Mobile Sands

May 27, 2009

Nokia’s Ovi Store – A Very Strange Launch

Filed under: App Store, Ovi — Tags: , — AJ @ 3:51 am

Nokia launched its Ovi store on May 26th 2009, but it do so in a very strange way.  

Despite setting expectations three weeks ago that the Ovi store would have over 20,000 ” items” (i.e applications + multimedia content), Nokia launched the store with little over 1,000 “items”.  Where did the other 19,000 “items” disappear?  Further, rather than launching the store with an enthusiastic endorsement from a major non-US operator, an area where Nokia has consistently claimed strength, Nokia decided to do a press release with AT&T; a press release in which AT&T Mobility”s CMO says that the carrier will offer the Ovi store to consumers in late 2009 because, “AT&T has a reputation for providing the most customer choice.”  

I browsed through store.ovi.com to see what is available there.  Once I selected my phone as “Any Phone”, 1365 items showed up.  Of these items, only 619 (45%) are applications, while the rest are MP3, videos, ringtones and wallpapers.  And as many other bloggers have pointed out all day, applications like facebook are missing. In fact, it is very likely that Palm Pre will have more marquee applications than the Ovi store will when it is launched on June 6th.  And Pre will definitely not be missing out on facebook.  Maybe someday we will know why Nokia felt compelled to rush out with this launch.

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May 15, 2009

On MIT NextLab and Mobile Ventures for the Next Billion Consumers

Filed under: Mobile Apps, Netbooks, New business models, Smartphones — AJ @ 7:16 pm

Yesterday, I attended the “finals” of MIT NextLab, a social entrepreneurship class that aims to “launch mobile ventures for the next billion consumers”. It was heart-warming to see how ubiquitous connectivity (via SMS) and low-cost mobile computing devices (smart phones) can be used to make a huge difference in the lives of poor people in developing countries. Still, the premise that somehow these socially beneficial projects could be turned into self-sustaining ventures without expanding the addressable market seemed a stretch.

MIT NextLab and the Next Billion Network Project

The NextLab course is offered as part of the Next Billion Network (NBN) initiative at MIT Media Lab. NBN’s goal is to encourage grass-roots level development using cell phones in developing countries. The program was founded by Telmex’s Jhonaton Rotberg little over two years ago. Telmex, its mobile arm America Movil, Nokia and Bank of America are the primary sponsors of the activity.

 Like most good entrepreneurial ventures (or successful IT projects), NextLab projects start with the end-customer. Each student team is paired with a NGO, corporation or some other representative group in a developing country who has a problem that needs to be solved. Projects are typically designed for a 1-year team period, encompassing two semesters, and MIT’s winter and summer breaks. At least one project started in this class (MoCa) has continued for almost two years, while few others have been taken over by local partners or are stand-alone ventures.

 Videos of this year’s projects are worth checking out. These projects address problems like making healthcare accessible in remote rural areas (MoCa), enabling people without bank accounts to do basic financial transactions (Dinube), making the life of truckers in Colombia easier (Hammock),  creating an even-playing field for small farmers in Mexico (Zaca), fighting crime in large cities via crowdsourcing (Civirep), and spreading adult literacy in India (CelEdu).

 Freemium Model for Social Enterprises?

 Most student teams claimed that they could somehow create a business by selling to the customers they are currently working with.  Though laudable, in my opinion,  it is very difficult to build businesses that cater ONLY to people who have very little or no money. Proponents of creating such businesses argue that they can make up for low gross margin per customer through scale. Alternatively, social ventures try to sell to governments or well-financed NGOs.  However, but for a few exceptions like Bangladesh’s Grameen Bank, success stories are tough to find.  

Take the One-Laptop-Per-Child (OLPC) initiative as an example (also, see Wikipedia link). OLPC was launched in January 2005 at the World Economic Forum with a singular focus of bringing a $100 laptop to the poorest children in the world and with a business model of selling these machines to governments and NGOs. It was not until late 2007, when the original business plan was not working out, that OLPC (half-heartedly) decided to sell its machines in the US via its “give-one-get-one” program. By then it was too late. OLPC’s XO was never designed with US consumers in mind and most consumers who got one were disappointed. By mid-2008, netbooks stormed the market and there were few takers for XO. But this does not mean that model of leveraging technology developed for the poorest to meet needs in more affluent markets is flawed.

One way to create viable ventures would be to gain scale by selling to poor customers in developing markets but earn profits by catering to more affluent customers in developing and developed markets. Such a business model would be similar to the freemium (free + premium) model used by many Web2.0 companies.

One company that is following such a model is AssuredLabor. This company started as NextLab project in the fall of 2007 with a local partner in Brazil, and that is where they built their prototype. In mid-2008, the team decided to turn the project into a stand-alone venture, with Boston as their first pilot market in the US.  Technology commercialized and developed here could be applied back in Brazil as well as other developing countries.

Many current NextLab projects hold similar potential. Hammock’s SMS-based logistics management system may be useful for small delivery companies in developed markets. CelEdu’s mobile games could be used to teach foreign languages. MoCa could play a role in connecting clinics in rural America to hospitals in larger cities. And, at the same time, these ventures could keep on providing technology to their NGO partners in the developing world at affordable prices.

May 8, 2009

Palm Pre May Revive Sprint’s Fortunes

Filed under: iPhone, Smartphones — Tags: , , , , — AJ @ 8:44 pm

Palm Pre has been getting rave reviews from all those who have seen it and many believe if there was ever an iPhone killer, this is it.  In a few weeks, Pre will be available exclusively on the Sprint’s network and combined with all the operational improvements Sprint has done in the last 18 months, it may very well revive Sprint’s fortunes.

What’s special about Pre?

 It has singular design vision – just like the iPhone. Almost two years ago, Palm managed to hire Jon Rubinstein, previously Apple’s head of hardware engineering and the guy behind Apple’s product design revival over the last decade – from iMacs to iPods (see details in Newsweek story). As WSJ reported in December 2007,  Jon has been actively involved in designing Palm’s smartphones and setting its strategy. Plus, as the Executive Chairman of the company, he has given “design” a seat on the board.

Palm started building buzz around the Pre at CES 2009 and it wowed everyone who saw it. Here is a link to a video recording of Pre’s CES debut. And here is another video that shows some of the really cool features of the phone – including its advanced multitouch capability, QWERTY keyboard, and amazing graphics.  At the heart of Palm Pre, is a new operating system called WebOS. According to a recent article in The Industry Standard, developers who have created apps on WebOS agree that it lives up to its hype. And according to Fast Company, Palm Pre can give iPhone 3.0 (the next-gen iPhone) a run for its money.

Though Palm will not have the tens of thousands apps that Apple boasts at the time of launch, it is working on getting all the top applications on the device before launch, from Google and Facebook to integration with MS Exchange and Pandora.  Just like iPhone, its browser is based on WebKit and beautifully renders web pages. And yes, it has a music store too – from Apple’s arch-rival – Amazon. 

Sprint has dry powder

 Palm Pre may be able to work a charm at Sprint only because Sprint (under CEO Dan Hesse) has aggressively trimmed its capital and operating expenses over the last 18 months, and has maintained positive free cash flow despite losing almost 6 million post-paid subscribers. 

Sprint has countered some of  the subscriber losses by winning pre-paid subscribers (its Boost service added ~700K subs in Q1’09) and adding more wholesale subscribers (like Amazon Kindle).  But more importantly, it has slashed cap-ex (Q3’07: $1.2B, Q1’09: 0.3B), and trimmed operating expenses (SG&A Q3’07: 2.7B, Q1’09: 2.2B). As a consequence, it generated $536M of FCF in Q4’08 and $796M of FCF in Q1’09. At the end of March 2009,  Sprint had $4.5B of cash and cash equivalents – a significant war chest to compete with the biggies.  (All numbers from Sprint Investor website)

A resurgent Sprint – small, nimble and hip?

If Palm Pre lives up to its hype, it would help Sprint reverse post-paid subscriber losses.  Consumers want cool devices, and just like Apple, Palm has its cadre of loyalists.  Not only can the Pre win new subs for Sprint, it can create a positive “hip” halo around Sprint.  The Pre, combined with the growth of Boost Mobile, could help Sprint reverse the trend of subscriber losses and may even add 5M between March and December 2009.

The world (yes, that is correct) needs Sprint. The US has been the center of wireless innovation – from new air interfaces like CDMA and WiMAX to devices like Blackberry, iPhone and now Pre – because it has carriers that need to compete.  And for competition to be vibrant, Sprint needs to be successful.

May 5, 2009

Smart Grid – A billion dollar opportunity for wireless carriers?

Filed under: New business models, Uncategorized — Tags: , — AJ @ 4:15 am

Last month, Verizon, AT&T and T-Mobile announced M2M initiatives targeted at the smart grid, talking about how this may be a multi-billion dollar opportunity.  My analysis suggests otherwise. In my opinion, even if all 175M electricity meters in the US were digitally connected to smart grid, it may not generate more than a few 100 million in annual revenue for wireless operators.

Revenue per smart meter

Typically, a smart meter is expected to record information (approximately 50-100 bytes) every 15 minutes, though it is not expected to upload it that often.  Even if, a meter were sending 50 bytes ever 15 minutes, it would send just 4.7 KB/day or 141 KB/month. Not much.

Today, carriers are earning more than $0.3/MB (or $300/GB) for data downloaded by retail consumers. Even though most data plans offer 5 GB per month, average smartphone usage is between 30 MB (for email devices) to 100 MB (for iPhones). If a carrier prices its retail smartphone offering at $30/month and an average subscriber downloads 100 MB, the effective price would be $0.3/MB. (I hope this also explains why AT&T and Verizon charge around $0.25-0.50/MB for any data usage above 5 GB on their “unlimited” plans).

If utilities were able to negotiate the same rate – 30 cents per MB – they will be paying the wireless carrier 50 cents a year per meter. That puts the market size for 175M meters at a mere $87.5M per year. It is unlikely that this number would get any carrier excited, and probably many utilities see more value than 50 cents. The questions remains – how much more? where will the pricing stick?

Not every smart meter needs to be a 2G/3G node

Many utilities are thinking about aggregating multiple residential meters at a concentrator (or a “collection point”) using private local-area networks and to then connect these concentrators using 2G/3G wireless data.

Different companies are advocating different approaches here:

If there are 17.5M concentration points (1 for every 10 electricity meters), a carrier would have to charge $5/month per concentration point for the total available market to exceed $1 billion a year. There may be some justification to the $5/month number. This is what Aeris used to charge its M2M customers according to an April 2005 story in Forbes. However, by 2015 and with all the competitors in this market, I would be surprised if any carrier can charge a utility more than $2/month per concentration point. At that number, the total available market would be little over $400M/year.

Utilities have strong incentives to go for cap-ex that reduces recurring cost

Over the next few years, utilities will have access to billions of dollars of stimulus money. In addition, unfortunately, regulators are agreeing to levy a surcharge of $3-$4 per month for over a decade on consumers in the name of grid modernization.

Take CenterPoint Energy’s 2.4 million smart meter deployment in Houston as an example. Itron has offered to create meters that can be meshed, and GE is providing WiMAX radios to connect mesh concentration points. This is also the deployment in which regulators have allowed CenterPoint to charge each consumer over $3/month for 12 years for grid modernization.

In my opinion, it is much more cost efficient (cap-ex and continuing op-ex) for a utility to integrate low-cost, high-volume cellular (GSM/CDMA/UMTS) modem in meters and negotiate long-term deals with public network providers rather than build a private radio network. But, I guess, that would not create as many “green jobs”!

Comments?

Smart Meters is just something I have been reading about recently. If you have a different view on the topics in this post, please do share.

Notes:
1. Itron investor presentation provides information on number of utility meters in North America and other parts of the world.
2. Interesting article in the MIT Technology Review (registration required) on how the rush to create “green jobs” in the stimulus bill may be hurting technology and innovation.

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