CTIA Wireless 2008
AT&T Would Like to Remind You that It is Open, Too

On March 18th AT&T highlighted the activities planned for CTIA, including three events targeting the development community (i.e., the Enterprise Developers Summit, Fast Pitch, and Open Call) that will encourage the creation of innovative wireless applications. AT&T also announced a new Web site that helps wireless customers learn about and experience many of the choices available to them, including “bring your own device” options for consumers and businesses.

Analytical Summary

► Current Perspective: Slightly positive on AT&T writing press releases touting its openness, because “open networks” and “open devices” are glorious buzzwords that Verizon Wireless and Google are co-opting, while AT&T has actually had similar structures quietly in place for years. In addition to the press release, AT&T is running developer contests (with a $70K prize and a place on the AT&T Media Mall deck) at CTIA for the third year in a row, and it has created a mostly static Web site highlighting its open network and application policies. However, having an open network has not made a dent in the company’s business so far; AT&T is offering no unique service plans for its BYOD (bring your own device) option, and devices still need to be custom built with AT&T’s unique technology-frequency combination (GSM/HSDPA 850/1900), which is not used by any other major carrier in the world.

► Vendor Importance: Moderate to AT&T, specifically its core wireless business, which will remain oriented to carrier-sourced handsets and contract-related offers for the foreseeable future. However, AT&T cannot let rivals run off with the openness slogan; if anyone makes money on open devices, it might as well be AT&T. AT&T also needs to preempt regulators from defining the terms of what being open means, as that could theoretically impose considerable restrictions on AT&T’s business.

► Market Impact - U.S. Wireless Services: Very low on the wireless services segment, because all the talk about open networks, open devices, and open applications is only relevant to consumers willing to pass up significant subsidies to get them. While Fast Pitch and Open Call (the self-described high-tech “American Idol”) are intended to excite a developer community to bring innovative applications, these applications eventually wind up on the AT&T Media Mall anyway. Still, AT&T has already had an open network (pretty much any quad-band GSM phone will work on the network today), and yet nobody buys these devices and uses them to run the mythical “killer app” that open networks are supposed to engender.

► Market Impact - Mobile Devices: Very low on consumer handsets and smartphones, because all the talk about open networks, open devices and open applications is only relevant to consumers willing to pass up significant subsidies to get them. AT&T has already had an open network – pretty much any quadband GSM phone will work on the network today – and yet nobody buys them and uses them to run the mythical “killer app” that open networks are supposed to engender.

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Hulu Goes Public with Free Premium Online Video from NBC, FOX, and Many Others

On March 12th Hulu.com went live and public to U.S. broadband users. The new online video Web site offers access to premium TV shows and movies in both short clips and full-length format free. Hulu is ad-driven, with integrated video ads and banners played during the streaming of a piece of content. Hulu was founded about a year ago as a joint project of NBC Universal and News Corp., and until now, it was in private beta with limited access granted to test users. Along with the main Web site, Hulu has partnered with several consumer portals including AOL, Comcast’s Fancast.com, MSN, MySpace, and Yahoo! to have embedded Hulu content run on their video portals.

Analytical Summary

► Current Perspective: Slightly positive on the launch of Hulu.com, because the new online video site provides consumers with a wealth of popular TV shows and movies from more than 50 content providers including Hulu’s founders, NBC Universal and News Corp. The biggest market driver to this new Web site is that access is free and the advertising is designed to be less intrusive than traditional TV commercials. Hulu will not be the YouTube or iTunes killer, but it offers another attractive choice for consumers to gain more access to video content.

► Vendor Importance: Very high to Hulu, because with so much pre-existing competition, Hulu has one chance to grow its business on the merits of its value proposition with instant access to premium content for no fees and few commercials. The Web site will need to prove to its advertisers that Hulu users are a suitable audience for their goods and services and that consumers do not mind the way they are exposed to advertising. In addition, Hulu needs to grow its distribution relationships with its portal partners such as AOL to help ensure its survival by branching out with the most Internet exposure possible.

► Market Impact: High on the digital home services market; since two major media companies (FOX and NBC) back Hulu, its competitors must monitor the success of this new online video Web site. Hulu has been cautious with its launch following a four-month private beta period to iron out the potential kinks and develop innovative ways to weave ads into its video streams. Online video has yet to create big profits and other companies in the space such as Apple and Google are still in the early stages of better monetizing their online video platforms. With over 60 million U.S. broadband subscribers, there is room for new companies to enter the online video space and ultimately find success through various business models.

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Apple to Push Corporate E-mail and Applications to the iPhone This June

On March 6th Apple previewed its iPhone 2.0 software, scheduled for release this June, and announced the immediate availability of a beta release to selected developers and enterprises. The iPhone 2.0 beta release includes both the iPhone SDK as well as new enterprise features such as support for Microsoft Exchange ActiveSync to provide secure, over-the-air push e-mail, contacts, and calendars as well as remote wipe, and the addition of Cisco IPSec VPN for encrypted access to private corporate networks.

Analytical Summary

► Current Perspective: Very positive on Apple’s iPhone 2.0 software announcement, because it opens up the iPhone to consumers who wanted to buy an iPhone but were frustrated by the inability to get their corporate e-mail on the device. However, the announcement goes much further than that; the iPhone now meets the definition of a “smartphone,” as the SDK opens the iPhone – and iPod touch – up to developers to create applications. Apple appears to be giving full access to the devices’ capabilities and claims to be placing minimal restrictions on the type of applications that can be written. The business model for distributing applications is centralized, bypassing the carriers; some developers are sure to chafe at the limitations, but Apple’s 30% cut is reasonable and the consumer experience should be excellent. With push corporate e-mail/PIM, basic device management/security, and custom application development, Apple is taking the iPhone beyond prosumers and solidly positioning it as a mobile enterprise platform. Price, brand, and the lack of a physical keyboard will still be obstacles for some corporate customers, but iPhone – which was always sexy – is maturing.

► Vendor Importance: Very high to Apple, because the iPhone is one of Apple’s three main product lines, along with the Macintosh computer business and the iPod. The ecosystem built for iPod benefitted the iPhone, and now the iPhone is returning the favor by turning the iPod touch into a portable computing tablet. Considering how well Apple did selling the iPhone even without third-party applications, the SDK will significantly increase uptake among new high-value customer segments.

► Market Impact: High on the smartphone market, because the iPhone can now compete on more even terms against traditional smartphones. Other smartphone vendors still have a large window of opportunity, especially at the entry level ($99 to $149), which is quickly becoming a significant segment of the market that used to go to feature phones. Another approach will be to compete on hardware; the iPhone still lacks 3G, high-end imaging, and a physical keyboard. Palm, however, will have to raise its profile significantly if it expects developers to stick around for its mobile Linux platform.

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