal it really has ceased to be a force for genuine innovation with life-changing and market-affected impact.

iPhone Gets First Release of New SAP Software

Maybe usability really does matter. SAP unveiled the first version of its new generation of business software products for the iPhone, not the BlackBerry or some other enterprise class device, as one normally would expect.

Granted, the lag between the iPhone release and the BlackBerry release might only be a matter of weeks. But when was the last time you heard of this happening?

The German company is the world's biggest maker of business management software and, while analysts generally praise its broad line of products for their deep functionality and analytical abilities, they say they are difficult to use.

The software can be customized by each user with as much flexibility and ease as one might be able to customize an iGoogle page, or myYahoo page, officials with SAP said.

"The iPhone has become such a popular thing," said Bob Stutz, a SAP senior vice president who is responsible for developing customer relationship management software. "Everybody wants the ease of use of the iPhone."

Stutz said SAP decided to introduce the iPhone software ahead of programs for other devices at the request of its sales people, saying they prefer using iPhones to the other devices.

Programs for the Blackberry and other devices will ship a few weeks after the initial launch of SAP CRM 2007.

Apparently this is a case where the people who actually have to use a device to make a demo really prefer to do so using an iPhone. Which is about as strong a testimonial for usability one can note.

Enterprise IT Spend is Falling

The latest ChangeWave corporate IT spending survey shows--for the first time in years--a weaker IT spending growth rate and poor visibility headed into the first quarter of 2008. About 24 percent of respondents say their company will increase IT spending for the first quarter, a figure unchanged from the previous survey, but far below the average seven-point seasonal increase seen in each of the last four years, Changewave says.

Another 20 percent of those surveyed report IT spending will decrease, or there will be no spending at all in the first quarter, which is three percentage points worse than reported in the last survey.

While just over half (52 percent) say their company is giving a "green light" to IT spending, suggesting spending is normal, this figure is down five percent from previously and is now at its lowest level in more than three years, Changewave says.

Some 42 percent say their company is either reducing spending or putting spending on hold, the worst reading in three years, Changewave notes.

BlackBerry Still Owns Enterprise Smart Phone Market

Research in Motion's Blackberry (73 percent share, up two points) continues to control the lion's share of the corporate smart phone market, according to a recent ChangeWave Alliance survey. In contrast, second place Palm lost about four points of share (19 percent). Motorola has 11 percent share, down one percent since the last ChangeWave survey.

Apple's iPhone has five percent share, up three points since the last survey, but has presence primarily among small to very small companies, the ChangeWave survey shows.

Google Threat to Telcos: How Real?

Yesterday at the Stealth Communications Voice Peering Forum, there was spirited discussion about Google, and on Google's impact on the broader telecom industry. One line of thinking was that Google wasn't as big an issue as sometimes thought, because the one thing it really has succeeded at is advertising. The implication is that Google will not, or cannot, emerge as a force in the mobile or landline parts of the telecom industry.

The other point of view is that Google already has become a factor, even if it is only as a force reshaping all of advertising.

Likewise, some people are going to argue that Verizon Wireless and at&t Wireless announcements about the openness of their networks are essentially "no big deal." Customers already could swap Subscribe Information Modules" in at&t and T-Mobile phones because both carriers use GSM, and that's just a feature of a GSM network.

That misses the point. The entire U.S. wireless industry now has formally and publicly embraced the notion of open networks. There won't now be any retreat from that position, as end users increasingly will expect it, as every consumer expects such openness in Europe.

And though it sometimes seems as though all essential regulatory debates have ended in the U.S. market, the converse is true. In large part because of what now is happening in Europe, policymakers ultimately are going to have to reexamine the basic national framework for telecom regulation in the U.S. market.

The argument that a capital strike is inevitable in any "functional separation" regime, or a "structural separation" regime, does not seem to be borne out in the European markets. Carriers might not like the framework, as it is helpful to competitors. But dire consequences: a capital strike that cripples robust broadband access deployment, does not seem to be occurring in Europe, where such a strike might have happened.

That is not an endorsement of "anti-telco" restrictions. What is required is some encouraging, stable policy that provides clear incentives for rapid, aggressive optical access investment on the part of the leading U.S. telcos, and assures their investors that a predictable return is possible. "Structural" or "functional" separation essentially can "guarantee" a carrier that most wired broadband traffic (other than cable's) will flow over the carrier's owned pipes.

In essence, regulators can ensure that nearly 100 percent of broadband access traffic. other that that provided by cable operators, flows over the incumbent wired telecom network. Granted, the U.S. and European markets are diverging. Cable is a big factor in the U.S. market and is driving measurable and effective competition to a large extent.

The issue is whether some sort of separation can be crafted that actually creates a better investment climate for incumbent optical access facilities. That isn't the way separation traditionally has been viewed. But circumstances might be changing. A company whose "reason for living" is the "best possible optical access", serving virtually every potential retail competitor, with reasonable assurances of a return on investment, might be worth looking at.

The analysis will not be easy. Cable is a huge "fact on the ground". It might be too late to create a regime where all retail services flow over one huge physical access network. Also, cable operators historically have resisted giving up their networks. But there's a cost to upgrading those networks, and the financial markets never like it when cablers have to invest heavily in those networks.

But even large global carriers are discovering that spending more of their dear capital on transport facilities might not be the best way to proceed. It might seem improbable at the moment that such a fundamental new debate is possible. But give matters a couple of years. Demand for access bandwidth is going to explode. Carriers, with the exception of Verizon, will need to respond.

Financial markets will need reassurance. Maybe the current regime continues to work. But maybe it doesn't. Watch the European markets. If bandwidth demand continues to explode, and European end users start to routinely receive much more bandwidth than U.S. consumers do, there will be an inevitable demand for doing something in the U.S. market.

att wireless goes open

The last wall has crumbled: at&t Wireless says it will "immediately" open its network to any device and use of any application, without contract requirements, with the exception of Apple's iPhone, which still will carry a two-year contract requirement and remains subject to Apple's own requirements.

Consider what has happened in just a month: Sprint Nextel and T-Mobile agree to work with Google on Android, the open operating platform for mobile devices. Then Verizon says it will open its network next year. Today, at&t Wireless says it is open "now" to any GSM devices.

In the process, the entire U.S. wireless industry has moved to an open, unlocked devices regime that, although the norm in Europe, never has been the U.S. regime.

Give credit to Google. It has done what no other company could do: it has forced openness upon the entire U.S. wireless industry, proving that, at least sometimes, only a very large, very powerful contestant can cause massive industry innovation.