Mobile Sands

March 28, 2009

Open Access Makes Networks Valuable Platforms – Not Dumb Pipes

Filed under: Android, App Store, iPhone, LTE, Mobile Apps, New business models — Tags: — AJ @ 2:13 am

“Open” is in the air 

Recently AT&T chief Ralph de la Vega talked about open development platforms with FierceWireless. In his view, handset platforms are not open if they use proprietary APIs to access handset capabilities and he stressed the need for open APIs within handsets. A friend at Verizon reminded me earlier this week about Verizon’s Open Development Initiative (ODI) which allows third-parties to get hardware certified to work on Verizon’s network and Verizon’s upcoming 4G innovation lab

Among handset vendors, Nokia wants to open-source Symbian and Google is already doing so.  Google’s Android, in particular, is widely regarded as open. In contrast, many industry commentators, including FierceWireless editor Sue Marek, call iPhone and Blackberry closed because Apple and RIM will not license their OS to other handset vendors.

 Defining “open”

 If we are willing to accept the Internet as the gold standard of openness, the more a system resembles the internet, the more open it is. Therefore an open system is one that

  1. Anyone can access on equal terms
  2. Anyone can build content and applications on equal terms
  3. Anyone can distribute their content and applications on equal terms

Based on this definition, Apple’s iPhone provides a remarkably open platform for application developers and consumers, even while Apple keeps its OS closed to other hardware manufacturers. In a sense, iPhones are a similar to Sun Servers that power large parts of the Internet – a proprietary hardware/software combination that is available on equal terms to users and developers.

 “Open” does not mean “free”

Since the terms “open source” and “free software” have been used interchangeably, it has created the impression that free means open. This is not true in general. For example, free broadcast TV is actually a closed system.

On the other hand, two of the most valuable “open systems” we all use – the electricity grid and the phone system – are not free. However, they are open because everyone can access them on equal terms. Anyone can create applications and end-points for them (cordless phones, answering machines, refrigerators) and can distribute these applications. Technical standards that require patent holders to contribute IPR under a FRAND regime are open in the same way.

 The “dumb pipe” misnomer

Whoever came up with the term “dumb pipe” did a tremendous disservice to the mobile industry. Imagine how people at facebook would have feel if they were dubbed  “that dumb online directory” for offering open access to application developers. Instead facebook have been celebrated as a “platform”. In the same vein, the right way to describe a network that provides open access on equal terms is not “dumb pipe” but “platform.”

Once network providers start thinking of themselves as platforms, they will see the benefit of allowing huge number of third-parties to create applications on their platform.  Most of these applications will fail, but the applications that succeed will not only make the developers who creat them rich, but will also make the network  incredibly valuable for consumers, and for the investors who own the network.



March 20, 2009

With iPhone OS 3.0, Apple Takes Aim at Game Consoles

Filed under: App Store, games, iPhone — Tags: , , , , , — AJ @ 12:44 am

Apple may have single-handedly revived the mobile games market.  Within 8 months of iPhone 3G’s launch, more than 6200 games are available on Apple’s App Store and 74% of them require payment.  And iPhone users are downloading them, voting with their dollars for the games they like.  At the end of January reported that 32.4% of iPhone 3G users download games, compared to 3.8% of all mobile subscribers.  

With iPhone OS 3.0, Apple is going after gaming consoles popular with casual gamers – Nintendo DS (NDS), Playstation Portable (PSP) and Nintendo Wii, by providing:

  • Peer-to-peer gaming over Bluetooth. P2P gaming (over WiFi) is a very popular feature of NDS and PSP. Apple claims that its “Bonjour” application will discover other users who are playing the same game, and customers will not have to do manual Bluetooth pairing
  •  Accessories controlled via iPhone. Accessories are a big part of Wii’s value proposition, enabling products like Wii Fitness and EA Active. Now similar applications can be created for iPhone devices

Further, iPhone OS 3.0 will offer “In-App” purchases. This enables developers to use business models similar to those used for PC games. Developers can

  • Offer subscription based pricing, popular with PC-based MMOGs
  • Start users on free version, then convince them to upgrade to a premium version
  • Sell a wide range of virtual goods

By offering developers 70% of the selling price, Apple has attracted a wide range of developers – small and large. Several experienced independent game developers have hit the jackpot and some small development teams like Smule are turning their hits into venture-funded game studios.   At least two large publishers, EA and Gameloft, are making a significant investment in iPhone games and seeing real revenue.  Gameloft has 20 games available on iPhone and, by early March, had seen 2 million downloads. With In-App purchases, Apple is further sweetening the deal.

Apple’s installed base is still a fraction of NDS, Wii and PSP. According to Nintendo’s Q4’2008 results, they had sold 96 million NDS and 44 million Wii devices worldwide.  Sony PSP has an installed base of 50 million units. In contrast Apple announced on March 17th that it had sold 30 million iPhone 3G and iPod Touch. Probably, just 30% (i.e. 9 million) of these are used for gaming. Still, Apple is growing its base at a rapid clip and I will not be surprised if the number of iPhone 3G and iPod Touch devices crosses 100M by the end of the year – a respectable market share compared to the console biggies.

Update (03/25/09)

March 18, 2009

An alternate way to use TV band spectrum

Filed under: white space — AJ @ 10:19 pm

In the past, I have argued that FCC’s proposed rules for TV band white spaces make this spectrum unattractive for launching either wide area broadband services or local-area data/video services.  Limiting transmit power to 4W dilutes the coverage benefit of operating in 600 MHz (UHF) spectrum. Requiring CPEs to determine their location and connect to a central database makes CPEs expensive and difficult to install. The FCC is placing these requirements to ensure that white space devices can co-exist with terrestrial TV and all other existing services in these bands. Though these problems can be overcome with significant investment, the unlicensed nature of this spectrum weakens the business case to make such investment, especially since unlicensed spectrum with fewer strings attached is available. Bottomline – it will be years before TV band spectrum will be productively used.

All this raises the question – shouldn’t there be a better way to utilize this valuable radio spectrum? This afternoon, I was listening to a podcast on EconTalk with Thomas Hazlett – Professor at George Mason University and Chief Economist of the FCC from 1991-92, with stints at several other universities in between. Professor Hazlett argued (convincingly, in my opinion) that the FCC should pay all terrestrial TV stations to migrate to a free-to-air satellite system, give free satellite dishes to the 30 million or so Americans who still watch terrestrial TV, and auction the almost 300 MHz of spectrum that will be opened up.  Auctioning ~300 MHz of spectrum in the the 400-700 MHz band will more than cover the cost of the TV transition. If you decide to listen to the podcast, the discussion on spectrum starts after 44 minutes.

Just imagine the kind of wireless broadband services that could be deployed if ~300 MHz of spectrum in low frequency bands was made available. It would make wireless broadband a credible competitor to cable and fiber in the last mile, increasing consumer choice and lowering prices.  I am surprised that groups like the Wireless Innovation Alliance are not pushing for something as radical as this rather than unlicensed use of TV band white spaces.

March 14, 2009

Windows Mobile Needs a Killer App To Attract Developers

Filed under: Android, App Store, iPhone, Smartphones, Windows Mobile — Tags: , — AJ @ 5:22 am

Earlier this week, Microsoft announced that like Apple, Android and Nokia it will give developers 70 percent of app sales revenue.  However, unlike other platform providers, it will provide  “transparency throughout the certification process, and guidance and support from the stage of development to the final sale to the consumer.”

Microsoft’s differentiation sounds good on paper and I have read analysis which claims that since developer relations is Microsoft’s strengths, leveraging it against the czars of Cupertino is a wise thing.  Even if Microsoft can economically provide cradle-to-adulthood support to hundreds of thousands of developers, will that be enough to attract the best developers to WinMo?

The best development teams are breaking down walls to create fantastic apps. They will build their apps for platforms which consumers buy.  Android is a case in point. Despite all the buzz around it, Android Market has around 1000 apps compared to over 27,000 on the App Store. Unless the G1 moves off-the-shelf as fast as iPhone, majority of developers will not invest in it.

To really get legions of developers on board, Microsoft must find a way to make Windows Mobile devices fly off the shelves. To do so, Microsoft needs to internally develop (or acquire) at least one application that alone provides enough reason to buy and love a WinMo6.5 device – a killer app.  Blackberry’s killer app is Wireless Email and Apple’s killer app is Safari.  What does Windows Mobile have up its sleeve?

To close off, I don’t think is lousy in supporting developers, it is just selective.  Recently, I went for a talk by Jamie Gotch, one of the two developers who created the hit iPhone game, FieldRunners. Jamie talked about how extensively Apple promoted their game once it had received great reviews from users and the press.  And this afternoon I was reading about how Apple has allowed another top gaming app iMafia – a multiplayer online role playing game – to do microtransactions. Bottomline –  if a developer builds an app that consumers love, Apple will bend the straitjacket and provide it great support.  Rest of the developers should just be happy that they get to hang out with the hip crowd.

March 9, 2009

Blackberry App World Looks Well Thought Through

Filed under: Android, App Store, iPhone, Smartphones — Tags: , , , — AJ @ 8:58 pm

Recently, RIM disclosed more information about its planned application store, now called “Blackberry App World”. Information on a FAQ posted on RIM’s website shows that its store addresses several shortcomings of Apple’s store and tries to replicate what worked well for Apple. Here are few things that I liked:

  • Leverages Paypal to reduce purchasing friction – Customers with Paypal accounts will not have to go through the hassle of establishing a new account to download their first app. This is similar to Apple’s strategy of leveraging iTunes accounts to reduce friction on its App Store.  However, it remains to be seen if Blackberry will use free apps on its store to drive Paypal sign-ups,  something Apple does.
  • Sets $2.99 as lowest price to entice developers to invest – Blackberry is pushing for higher quality applications because it is unlikely to beat Apple on the sheer number of applications (Apple claims to have over 25,000). Though there is no guarantee that a $2.99 application will necessarily be better than a $0.99 one, it does provide developers with a business case to invest more.  Blackberry users will not lose out on apps are available for $0.99 on App Store because most such apps have free (“ad-supported”) counterparts that will eventually make their way to Blackberry
  • Allows developers to offer “Try and Buy” – Blackberry allows developers to chose if they want customers to try their application before they buy it. This is a better model than Apple’s, where developers who want to encourage trials have to create and distribute a “Lite” version or Android’s where all apps are “try and buy”by default (since they are returnable in 24 hours)
  •  Offers flexible licensing schemes to attract enterprise software vendors- Blackberry allows software vendors to run their own license distribution servers. This enables software vendors to implement pricing schemes in which they sell a pool of software licenses to large corporations.
  • Is customizable per operator – Gives operators (and developers) control over which apps are distributed in which markets.

Blackberry’s policies combined with the fact that it offers a higher revenue share (80%) than all other application stores should win it developer support. Now, Blackberry needs to do three more things to effectively compete against Apple:

  1. Offer a fantastic shopping and usage experience to buyers
  2. Convince operators and developers that it has momentum
  3. Create awareness about the applications available on its platform

Let us wait and see how it goes.

    March 4, 2009

    Apple allows Amazon to Sell eBooks on iPhone

    Filed under: App Store, eBooks, games, iPhone, Smartphones — Tags: , , , — AJ @ 3:35 pm

    Apple approved Amazon’s Kindle eBook reader app on the iPhone today. A few days ago, it had allowed Indigo Books’ Shortcovers eBook store.  In a previous post, I had speculated that Apple may not do so and try to sell eBooks itself. Not so.  In the last two months, Apple has also allowed several third-party browsers – something many did not expect last year.  

    These deciscions indicate that Apple cares less about selling digital content (books, apps, games, music) and more about dominating the smart phone market; that it regards Nokia, Blackberry, Windows and Android as its competitors competitors – not Amazon.  And that it regards building a profitable app ecosystem as a way to strengthen its position as the leading smart phone supplier.  This seems like a very wise strategy.  

    Now that Apple has opened the door to companies who want to sell different forms of digital content on iPhones, one of these days, we may even see a digital music storefront show up in the App Store! And maybe some startups will try to create niche marketplaces to sell apps on the iPhone.

    I did download the Kindle app on my iPod Touch.  It looks like a rushed job – a land grab rather than a landmark. Right now, it is exactly what Amazon’s spokesperson calls it – a companion to Amazon’s Kindle device.  A user cannot browse or buy books from the app; that can only be done online or via Safari.  Not exactly, “1-click” shopping.  Further, Amazon does not provide any free, off-copyright books. I expect App Store users to rate the Kindle app at 2.5/5.  Still, not great news for startups like Lexcyle. Or for publishers who are troubled about Amazon’s power in the book industry and would prefer open formats like ePub rather than Amazon’s proprietary format.

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