Research

The US smartphone penetration continues to accelerate.

ComScore has been reporting the estimated absolute number of  smartphone users and the last month saw a significant increase of 1.58% in penetration. About 30% of the 234 million US cellphone users (above age of 13) use smartphones. That number was 21% in May of last year.

 

That means that over 20 million people stopped using voice-only or feature phones in the last 10 months. Equivalent to a rate of 2 million per month.

However, the rate of switching has not been steady. The following chart shows the number of switchers per week. In February it's been about 900,000 per week and it's quite possible that in March we've seen 1 million per week.

To bring the point home, I have put together a countdown timer which will be updated monthly with my estimate of the date when 50% of US cell phone subscribers will be using smartphones. (There is a link to the timer at the top right of every page on this blog).

I pinned that 50% figure because by then I hope people will stop calling them smartphones and begin calling them phones.

It's a great misfortune that we don't have data about the future. It makes it hard to tell what's going to happen.

It's even harder because although sometimes we have data about the past, the past and the future don't always look the same.

Clearly that's what makes predictions about mobile computing platforms tricky. Nothing that has happened recently had been predicted by those who had tried to do so in the past.

The difficulty is compounded if trying to forecast in the long term like 4 or 5 years ahead. The tendency is to extrapolate what has been happening to date.

It's tempting to project whatever trends one sees into the future. The problem is that some trends are more visible than others.

For example, let's look at the following three forecasts (IDC, ABI Research and Ovum) projecting platforms for 2015 and 2016. Although there are some differences in magnitude of the entire market, there is a strong similarity between the forecasts and with the current trends[1].

However, when comparing what was happening in 2007 with the market three years later[2] it's clear that most of the change was from the entry of iOS and Android (and a large expansion in RIM as well.)

So how are we to be sure that there won't be another entrant between now and 2016? I presume the argument is that the market is "too big" for a newcomer to make an impact. This argument is equivalent to saying that some organizations are "too big to fail". That might has a right of its own.

However, the evidence has shown that no Goliath has ever stood for long against a suitably equipped David, especially in technology.

Given this knowledge, the pattern or trend that I see more than any other is that the future will be dramatically different than the past. This invalidates any forecast which assumes otherwise, including all those above.

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Notes:

1. The primary difference seems to be with how to treat Symbian. Some forecasters are replacing it with Windows Phone while others are mixing in a bit of "other" and Bada into what used to be Nokia's share.
2. It's quite pointless to try to compare 2005 with 2010 as on this chart's scale (bounded by 1 billion units/yr), the size of the market and the size of each participant's share are indiscernible. As pointed out earlier, predictions from that era focused on PDA market shares and there was no agreed-upon definition of mobile computing competitors.

When I began the series of posts on Google vs. Android I put forward some questions about the business logic of Google becoming an operating system supplier, especially as that role can be seen as being counter-productive to Google's strategy.

I noted three strategy costs associated with a zero priced systems software bundle.

1. A opportunity cost with other platform vendors, namely Apple who might retaliate against Google's core business.
2. Versions of the software being usurped and modified to provide distribution to Google's competitors.
3. Damage to Google's brand and positioning and negotiating power in relation with other members of their value chain.

More fundamentally, Google-as-systems-software is asymmetric to Google-as-cloud-software and contradicts the value proposition that Google enables value in the web not in accessing the web. Android appears to be a nod in the direction that systems software still matters.

In my numerous posts on the need for integrated development in the era of mobile computing, I also criticized any device vendor that chose to rely on a software stack from an external supplier as foolish. I claimed that they would end up creating uncompetitive products. I thus labeled Google's pursuit of them as ultimately futile.

More than a year has passed since I began this critique of Android. It seemed quixotic as Android volumes exploded and a mad rush to the platform spun it into becoming the biggest mobile platform by units.

However those costs did not go away. As the platform grew, they compounded. At first I wondered whether Google management was seriously considering the cost or whether it was giddy with the semblance of success.

Well, finally, it seems that Google management has begun to acknowledge that these costs exist. In a recent Bloomberg story there are many claims that Google is reversing many of the operating principles of Android. Namely:

• Restrictions on who gets what version of software when
• Restrictions on what changes can be made to the software
• Requirements for approval for source code changes

These changes, if feasible, will affect the ecosystem dramatically. It will also reduce the second type of cost associated with the platform (the cost of enabling competitors.)

Good news for Google then.

There are still the other problems (disconnect from business model, loss of goodwill, damage to negotiating power). But there is actually a more sinister new problem brought about with the new crackdown: Android will no longer be disruptive.

I also wrote a few posts (e.g. What has Android done for Apple?) where I claimed that Android has the power to accelerate smartphone adoption, especially in the "Wild East." The power of Android was with the little vendors--the ZTE and Huaweis of the world. They could finally make smartphones cheaply--almost as cheaply as voice phones--and not have to negotiate licenses and pay for software IP.

It would be these smaller "unbranded" vendors that would really disrupt and, with them, Android would become ubiquitous for the billions of mobile broadband non-consumers.

However, with the new policies, it's much harder for this to happen. Smaller vendors will look at the new hoops they have to jump through and probably say "no thanks." In a beauty contest, they don't look so good next to the big brands.

They may turn to homebrewed versions of Linux or new forked Androids. This redefinition of openness will essentially remove Google from the disruptive trajectory of mobile computing.

So we're back to the old question: Google vs. Android, who wins? If Android still has hidden costs to Google and, with its sheep's clothing cast aside, no longer offers significant distribution to the low end then how will Google benefit? The answer that there will be additional ad revenue does not cut it. That revenue would have come from placement deals with other incumbent platforms (just like Google manages to compete on PCs without having to provide its own OS).

As Google figures this out, its licensees are at the mercy of the ensuing decision. Good luck with that.

 

Two years ago:

With new netbooks, laptops, desktops, and, yes, a smartphone, Acer CEO Gianfranco Lanci explains why he expects to soon overtake No. 2 PC maker Dell

via Acer Boss Lanci Takes Aim at Dell and HP - BusinessWeek.

Today Acer CEO and President Gianfranco Lanci resigned with immediate effect. Acer is in trouble. You can read more on Acer's current problems in the wake of the downward revision of its sales targets for two quarters here: Acer Should Overhaul Its Operation: Stan Shih | CENS.com - The Taiwan Economic News

In a nutshell, whereas Acer under Lanci took aim at Dell and HP, it seems that Apple took aim at Acer. And whereas Lanci missed, Apple's aim was true.

What is interesting here is that Acer had a very disruptive approach. They used the low end "netbook" concept to take share from incumbents motivated to move up-market.

But what went wrong? Part of the answer is that "low end" does not just mean "cheap". Low end disruption is about also offering simplicity and performance along a new dimension or trajectory of improvement.

Mobile computing could not be implemented as a low-end strategy because the modules available to portable computing could not be used to make it expand into new contexts of consumption. Windows and keyboards and all the input methods associated with portables could not be adapted to mobility. You could not use a netbook in places or at times when you did not use any other laptop.

In addition the business model was not a good match. Low margins could not support development or new integration that could improve that which was not good enough. Acer did not have the means to tackle the problems of not-good-enough mobile computing. They did not build software and low margins meant that they could not even try to build software.

Competitors also were motivated to respond. HP and Dell built their own netbooks which, arguably, were just as good (or, perhaps more accurately, just as bad) as Acer's. But more problematic was the fact that regular notebook prices dropped to netbook levels and the category came to mean "cheap" not "convenient".

Finally, Acer's strategy did not have the time horizon necessary for true disruption. It takes many years to polish a product and nurture it up the trajectory. Acer was too impatient for growth and not patient at all for profit.

Contrast this with Apple's tablet strategy:

• It dealt with complexity of computing by removing it. This was not easy as simplification required a new platform altogether--something that portable computers could not benefit from.
• It priced low but held on to margins because removal of complexity also reduced cost
• The margins allow it to rapidly iterate on integrated development and improve the product
• Competitors initially were not motivated to respond. They did not have the tools at hand to respond: no integrated operating system for PC vendors, no distribution for phone vendors.
• Apple is also patient enough to wait for several product cycles. Even though demand is astronomical, the iPad still has a long way to go to become a new computing standard. Time is on Apple's side.

Apple is effectively disrupting the PC with asymmetry. It contrasts with Acer's reliance on a sustaining, symmetric approach. The market was showing clear signs of over-service, declining margins, in-absorbable features and performance and complexity.

Calling the winner in 2009 may have been tough given no iPad was visible, but knowing Apple's resources, processes and motivations should have guided observers to the right answer.

IDC released a new forecast for the worldwide smartphone market which included a long range forecast--all the way to 2015.

Most people fixated on the share data in 2015. Not hard to do since whoever wrote the press release highlighted this flashy headline. Putting aside the three significant digits of accuracy on every data point and the hard to swallow declaration that a painfully underperforming (in more ways than one) Windows Phone will overtake iOS and BlackBerry to become the second largest platform by units/year in 2015, there is much more to the report.

Using only the public data from the press release we can put together a pretty good picture of the transition being forecast and determine some of the (unstated) assumptions being made. It's these assumptions about the underlying market dynamics which illuminate far more than the falsely precise share data.

The following chart shows both historic platform performance (which is detailed in the Asymco Interactive data sets on a quarterly basis) and the forecast based on the given compound growth rate published.[1]

I see three main assumptions being made:

1. Nokia (or more precisely Symbian) share will be swapped for Windows Phone. The transition period 2011 to 2015 shows approximately 150 million Symbian devices will be sold which is the stated goal for Nokia. IDC is making an assumption that the hardware vendors will roughly maintain their respective shares irrespective of platform dynamics and that Nokia will switch its share of users from one platform to another in a predictable way.
2. iOS and BlackBerry will maintain share. Presumably this is also driven by hardware channel dynamics and relationships with carriers.
3. Android will grow share slightly but the vast bulk of growth will come from market growth.
4. Market growth is strong but undramatic.

Overall this is not a controversial set of assumptions.

Except perhaps that it assumes that the basis of competition in the market is unchanging. Of course it's well understood that the basis has shifted during the tumultuous 2007 to 2010 and forecasts made before the iPhone was launched sound absurd today.

But IDC says that the unpleasantness won't happen again. From listening to the conversations going on today on this blog and elsewhere, their assumption that things will not change (again) is fairly deeply ingrained, indeed conventional wisdom. In that sense IDC is not taking any liberties with the future. The projections of current realities onto the future leads to this type of forecast and status quo defenders should be satisfied, if not rejoice.[2]

However, there are a few more consequences of even this uncontroversial forecast which should make keen observers sit up and notice.

If we look at more than the before and after snapshots and comfortable pie-splitting sound-bites there are some profound seismic things being implied.

For example the entire market will be nearly 1 billion smartphones a year (in four years!). Even more startling, considering the "race to a billion" discussion we've been having, some of the platforms seem to be reaching that threshold rather quickly. The following chart shows the cumulative unit sales for the candidate platforms on a log scale:

 

Android is considered likely to break one billion units in five years post-launch. Windows Phone will sell nearly half a billion units and Blackberry will be well over that number.

I tallied the cumulative platform unit totals below:

No less than four platforms will have sold half-billion units by 2015. The suggestion that Android will "win" by having the most units sold seems as hollow as the suggestion that Symbian "won" by having the most users in 2008. Not so much because it will go on to lose them, but because there were plenty of viable alternatives for users to buy and developers to build for. Half a billion users cannot be easily ignored.

So even "safe" assumptions can lead to astonishing results in this market. Namely, IDC is saying that the smartphone market will not have any platform losers.

There is one more thing the report implies. If you look at the ranking of leading platforms (by units/year) in 2008,  2015 and, with a little extrapolation, 2016/2017 you get:

Rank in 2008		Rank in 2015	Rank in 2016/2017
Symbian		Android	Android
Other		iOS	Windows Mobile
RIM		RIM	iOS
Windows Mobile		Windows Mobile	RIM
iOS		Symbian	Other
Android		Other	Symbian

 

In other words, there is a complete reversal being projected. An almost perfect flip: those on top end up at the bottom and those on the bottom end up on top. That's about as controversial as it gets. Pretty impressive for a set of safe assumptions.

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Notes:

1. You should ignore the shape of the curve between 2011 and 2015 as it assumes the CAGR is applied to every year. Although the press release shows a CAGR, the actual report may include various fluctuation in yearly growth. The starting point of 2011 and the end result in 2015 however should be the same.
2. If, on the other hand, you believe that exponential growth, rapid gains in communications speed, new breakthroughs in interaction with devices, and entrants winning with new business models are causes for a disruption, then perhaps extrapolation may not be the way to forecast this market.

The World-Wide Developer Conference is an event for developers. It is not a trade show and it is not a consumer show or an enterprise show for salespeople. Except for the keynote, all events are subject to Non-disclosure Agreements so it's not even an event whose proceedings can be discussed openly.

It's also expensive. Registration is at least $1,500. Attendants are there to learn and ask detailed questions about development. It's not for deal making. People not familiar with development would not be well served by the event. Registrations are therefore somewhat limited to about 5000.

After the iPhone SDK was launched, the WWDC took on a new dimension. It became a mobile development event. As a result, 2008 was the first year when WWDC sold out. Attendance tripled over the Mac-only event the previous year.

Every year since, not only has WWDC sold out but it has sold out quicker every time. The following chart shows the days it took to sell out WWDC. I also added Google I/O data for comparison.

In the era of the iPhone, the limited resource of attendant seats has always been exhausted at accelerated rates: from 60 days in 2008 to 0.5 days in 2011. A similar pattern emerged for the Android event.

What should be noted is that these events are focused on post-PC development[1][2]. Clearly the increased interest among developers is for the mobile side of the business.

Developers certainly seem to sense the way the wind is blowing. They are, as humans, prone to over-confidence but they are also often accused of being hard to please. The most common lament among new platform builders is "How do we attract developers?"  The platforms showcased here had no trouble attracting developers in the tens of thousands three years after being launched.

The Post-PC era is evident in all kinds of data. This set (developer attendance to mobile development) is particularly stark. It's a proxy for investment and IT interest. There is a non-linear nature to this growth and history shows that non-linearity leads to unpredictable or unforeseeable change.

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Notes:

1. WWDC still has Mac OS X tracks but that track was there pre-2008 and did not sell out the event.
2. Microsoft hosts several developer events (PDC, MIX, and Tech·Ed) some of which also sell out, but they have a far wider focus.

Apple's second fiscal quarter has just ended. Time for analysts to put forward their predictions for the quarter's report (due in about 3 weeks.) If history is a guide, the estimates will range quite widely and accuracy will be determined mostly by the ability of an analyst to predict iOS device sales (and iPhone most of all).

How hard can it be?

It depends on what you choose to prioritize as the proxy for sales. In competitive markets there is usually a constraint on demand and rivalry among suppliers. If that's your assumption you might want to use samples from the sales channel as a proxy. That means sampling distribution channels and sales through to end users at retail. You might even watch competitors and index them to each other using historic market shares.

In markets where demand outstrips supply, the best method would be to determine the constraints to production and measure those.

In Apple's case we know from company statements that Apple faces more demand than it can supply. That makes things easier for the amateur because she can just figure out production. In other words, the logical way to forecast Apple's iPhone sales is to guess how many they can make.

That is not trivial since production data is not public. However, we have historic sales data. We also can make assumptions about how much inventory is carried (some data is actually available here as well.)

Combining these public data sets we can build up a model of production ramps and look for patterns of growth.

So here are the patterns of sales for the four versions of iPhone sold to date with some production ramps overlaid. The monthly sales are approximations based on actual quarterly sales divided over the months according to the number of days available.

The assumptions are:

1. Inventory during any one month has to be greater than zero.
2. Inventory must be minimized. Ideally it should not exceed 2 million units and preferably should be around 1 million units at any given time.
3. There is a limited amount of overlap between production of various generations. I.e. once a new version is launched, the older product should end production. Continuing sales of older model should be made available from inventory.

The following chart shows the ramps for the various versions of iPhone that satisfy these assumptions and are shown relative to the same time frame (each line shows the number of units produced per month for each generation of iPhone):

I need to stress that this is just my estimate. It's an approximation and not reality. What it does is give reasonably accurate predictions for units sold.

What I've always assumed is that each new version of the iPhone sells twice as many units as the last. This is roughly translated into: each ramp is roughly double the previous ramp (at least on average). The data bears this out. Apple has been very considerate in keeping products on similar cycle times so that we can see this pattern emerge.

Once you build these models, forecasts are not that hard to make:

• The current generation will probably sell around 60 to 65 million units.
• The product will still sell for at least one more quarter (CQ2, FQ3)
• We know how many have been sold so far, so we can be pretty sure what will happen in the quarter just ended and the one just starting.
• Looking at the pattern between generations, we can guess what the iPhone 5 curve will look like and build up the units forecast by month and quarter.

You can sanity-check the forecast by looking at overall market shares for Apple and overall market growth. If share moves too far up or down it might makes sense to revisit the data.

Yesterday RIM reported their quarterly earnings. The results were mixed to slightly negative and the shares were down 10% in after-hours trading.

I'll work through the smartphone market data at a later time but for now what I want to focus on is RIM's strategy which really means understanding RIM's intentions or their approach to the market. For that we have to go straight to the source: what management actually says. Trouble is, management often speaks in a jargon that is unfamiliar to people (sometimes unfamiliar to anyone outside the company).

Strategy analysis involves translation. So here follows the interpretation of Jim Balsillie's remarks during the conference call (transcript sourced from Businessinsider.com).

What Balsillie Said	My interpretation
First of all, what we announced is Gingerbread. This is not Honeycomb. I don't know what the number of Honeycomb apps is, but it's not very many. Whereas Gingerbread they've got lots of them.	RIM will support Android apps in the PlayBook tablet. As there is not one Android, I need to clarify that RIM will not support Android tablet (Honeycomb) apps but Android phone (Gingerbread) apps. So RIM's tablet will support Android phone apps even though our tablet does not actually have a phone in it, but requires tethering to a BlackBerry for cellular data.
You've got the volume of the handset apps, so if you're looking for the tonnage of apps, or some kind of long tail stuff, you've got it.	This support means there will be many apps including apps that are not very popular. We don't like supporting unpopular apps. We like a few good quality apps but this approach allows us to offer all kinds of apps.
At the end of the day, people are going to want performance.	However, many apps will not run smoothly.
You're just not going to get things like gaming and multimedia, you're not going to get the speed going through a VM interface. If you want content, or Flash type stuff, or you're looking at AIR-type, evolving web-type assets, that's what you're going to do.	Games and graphics will not run well through emulation. For processor intensive experiences we will have native execution options or browser apps.
There's no compromise here. You've got the tonnage of apps. And you've got the performance. Do I think the tonnage is overplayed? Yes.	By supporting emulation of Android apps we can offer a large catalog of so-so apps while having a small portfolio of high quality native apps.
But if you think it's about having a couple hundred thousand apps, there you go	For people who value large selections, they can go to one store.
Do we believe it's about super high performance? Yes	But for those people who value quality, they can come to our store.
I'll just offer that observation that today broadly in the world without any specific comment on us or our competitors, there are multiple ecosystem patterns that need to be considered	Beside emulation and native we also think there are many other ways to deliver applications.
Do we believe it's about full web fidelity? Yes.	For example, Flash.
These are concepts that were really relegated as not technically possible, which we're doing here. This is a no compromise environment.	Because of Moore's law, Flash is becoming viable on a mobile device.
If you want to work on Android, great. Do we think people will want to migrate web assets? Yes	Then there are browser apps.
Do we think they're going to want super high performance native assets with the SDK? Absolutely	We will have our own native SDK.
You think they're going to want to use their Flash based stuff for an offline Flash/AIR type environment? Yes	And support Flash.
I'm just not interested in these sort of religious application tonnage issues.  I really think we put that issue to bed.	We have a new platform but catalog sizes can no longer be used against us.
And if you think the whole world's going to want to develop for Gingerbread, fine. Do I think that's going to happen? Then why is there a different environment for a tablet? And you know about the performance issues and you know about the app volume issues, cause it's tough. And that's why QNX matters	Google's ecosystem is fragmented, Android apps are not able to rely on competitive hardware and there is too much competition. That's why developers should target QNX (which is unfragmented, built on fast hardware and there are few apps on it).
Is this stuff going to go more in the browser and HTML 5 and more native? These are going to be strong trends. But if you want these app players for different VMs -- and don't forget we have 25,000 BlackBerry 6 apps	Browser apps will increase in value and we also have legacy BlackBerry apps.
So, at the end of the day, we believe this is going to be about performance. It's going to be about enterprise greatness.	But we believe in a future with native applications running on QNX.
Things like multi-threaded capability, symmetric multiprocessing. We believe it's about an uncompromised web. We believe it's about enterprise security. True multitasking, not with suspension -- and that matters because you're going to want to run these things in the background.	Because QNX is a robust operating system with PC-like performance. It also supports a good browser.
But I'm out of the religious war on tonnage, which I'm delighted.	However, before QNX takes off, we will provide access to catalogs of apps which are built for other platforms.

Apple is having difficulty meeting demand for the iPhone and the iPad. It is growing both businesses at more than 100% and they make up about 65% of revenues, and 71% of profits. The Mac business is also growing at 2x to 3x the PC industry.

Being supply constrained makes it therefore a great challenge to forecast future growth for the company. Supply issues and ramp rates are needful of an operational expertise few possess outside of the industry. But many take up this challenge, myself included. We put up our numbers every quarter and get scrutinized and challenged for our failures.

So it's always exciting to see how others are looking at the big picture. Sadly, with the growth data being what it is, there seems to be a great deal of pessimism around the company's prospects. The P/E ratio has remained at despondent levels for over two years, barely tracking with the P/E of the S&P 500 and not reflecting the company's historic or current growth.

The logical explanation is that pricing reflects a consensus that growth will fall off a cliff. Indeed this can be confirmed. Bloomberg surveyed analysts and they say:

Apple’s sales may climb 54 percent to $100.3 billion this fiscal year, which ends in September, the average prediction of analysts surveyed by Bloomberg. Growth may slow to 18 percent the following year.

Fifty percent growth this year and 18 percent next year is indeed catastrophic. Consider the company's recent history as shown in the following chart:

The company has been growing earnings around 70% a year since 2007 at least. The exception being 2009 when in the middle of the worst recession for a century the growth dropped to 34%.

I took the liberty of adding the estimates cited above to the chart (in orange) while putting forward my estimates for the same time frame.

I am, I believe, conservative in my estimates (for example, my estimates do not take into account any new product categories Apple may launch). But the prospect of 18% growth for the fiscal year beginning this October is quite hard to justify knowing what I know about the markets Apple competes in. As I've amply described in this blog, the mobile computing (aka post-PC) shift is underway and Apple is leading the charge. The prospect of billions of unserved customers beckons and Apple is crushed with demand.

But let's not quibble about billions of desperately underserved consumers. The thing that sticks out from the chart is that analysts are forecasting growth about half of what Apple was able to achieve in 2009--a time when consumer spending practically stopped world-wide and there was talk of another depression.

Either they're in agreement that we're in for something resembling a global plague starting in six months or they believe Apple is singularly positioned to drop the ball.

I would love to hear some these scenarios defended because I see no evidence for either.

AT&T's intent to acquire T-Mobile USA is subject to regulatory approval. Will regulators look at the deal through the lenses of sustaining the traditional industry's profit allocation or through the lenses of device-led disruption?

In theory, regulators are to make a determination on whether the deal will reduce customer choice. But the question is really choice of what? The focus is presumably on the choice of service plans. That's understandable, however coupled to that choice is the choice of devices and even more importantly, the choice of platforms.

The trouble is that US consumers have never had much choice and the US wireless marketplace has been a minefield of incompatibilities and obstacles to market forces.

To begin with, US carriers maintain multiple incompatible network standards. Phones which work on one network do not work on any other. A Sprint phone won't work on AT&T or on Verizon. In fact, some Sprint phones won't work on all of Sprint's network as it still uses the iDen standard legacy from the Nextel acquisition. Even the iPhone which is designed for the AT&T network does not handle T-Mobile's version of 3G. So a consumer cannot make a decision on devices independent of a decision on carrier. This is a phenomenon unique to the US[1].

Secondly, in the US carriers charge for incoming minutes and have shunned pre-paid customers. There was a time when SMS messages were not compatible between networks, which led to the emergence of RIM as the only wireless messaging solution available, though initially not to the average teenager.

Thirdly, because of the multiple incompatible standards, network coverage in the US is still abysmal. Each carrier has had to build out parallel (incompatible) networks at great expense using non-standard equipment over a vast landmass. The result is not only a very expensive network whose capex demands high service fees, but a very poor quality network which is always both spotty and capacity constrained. Operators are therefore keen to lock customers in to post-paid plans to ensure cash flows that drive capital allocations. This is essentially an upmarket flight which does not encourage low end innovation.

These idiosyncrasies are rooted in historical regulatory rulings that led operators to create a uniquely American wireless market. The key regulation was that the US shall have no single wireless standard. In the spirit of laissez-faire this may make sense. But the result has been failure of the common good. This is sharply contrasted with other developed countries which (with notable exceptions) deliver superior service with high efficiency.

The US is so unique that it developed its own "Galapagos syndrome". Few global brands can be bothered to invest in it. Vodafone tried to play in the US with Verizon, but its minority position offered no leverage because Verizon spent the better part of a decade avoiding global networking standards. Now T-Mobile is desperate for an exit after trying to leverage the foothold it paid dearly for and failing to offer devices that capture users' imaginations (because they were railroaded into another incompatibility with 3G). Conversely, no US brands have been able to expand internationally. US operators are non-entities abroad, even in what would be natural expansion territories like Latin America or the Caribbean.  Those markets belong to European investors today.

Given this background, it's very likely that regulators will look at the deal in terms of balancing what is essentially a deeply flawed, cobbled together industry.  Companies can argue that they are rationalizing through consolidation but regulators can argue that "choice" is decreasing. These arguments are mostly moot. The problem is that the US wireless market is balkanized and byzantine.

It's therefore perhaps stunning that the platforms that are currently winning in mobile computing are American: iOS and Android[2]. Note further that none of these winners came from the world of wireless or telecom. These new points of profit condensation in the industry entered from a different industry: computing. But are they now pursuing telecom-compliant strategies? Arguably no. I choose to call them mobile computing and not phone platforms specifically because they will tolerate the cellular regimes as long as they need to, and no longer. Once they will reach the perch of power, the industry will conform to them, not vice versa.

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Notes:

1. Japan has a similar problem but less pronounced.
2. Microsoft is still in the running as is Palm, both American.

 

 

data source: ITU