“All but death can be adjusted” – Does RIM have the desire to win?

Emily Dickinson eloquently portrayed how dynasties can be repaired – and the only thing exempt from change is ultimate demise. For many years, RIM was the undisputed leader in mobile email and messaging. They set the industry standard and created the performance benchmark, and helped propel mobility into the mainstream of business. Unfortunately, recent media almost exclusively focuses on their diminishing market share, bad management, poor tablet strategy, and how the Blackberry brand is entangled in a downward spiral of obsolescence.

These observations have strong elements of truth – RIM is being taken to task by hungry, agile competitors with a clear vision for the global mobile ecosystem. It needs to reengineer its brand, product portfolio and go to market strategy in its entirety to compete. Nothing can be left “as is”, since this is honestly how they arrived in their current state.

As early as 2006, before the formal launch of the iPhone, RIM had already buried its head in the sands of arrogant market leadership. Whimsical quotes about the challenges of typing on a glass screen, security issues, carrier-friendly efficiencies and other “obstacles” for iPhone adoption were launched from the RIM marketing machine. When the iPhone did launch, it garnered nearly 20% domestic market share in less than six months. Soon after, Apple was selling more iPhones monthly than RIM moved in an entire quarter. Alarms were sounding. Apple had, for all intents and purposes, completely reset expectations of the smartphone experience. RIM missed this crucial point, focusing instead on historical demand patterns and accomplishments.

Instead of taking tangible action to address new competition, the market was treated to more quotes on elusive strategies yielding little result.

“I wouldn’t underestimate the amount of research we’ve done on user interfaces and technologies. We are not afraid to reinvent ourselves.”

We’re still waiting for reinvention, and it may be too late. Apple and Google are nimble, cash-rich and willing to innovate rapidly. They are well positioned in adjacent markets to fully exploit opportunities far beyond handsets and the OS. Paramount to their success, they understand clearly the role of the product, consumers, developers, and the larger revenue-generating ecosystem surrounding their platforms. Even Microsoft is posturing for a strong re-entry into the marketplace and is slowly building credibility through enhancements to Windows Mobile. It’s next release due this fall, Mango, integrates multiple points in the Microsoft product portfolio – and represents a giant leap forward in Microsoft’s global approach.

RIM needs to follow a similar path.

The road to recovery starts with changes at the top, most notably the RIM leaders we see publicly every day portraying a reality that is well removed from the truth. No one can dispute Mike Lazaridis and Jim Basille played key roles in building RIM to fantastic levels of success. Unfortunately, given at least four years of public miscues and product challenges, it is time for change. Rebuilding the brand and creating a new organization will require fresh leadership, signaling acknowledgement of the issues and potentially slowing the downward pressure on RIM’s stock.

RIM also needs to quickly hit a “product home run”, developing a handset or tablet that creates genuine emotion and loyalty. The PlayBook is not that device. Historically, RIM has been part of the all star team in terms of game-changing handsets that push the industry forward: the StarTac, BlackBerry 957, RAZR, Nokia 9000, the “Blueberry”, iPhone and others. All of these products were surrounded by stellar marketing that created fanatical consumers. More important, they were products that worked well, delivered as promised, and were surrounded by organizations with vision and focus.

Ironically, the biggest opportunity for RIM to recover may lie in the Blackberry suite of software and infrastructure services. Blackberry Enterprise Server, MVS, Pushcast, hosted infrastructure and even Blackberry messenger represent a massive installed base of touch points to be monetized. This could be the saving grace, if they aggressively pursue interoperability and invest in their developer community with strong corporate commitment. Enterprises are ready to open the door to app stores and secure consumerization, unified communications is poised for critical mass, and messaging continues to grow at hockey-stick trajectories. RIM is uniquely positioned to be disruptive, and it’s time to take the restraints off the employees who see the opportunity and can make it happen.

Time is running short for course-correction, as the organization grows more attractive every day for acquisition. It would be healthy for the marketplace, and beneficial to consumers, to have a strong RIM competing for business globally. It would also be good to see a world-class organization regain its culture of innovation and succeed.

Update: Verizon iPhone launch

As an update to our previous post, Verizon introduced the iPhone Tuesday and provided select details about the launch including:

- Pricing: 16GB for $199, 32GB for $299
- Data plan: no formal announcement, but expected to be unlimited data for roughly $30-$40
- Availability: Feb 3 for existing subscribers, Feb 10 for new subscribers

Most commentary surrounding the launch in centered on the network differentiation (no simultaneous voice and data on Verizon), and the lack of LTE support. Telwares maintains its earlier key observations:

- AT&T’s quarterly churn numbers could jump significantly if there’s a mass exodus, 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 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.
- 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.
- Verizon will have 7 to 9 million iPhones in its subscriber base by the end of 2011.
- 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.

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.

Smart Phone Sales Projections Raised

Mobile phone vendors are projected to ship 55.4% more smart phones this year than they did in 2009, according to the International Data Corporation (IDC) Worldwide Quarterly Mobile Phone Tracker.

IDC raised its projection 10% from its previous forecast after several new models were released recently, including the BlackBerry Torch, EVO 4G and iPhone 4, the research firm explains in a press release. Device vendors are now expected to ship 269.6 million smart phones this year, up from the 173.5 million sold in 2009.

While a majority of those devices will be sold to consumers, enterprise IT departments will continue to see increases in the number of requests they get to support individually purchased smart phones.

Android and iOS devices have stolen market share from traditional players like RIM and Microsoft, and Android is on track to be the fastest-growing operating system over the next five years, IDC’s study reveals.

Android will cut into Symbian’s share, but expect Symbian to retain its leadership in smart phone sales, IDC says. Windows Mobile is projected to regain lost share and BlackBerry devices will retain their current level of popularity, while iOS phones will decline gradually, the study finds.

The smart phone market will remain fragmented, supporting as many as five operating systems during the next five years.

The booming yet fractured smart phone market makes it even more critical that enterprises understand, evaluate and take action on their mobility strategies including device procurement, policies, liability models and expense management, Telwares’ mobility experts add.

Enterprises should also be actively planning on the integration of mobile end points into their overall network strategy. More devices are hitting the market every day that can support and satisfy end-user computing requirements, and this will have a drastic impact on planning, sourcing, implementing and managing next-gen networks.

NTP Sues Apple, Google, HTC, LG, Microsoft and Motorola

The company that sued BlackBerry maker RIM for patent violation and incited enterprise panic in 2005 is at it again.

Richmond, Va.-based NTP Inc. filed suit July 8 against Apple Inc., Google Inc., HTC Corp., LG Electronics Inc., Microsoft Corporation and Motorola Inc. in federal court. NTP alleges the six companies infringed on eight of its wireless e-mail delivery patents and wants the companies to pay licensing fees for using the technology.

There’s precedent from NTP’s suit against RIM: The BlackBerry maker was found to have willfully infringed NTP’s patents and the verdict was affirmed on appeal. RIM paid NTP $612.5 million to settle its patent infringement lawsuit in March 2006, which included a perpetual, fully paid license going forward.

If the court finds NTP’s new claims to be valid, the six manufacturers and developers named in the suit must pay the fees or cease use of the technology.

Telwares believes settlements and fees are the most likely outcome. As in the RIM case, NTP has little interest in stifling smart phone sales or use; its revenue will come from licensing fees.

So enterprises shouldn’t worry about losing their iPhones, Android handsets or Windows Mobile phones. The real question is whether licensing fees will increase device and service costs for enterprises, according to Telwares experts.

NTP is a privately held intellectual property firm and claims its founder, the late Thomas Campana Jr., invented wireless e-mail in 1990. NTP already has licensing agreements with RIM, Good Technology Inc., Nokia Inc. and Visto Corporation.

“Use of NTP’s intellectual property without a license is just plain unfair to NTP and its licensees,” says Donald Stout, NTP’s cofounder, in the company’s press release. “Unfortunately, litigation is our only means of ensuring the inventor of the fundamental technology on which wireless e-mail is based, Tom Campana, and NTP shareholders are recognized, and are fairly and reasonably compensated for their innovative work and investment. We took the necessary action to protect our intellectual property.”

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.

Line2 for iPhone

There’s been a tremendous amount of media coverage in the past few weeks concerning Line2 for the iPhone, a VOIP application that creates a second number on your iPhone and leverages both WiFi and 3G to make calls. This is pretty remarkable on a few fronts – first and foremost, it’s in the app store. If you’ve followed the drama around VOIP calls and iPhone, this is a big deal. Second, it actually works well. Voice quality, ease of setup and intuitive use are all present so far (a whopping 12 hours into the user experience).

We will post observations here on Monday after a weekend of testing. If you’re curious about the application, here’s a few links to get you started:

Line 2 website

New York Times Technology Section article

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.