Google Nexus One: Lessons to be Learned?

New sales data on the Google Nexus One smartphone has most observers concluding that Google has failed with its launch. Flurry notes that the Nexus One has shipped about 135,000 units in 74 days, where Apple shipped a million iPhone units in its first 74 days while the Verizon Droid sold a bit more than a million units in its first 74 days.

"Google Nexus One may go down as a grand, failed experiment or one that ultimately helped Google learn something that will prove important in years to come," Flurry notes.

But the sales curve might suggest something about the distribution channel more than anything else. Droid's sales suggest it is not the Android operating system which accounts for the low sales.

More likely the low sales are the result of a combination of changes in the typical distribution system. Most users buy their devices from carriers, most often preferring a discounted handset with an accompanying contract.

Google has been selling only unlocked devices, and only from a Web site, at full retail price. One could have predicted that would not be popular.

Also, Google initially started out with email support only. Given the history of consumer unhappiness with mobile service provider customer service, that also could have been predicted. When people have a problem, they want to talk to a live person, and they want to talk "now."

Also, though some policy advocates have been loudly calling for sales of unlocked devices as a consumer choice value, most consumers care less about unlocked devices and more about customer support. In an unlocked device scenario, it isn't clear whether it is Google, the handset vendor or the carrier that has the issue causing the problem.

Consumers may have issues with contracts, but they also prefer lower phone prices and the assurance that if there is a problem, the retailer will take responsibility.

What Google's experiment mostly shows is the value and power of an integrated distribution model, with clear responsibility and good customer service support. Unlocked devices do not generally resonate, and neither do full price handsets, especially when customer experience after sale is so poor.

Flurry post

Except for Wireless, National Broadband Plan Much Ado About Almost Nothing

Oddly enough, the proposed National Broadband Plan is light on new spending and puts primary emphasis on wireless, while mixing in a bit of a grab bag of existing and vexing voice-related issues. The goal of getting 100 Mbps service to 100 million U.S. homes by 2020 appears to be just that, a "goal," not a requirement.

Some people would call that a mistake, but the Federal Communications Commission is not unmindful of some basic facts, including the requirement that the investment heavy lifting must be done by private industry, and that means raising lots of investment capital from private sources.

Those sources already have made clear their fears that too much tinkering with broadband regulations, especially regulating broadband access as a common carrier service, will choke off investment.

The single-biggest substantive proposal is the plan to make 500 megahertz of new spectrum available for wireless communications by reallocating spectrum presently used by TV broadcasters.

It might be close to heresy, but if you look out 10 years, the business case for investing lots of money in fiber to home facilities is starting to look worse, not better. Many policy advocates call for much-higher speeds and lower costs at the same time. That's not a convincing scenario for investors who would have to take a chance on loaning money in that sort of market.

Also, to the extent that entertainment video has been a big part of the business case, not many observers would believe the future is as bright as the past has been. With voice also under pressure, it may not make as much sense as it once did to invest too aggressively in fixed broadband. Broadband still is the foundation service for fixed networks in the future.

But that is a different issue from the separate issue of how much investment ought to be made, because it is unclear how much users are willing to pay for really-fast service, or how much incremental revenue might actually be created by new applications that require really-fast broadband.

$17.5 Mobile App Sales in 2012

Mobile App Stores: A Closer Look from Plugg Conference on Vimeo.

A study conducted by mobile analyst Chetan Sharma and sponsored by GetJar suggests the market for paid mobile apps should grow to $17.5 billion within the next three years, implying a value greater than CD-based apps in 2012, when apps sold on physical media are projected to be $13.8 billion.

App downloads will leap from slightly more than seven billion in 2009 to nearly 50 billion in 2012, representing an annual growth rate of 92 percent, the study also suggests.

According to the study, by 2012, off-deck paid-for apps will be the biggest revenue generator, accounting for almost 50 per cent of all apps revenue.

In 2009, on-deck apps available from mobile operators accounted for over 60 percent of all apps revenue, but this will fall significantly to just under 23 percent by 2012.

The average app selling price for apps in North America was $1.09, significantly higher compared to that in developing markets such as South America ($0.20) and Asia ($0.10).

According to the study, revenue opportunities in Europe are set to grow from $1.5 billion in 2009 to $8.5 billion in 2012, while in North America the figure will rise from around $2.1 billion to around $6.7 billion in 2012.

Currently, apps are most popular in Asia, with the region accounting for 37 percent of global downloads (free and paid) in 2009. North American downloaders spend the most money on apps, accounting for over 50 percent of global app revenue.

Advertising and transactions are a growing portion of the way applications are monetized, though purchase fees will represent most of the revenue for the near term.

Recession Not the Issue, Structural Is What Challenges Telcos

The global telecom industry performed pretty much as it always does during the recent recession. Basically, revenue growth continued at low single digits, overall. As always is the case, some industry segments fared better than others, but consumer demand for communications and entertainment video services was steady.

Some might wonder whether some clear signs of consumer frugality will affect growth rates for some time to come, but even that is not the big issue.

The big issue is that wired communications is an industry with a cost structure too high for expected revenues over time, so cost cutting must continue and network operations must become even more efficient than they have, up to this point.

Ovum researchers point out that "the economic downturn hasn’t resulted in the downward pressure on telco top lines that many expected."

But Ovum researchers also point out that "revenue growth is in decline for many mature market operators, and slowing for those in emerging markets."

“Market saturation, increased competition and regulatory intervention on roaming and termination rates won’t disappear just because the economy picks up”, says Ovum Principal Analyst Clare McCarthy.

Telcos are cutting operating expenses and capital investment. They are also accelerating employee early retirement programs and stockpiling cash. Many telcos in fact are emerging from the downturn with healthier balance sheets than when they entered, as well as significant cash balances, Ovum says.

Covad Launches Ethernet Access Services Nationwide

Covad Communications Company is launching nationwide Ethernet access services in mid-April.

Designed especially to support business-class, real-time applications like Voice over IP, video, gaming, virtual private networks and video conferencing, at speeds from 1.5 Mbps to 35 Mbps out of more than 4,000 central offices reaching approximately 10 million businesses nationwide, the company says.

Covad will offer quality of service and class of service features and are backed by service level agreements.

“What will differentiate this product in the market are the integrated QoS and CoS options that give our partners immense flexibility in optimizing network performance based on their application requirements,” says Patrick Bennett, president and chief executive officer at Covad.

Covad began testing Ethernet services on a technical level with a limited offering in selected markets last year.

Buy Your Bandwidth When You Buy Your App

As the mobile industry starts selling more connections to support sensor networks and non-traditional mobile devices such as game players and media players, it is going to create new charging methods as well.

The Kindle, for example, hides the cost of connectivity in the sales price of content. That model likely will become more popular over time as more devices emerge that require occasional connectivity, but are unsuited to the traditional monthly or prepaid billing plans.

At the same time, assuming regulators do not outlaw the concept under the guise of "network neutrality," more operators may start experimenting with priority access and other quality of experience measure.

3UK, for example, gives users on  more-expensive plans access priority access when the network gets congested. Tiered service levels are one obvious way to allow users to match their preferences with their payment plans.

Application stores might offer another approach that is akin to the way Kindle now works. It might be the case in the future that some applications are sold in a way that incorporates the cost of bandwidth in the sales price of the software.

Some users will want to pay less, and take their chances with  YouTube viewing quality. Alternatively, a user might be able to buy a service that includes quality of service mechanisms for YouTube consumption.

In principle, that isn't much different from selling access plans offering varying bandwidth at varying prices, or different buckets of voice minutes of use or text messages or data consumption. The concept might be especially attractive for users at two ends of the usage spectrum.

Very-light users might prefer the lower overall cost of paying for just enough bandwidth to support their use of particular applications. "Power" or business users might be willing to pay much for the best possible quality for business conferencing or voice quality, especially when the network is congested.

Yes, that is a combination of network management and bit discrimination. But there is no good end-user focused reason to give consumers a choice of consumption options.

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Augmented Reality Projects Web Data Onto the Real World

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Augmented reality overlays information from the Web on top of objects in the real world, typically when a user points a mobile phone camera at objects in the real world. In some sense, augmented realtiy takes Web accessible data and projects it in real time onto physical objects viewed by the camera. 

There are all sorts of prosaic applications one can imagine. Helping people buy shoes and clothing is an obvious commercial example.