Verizon to announce iPhone offering today

According to multiple sources, including the Wall Street Journal, Verizon will formally announce later today the carrier will begin offering the Apple iPhone at the end of January. This will mark the end of AT&T’s exclusivity deal with Apple regarding the devices, but also represents a pivotal moment for both AT&T and Verizon in terms of Wall Street and network performance.

The impact to AT&T could be substantial given the network capacity and quality issues that subscribers have reported, leading to frustrations that could result in a switch of service providers. Quarterly churn numbers could jump significantly if there’s a mass exodus from AT&T, but that’s not likely. A vast majority of AT&T’s installed base of iPhone users are tied to family or corporate plans, making it more difficult to switch without prohibitive financial penalties.

The network capacity and quality issues caused by an overwhelming amount of data traffic on AT&T’s network could replicate themselves on Verizon’s network as well. While Verizon maintains their network is ready to handle the demand, there’s no guarantee and no way to predict what actual demand will be. For example, several studies have cited that Android users (the bulk of Verizon’s non-Blackberry smart phone portfolio) use more data than current iPhone users on AT&T’s network.

Perhaps the most significant difference (and differentiator) in the network offerings of AT&T and Verizon is the ability to talk and use data simultaneously – an advantage AT&T has leveraged in the marketplace since launching 3G services. This functionality is important to many subscribers, and may prove problematic for Verizon if the majority of potential new subscribers are not aware of the technology difference.

The most interesting metric to observe, if the announcement happens as planned, will not be the bleeding of customers from AT&T to Verizon – it will be the battle for market share between Android, Apple and RIM in the Verizon customer base.

Given the announcement is still pending, Telwares believes:

- Verizon will announce the iPhone with an unlimited data plan, attempting to lure dissatisfied AT&T users across carrier lines and attracting smart phone upgrades within their installed base of subscribers.

- Verizon will have 7 to 9 million iPhones in its subscriber base by the end of 2011.

- Verizon will not experience the network issues that AT&T has endured; all service providers are now beyond the shock factor of data usage from smart phones, and Verizon has the advantage of the lessons learned from AT&T’s deployment.

- AT&T’s quarterly churn numbers will be moderately impacted, but will not drastically impact stock price during 2011.

Telwares CEO Charlotte Yates on spectrum and network optimization

From Bill Snyder’s column:

Wireless broadband woes are harder to fix than you might realize

AT&T has taken a huge amount of heat for its subpar 3G performance. Much of the criticism is well deserved, but there’s a larger, more disturbing truth: We’re running out of wireless spectrum. What’s more, networks designed to handle big downloads can’t cope with the peer-to-peer traffic generated by games and smartphones.

“No one was prepared for the effects of [Apple's] iPhone,” says Charlotte Yates, CEO of Telwares, a telecom and IT infrastructure consultancy. Sure. You’ve heard that before, but Yates explains that it’s not just the amount of traffic, as many of us suppose, but the type of traffic, that poses difficulties.

Consider your iPhone, Droid, Pre, or similar device. Much of the time when it’s in your pocket or purse, it’s actually pinging the network to see if you have e-mails, stock updates, or news alerts. Most of those chunks of information are rather small, but when added to the constant polling of the network, they consume lots of resources. Similarly, multiplayer games, Twitter, and social networking sites used on wireless networks are constantly refreshing and pulling down data on what individuals are doing and broadcasting it.

There’s also a less-than-obvious problem caused by big downloads of things like HD video. Networks, says Yates, are designed for two-way communication. In effect, the network is waiting for traffic to come up the pipe and consuming a certain amount of resources as those channels are idle. Thus, massive downloads actually cause both downstream and upstream problems — stress the networks weren’t designed to handle.

“Carriers handle network management differently — even if one carrier is optimized, another may not be. And because networks are connected, the weakest link sets the pace,” Yates says.

Spectrum, like water, is a resource you don’t think much about — until it runs out. And that’s a major challenge facing carriers, consumers, and the government.

“I believe that that the biggest threat to the future of mobile in America is the looming spectrum crisis,” said FCC chairman Julius Genachowski at the CTIA conference in October. He predicted that total wireless consumption could grow from 6 petabytes a month last year to 400 petabytes by 2013. (A petabyte is 1,024 terabytes.)

“So we must ask: What happens when every mobile user has an iPhone, a Palm Pre, a BlackBerry Tour, or whatever the next device is? What happens when we quadruple the number of subscribers with mobile broadband on their laptops or netbooks?” Genachowski said.

Right now, there’s approximately 834MHz of total spectrum available (including 50MHz about to be added), but the FCC believes that most of it — 760MHz to 840MHz — will be needed by 2010, leaving little for future demand. The commission may well expand that, but there will be competition beyond the wireless industry to use it, particularly from the military and emerging entrants to the marketplace, says Yates.

A December 2009 report from Morgan Stanley shows that peak wireless data usage in the United States routinely exceeds 75 percent of capacity, which is a danger sign for carriers, as the figure below shows. Much of that is due to iPhone users, who use the Internet much, much more than other smartphone users (though Android users are beginning to take significant advantage of the Web as well). The financial firm expects AT&T and other carriers to have boosted capacity significantly by 2012 at its cell sites, where much of the bottlenecks occur that frustrate users, thus reducing peak demand to 60 to 70 percent of capacity.

The wireless industry has wrestled with capacity challenges in the past. In the 1990s, AT&T added Digital One Rate plans to its offering. This “one rate” deal was an overwhelming commercial success, adding hundreds of thousands of subscribers — but also overwhelmed a network that wasn’t ready or optimized to receive them in such short order, recalls Michael Voellinger, executive vice president of Telwares.

AT&T, Verizon, and the other major carriers have plenty of responsibility for the limpid 3G service, but if they are to avoid another, much broader meltdown, a lot of players — including the FCC — had better start moving to solve network management issues and the shortage of spectrum. Consumers may even have to moderate their desire for the most bandwidth-intensive applications.

Telwares in the media: smartphones

Telwares was quoted today in InfoWorld on the topic of corporate ownership of smartphones. You can access the full article by visiting:

http://www.infoworld.com/d/mobilize/who-should-own-your-smartphones-173

Behind the curtain: Corporate versus individual liability in wireless

The topic of who owns and who pays for an employee’s wireless services is once again heating up, and has been for the past year. It’s no coincidence – from a financial perspective, times are tough and companies need cost out opportunities. On the technology side, smart devices  continue to penetrate the enterprise at ever-increasing rates…sometimes even alarming rates. This is a recipe for direct conflict and the issue is multifaceted.

Many organizations think moving to a stipend or pure T&E model will solve the cost issue in wireless. Some companies are questioning the concept of subsidizing wireless at all. The real truth is that no single model will solve the financial requirement for cost out, and certainly won’t solve the technical issues. It’s all about having a relevant mix of liability models (think bell curve that spans the wireless population) that drives the optimal impact. Basically, the “IL versus CL” debate is based in financial logic today, but will quickly evolve into the relevant discussion of risk tolerance, security, culture, and ultimately competitive advantage. Here’s why:

•It’s not about the simple MRC versus a stipend: the TCO and IT impacts shape the story and drastically impact end results (you still need to support connectivity, which then spins into security, compliance and support)

•A stabilized (or at least consistent) environment to launch back office enablement or enterprise tools becomes front and center in the argument to own the assets – not for finance, but for consistency and foundation and speed of deployment

•There is no such thing as a liability model without layers of exceptions including tiered stipends (what happens if I spike?), T&E (I exceeded my cap, now what?), or a pure consumer model (you don’t reimburse, I don’t answer the phone)

•The ultimate mix of liability models depends almost entirely on the subtleties of IT capabilities, business requirements, financial conditions and organizational culture

•Almost every organization embraces multiple liability models, whether they are formally acknowledged or not

As financial conditions tighten, cost out often leads to demand destruction – the outright removal of devices from the subsidized population of employees. Cost out can also mean the removal of certain services, the potential downgrade of support, or refinement of eligibility or entitlement policies. The math might work in the short term, but the business effects can last long after the short term savings gain. The point here is to vet out eligibility early, and be smart about what is fundamentally impacted by making changes. It can be financially and culturally painful if not executed carefully.

The bottom line, corporate liability is a consistent best practice for most organizations. What’s changing is the need to be specific and savvy about how to apply it, and how to bolster it with smart options.

Look for more thoughts from Telwares on this topic next week in a media feature, link to be posted here Monday.

Something free – Mobility Webinar

Mobile Innovation: Fueling the Competitive Enterprise for 2009

Thursday, March 12, 2009 2:00 PM – 3:00 PM EDT

REGISTER HERE: https://www1.gotomeeting.com/register/839947960

Join Michael Voellinger, EVP and Analyst at Telwares, and Mark Foege, VP of Product Management and Marketing at Perlego for a discussion on how organizations can embrace and leverage mobile technology as a true enterprise asset and competitive enabler.

* Recommendations on simplifying the approach and practice of your mobile supply chain
* Identification of the hidden costs of mobile initiatives
* Discovery of the real ROI of moving beyond basic mobility management
* Identification of the real value of data assurance in the enterprise mobile landscape
* Tips on extending your IT policies to the mobile edge of the network