deal architect

The whole world as one “area code”?

Bell Labs thought up the 3 digit US area codes in the 1940s. They have spread around the world in the form of country and city code through ISO and other standards. The codes made long distance calling so much easier but telcos have also used them to terrify us with big bills even eight decades later.

So I was absolutely delighted during my recent trip around the world that Sprint allowed me to call from just about anywhere for 20c a minute. My text messages were free. My Google Fi service allowed me to access its 4G partner network at $ 10 a GB. I could answer my office phone on my Vonage extensions app on widely available wi-fi.

Wow, we are getting closer to that elusive one world as a single area code. I had heard Pat Phelan use that term when he ran MaxROAM 7+ years ago and I was cynical we would see it anytime soon

But don’t feel sorry for the telcos. They make pretty lucrative monthly fees from us. They charge businesses for MPLS circuits and other network infrastructure at even more lofty rates. They have just been forced to adjust to much more reasonable marginal costs of global communications.

However, before we celebrate too much, the US may be headed the other direction. Trump’s new head of the FCC, Ajit Pai could very roll back bunch of consumer protections and lead the US industry to  buck global trends.

A son of Indian immigrants, I hope Pai heard and still remembers horror stories from his parents on how miserable and costly global calling used to be. Let’s hope we keep pushing the ball forward, not regress.

Google Fi and mobile trends

MVNOs - mobile virtual network operators - are doing pretty well. They lease network capacity from the Big Four U.S. carriers and resell it under their own brands with their own value added services. Google Fi has only been doing it for a few months, and the Android Blog recently shared some stats and it is clear it is making an impact in several areas:

a) Finally putting a dent on international roaming charges

“Since launch, more than 15% of our customers have used Project Fi abroad. From Mexico to Montenegro, customers have visited 110 of our 120+ supported countries all while paying the same rate for data that they would in the U.S.”  Actually, the 20c a minute for calls back to the US is even more impactful. 

b) Slowing we becoming less and less dependent on carrier networks even in the US

“We believe that using Wi-Fi should be seamless which is why we created Wi-Fi Assistant - a tool that automatically connects to high-quality hotspots and helps secure your connection. Over 50% of Project Fi customers are connecting to public hotspots using Wi-Fi Assistant on a weekly basis.”

c) Data-only SIMs are taking off

“We launched data-only SIMs in December to help Project Fi subscribers connect to data from devices other than their phones with no additional fees or restrictions. Since then, we’ve seen SIMs used everywhere from tablets to cars. While we’re just starting to experiment here, one thing is already clear: people want access to data on more devices.” As impactful is the ability to use your Fi phone as a hotspot without having to buy a separate MiFi and a plan for it. 

 

The whole world as one “area code”

This time of the year, I am reminded of my Brazilian-American friend, Karin Morton. With family spread around the world she said her father would have palpitations, as she was growing up, with all the international phone calls at $ 5 a minute at holiday season.

Bell Labs thought up the 3 digit US area codes in the 1940s. They have spread around the world in the form of country and city code through ISO and other standards. The codes made long distance calling so much easier but telcos have also used them to terrify us with big bills.

Skype changed the rules, and with Vonage now, I don’t hesitate to call anywhere, anytime as their monthly global plan covers most landline calls around the world. Mobile phones, though, continue get us with roaming calling and data charges.

That’s gradually changing. My new Google Fi plan, when using local Sprint and T-Mobile partner networks, only costs 20c a minute from most of the world. On wi-fi, it costs nothing. Sprint has a plan called Open World where a number of S.American countries are counted as part of your US plans. Their rates for other countries are also improving.

But as with everything, there are always gotcahs. Sprint reminded me “If your travel plans include a cruise and you do not wish to incur these costs, you may place the device in airplane mode until you arrive at your final destination.”

70 years later, telcos still love playing Grinch.  The world keeps getting smaller and the dream of every call as a local call continues. Just may take another 70 years.

The new telcos–same as the old ones

My wife booked the family on a Christmas cruise through the Caribbean. Brilliant suggestion. It’s tougher to get the aging kids to agree on a destination but there was no argument about this one. I was just a tad wary. The carrier, Carnival had a series of mishaps in the last couple of years. No problems on ours – in fact, everything was superb.

Except for the wi-fi. After the eighth session with download speeds under 1mb, I finally complained. At 75c a minute they should be doing much better especially as satellite connectivity (via Ka-band and other innovations) has improved each year. I offered the lady Speedtest.net images I had run during my mobile sessions. She said she needed to check their own monitor. Except after a few minutes she said it would not load: “the  connectivity is very poor”. Duh! I told her to get back to me later. She forgot to. The next morning another agent helped and told me I “should not expect speeds you get at home”. Hello, I got better speeds on DSL a decade ago. She had a supervisor call who offered me 25 extra minutes. I told him I did not need more of the crappy service and we worked out a credit.

It made me contrast to the other experiences on the cruise. Don’t like an entrée? Want another appetizer? Want to swap “non-refundable” excursions? Want late check-out? No problem.  But when it came to the telecom, over-priced poor service, and then excuses and bureaucracy. 

Marriott has been my home away from home. They tell me I have stayed nearly 4 years with them! In the last few months,  however, I have complained to several properties. Either the service is too slow or it requires repeated log ins. They treat it like gold – ok, their beach towels they used to inventory after every stay. One of their properties even settled a claim they illegally jammed customer hot spots.  Seriously?

I have qualified for a Companion Pass on Southwest for 8 years running. It is their honor for very frequent fliers. Last year I sent the CEO a letter saying because of poor wifi (and couple of other reasons) I was moving 25% of my travel budget away from them. That allowed me to discover the much faster speeds on Jetblue, and much more reliable (albeit not as fast) GoGo service on Delta. In the meantime, the Row 44 service on Southwest has gotten even worse this year, so next year I plan to reduce my travel with Southwest even more.

Why are these respected brands offering such crappy connectivity? Do they have no leverage with their providers? Why do they feel the  need to price what is a utility so obnoxiously?

Oh wait, these are cousins of our telcos and cable companies who consistently compete with tobacco companies for the worst brand reputations. It’s an unfortunate race to the bottom which nullifies so much else good these companies do in other facets of their products and services. 

Even dumber pipes

WhatsApp valued at $ 19 billion for 450 million users. In Asia, another text messaging service, LINE has another 300 million users and is expected to IPO in Japan this year. Facebook at $ 175 billion for 1.2 billion users. Twitter at $ 30 billion for 650 million users. Netlfix with original programming. YouTube as major channel.  You can go and on.

As we celebrate on March 10 the 138th anniversary of Alexander Bell’s first ever phone call, it is pretty clear the world of communications and content has changed massively. Telecom and cable executives worldwide should be watching with intense jealousy at these valuations and even  more intense concern at the (mostly) young and non-paying demographic of these new services.

They have seen it coming, and yet they still compete on speeds and feeds and continue to annoy customers with long-term contracts and sneaky charges.  And keep acquiring each other with the hope they can continue to squeeze more out of their old models.

In my 2009 book, The New Polymath Martin Geddes, an ex BT exec had sent out an SOS to telcos with words like

“ The Internet is still so young. I am more worried about the next generation of Googles and Skypes, which will be far more terrifying. ”

Five years later he sounds so prophetic …and yet the telcos have not evolved much – at least in consumer markets

The “Un-carrier”

This blog loves disruptors so it caught our attention when BusinessWeek called T-Mobile’s strategy “wacky”.  It says “(John Legere, CEO of the US unit) is a midway barker, promising something marvelous if we’ll just step through the curtain.”

Nothing wacky about breaking all the silly, consumer unfriendly stuff the mobile industry has been doing for a while – locked in devices for 2 year terms, outrageous global roaming charges, coverage significantly worse than the billion $ ads suggest etc

It’s also worked before in markets where there are 2-3 dominant players, as 7UP successfully did with its Un-Cola strategy starting in the 70s with the unforgettable Geoffrey Holder – he of 6 ft 6 in, unforgettable laugh distinction

Indeed,  Legere told Bloomberg TV in his standard issue pink shirt

“The un-carrier is a recognition that the way the wireless industry works is a complete joke.”

Definitely a disruptor. He is starting with the business model. If he can also disrupt the poor coverage and service model of the industry he will have the last laugh – a hearty one like Holder’s

 

"It's not complicated"

AT&T's running a set of commercials with that theme. Lots of smart young kids reinforce the supposed simplicity associated with AT&T's 4G network. I look forward to a day soon when these kids all grown up go on Youtube and describe their actual, honest to goodness AT&T experiences:)

Frankly, T-Mobile should take over the tag line, as it rolls out its Simple Choice. ZDNet reports

" it's unlimited "everything." There are no data caps, no bill shock, and no hidden fees. Just one rate plan, which will cost $50, $60 or $70, respectively, for varying degrees of service.

You can either pay for your new smartphone at the full price up-front when you start your new plan, or you can pay off the device over time with additional monthly costs. What's different is that you can leave T-Mobile at any time. That said, if you take the latter option, you will can't just jump ship to a rival network — you will have to pay off the rest of the phone's price upon leaving.

T-Mobile will also allow you to effectively bring your own device to the network — giving an entirely different spin on the enterprise buzzterm "BYOD.""

Actually, I would feel much better if T-Mobile offered something similar in Germany and other markets where it is dominant, not a distant number 4 as in the US market. And it would be great if T-Mobile also took aim at outrageous global roaming rates.

Nonetheless it is a bold move by T-Mobile to try and tackle invoice shock, lock in and lack of network portability in the way too complicated industry today.

 

Blackberry: Ring in the Old?

It is a new day for Blackberry – the rebranding of RIM, the new 10 Smartphones

But I am more struck by the management team that CEO (since last January) Thorsten Heins has been building. These are alums of Siemens, Sony Ericsson, Verizon, Vodafone. They scream telecom and enterprise. While they may be in layers below, I would have thought he would be bring in a Scott Forstall or a Hugo Barra who helped build the massive iOS and Android ecosystems.

No wonder this Z10 reviewer laments the continued paucity of apps

I scoured BlackBerry World (formerly App World) for the apps I use the most often on my iPhone. eBay? Nope. CNN? Forget it. Pocket? Uh-uh. Netflix? Notoriously, no. What about stuff that ties into my gadgets, such as Eye-Fi, Nike+ or Jawbone's UP app? Nada, zip, zilch. Okay, how about productivity-related apps I use for work, including Trello, Campfire and Expensify? Not a one. Even Pulse, a news reader I use religiously and has a simple HTML5 base, isn't there. 

Apple as competition? See how the BBC badgered the UK MD this morning and could not get him to acknowledge it (thanks to my friend David Terrar in London for the pointer).

Well, maybe they are going after a different demographic than Apple or Google. They are targeting two influencers they are most comfortable with – those that reflect the background of their executives

Telcos  

There are at least a few telco execs who would like the clock reversed. As I wrote in my book “Prior to Apple introducing the iPhone, carriers paid device manufacturers just enough for “planned obsolescence,” and subsidized those devices to consumers. This allowed them to lock customers into another long-term contract with the new phone. There was little device loyalty. In fact, carriers like Verizon had the marketing slogan “new phone every two years.The iPhone is a platform with frequent software updates and an application ecosystem. So it has a much longer brand commitment. The device used to be the commodity in the equation. Now as Apple expands its carrier choices—AT&T, Verizon, and Sprint in the United States—the mobile service becomes the commodity in this changing business model.”  Well, Blackberry may give telcos that wedge.

CIOs

The corporate and government market used to be RIM’s most lucrative. In recent years, RIM’s problems and BYOD strategies at many companies has dented that loyalty. That is where the enterprise management focus comes in. As the WSJ reports

“RIM has responded by offering incentives aimed at getting CIOs to give BlackBerry 10 a try, including free software upgrades for the new operating system, a free phone for customers' IT departments and training to IT departments to help ensure a smooth transition. RIM also rolled out its upgraded phone-management software earlier this month, which now allows companies to manage BlackBerrys and other smartphones.”

Samsung has already shown Apple is not invincible in the enterprise. Blackberry could follow a similar script.

Blackberry may never (again) win the mobile features or the ecosystem wars, but if it can get the telcos and CIOs back in its camp, that is a sure way to survive and may be even thrive.

“Does anybody have leverage with Apple?”

responds Dan Hesse of Sprint to Charlie Rose in this interview

Wow, I never thought I would hear a telecom CEO say that about any device maker. It is the new reality as I wrote in my recent book:

Prior to Apple introducing the iPhone, carriers paid device manufacturers. just enough for “planned obsolescence,” and subsidized those devices to consumers. This allowed them to lock customers into another long-term contract with the new phone. There was little device loyalty. In fact, carriers like Verizon had the marketing slogan “new phone every two years.” The iPhone is a platform with frequent software updates and an application ecosystem. So it has a much longer brand commitment. The device used to be the commodity in the equation. Now as Apple expands its carrier choices—AT&T, Verizon, and Sprint in the United States—the mobile service becomes the commodity in this changing business model.

So, kudos to Dan for realism (disclosure they have been my family’s provider after over a decade with AT&T).

In many ways, though, he still thinks like old-telco if you read the rest of the interview

He expects a global sourcing advantage based on the recent deal with SoftBank

That’s actually one of the advantages of this combination with SoftBank, in that not only can we tap into their technical expertise, but in terms of scale, whether it’s network equipment or chips or devices like phones, collectively we’ll get a better deal, yes.

He expects more industry M&A

I believe in the U.S. it’ll be very difficult for the big two, AT&T and Verizon, to make additional acquisitions of other carriers because they’re already so large. But if you include everybody else in the industry over time, I think we’ll see significant consolidation.

And when it comes to innovation

Our differentiating advantage today is that we offer truly unlimited data—data being pretty much everything except for voice and text. Everybody offers unlimited voice and text. With this transaction you’ll see more innovation, more technological leadership from Sprint. I won’t show our cards any more than that.

Really?  He is talking to the Charlie Rose and that’s all he can say about innovation?

Chris Meyer of Monitor Talent in his talk at Cognizant Community last week contrasted Airtel of India with Verizon – innovation versus what he called “pseudo-competition”. He said our telcos were following the advice BCG and other strategy firms provided in the 70s “Gain market power to extract rents in a zero-sum game”. Consolidate, advertise heavily, use your sourcing leverage.  BTW Chris used the hilarious sequence from the movie Duplicity to make his point about what passes for innovation in telecom.

Wonder how Apple continues to inspire so many executives in so many industries – expect those at the ones which are closest to it?

 

Are we paying an “Apple tax”?

Much as I admire Apple and have profiled them favorably in my books, our household has no iPhones. Plenty of iPods/iPads/iTunes but no iPhones. I refused to pay the AT&T premium for the iPhone, and then the Verizon premium.

The Orbitz hotel recommendation engine which is in the news because in default mode it shows pricier properties to Mac users may be the tip of the iceberg. At least Orbitz allows you to sort properties by price. I imagine there are sites which deliberately show Apple users higher prices and don’t give them a choice to sort differently.

With Sprint also an iPhone carrier for the last few months, I had considered trading in the family’s Blackberrys and Android phones. Maybe we will wait!