iPhone

Droid, Android, and how Google could hurt Apple

Verizon, Motorola and Google can all be pleased at the pace of Droid sales, estimated at $250,000 the first weekend. While Apple’s iPhone sales record dwarfs that of Droid, it’s still the fastest-selling Android phone, and it’s said to be already responsible for half the Internet activity for Android handsets. Another report says it will likely drive Android past Windows Mobile in market share soon, a formidable achievement despite Microsoft’s indifferent promotion of its mobile phone system in the past.

Droid seems a clear winner, which could have significant impact on the credibility of Google’s Android and the potential Android may have as the near-term, de facto competitor to the iPhone and the eventual winner in the smartphone space. Apple with iPhone now faces a very “Mac-like” dilemma. The IBM PC won decisively in the market because it was open, but Apple has stayed very profitable and continues intact, while the PC has been fragmented and sold off to various players.

Should Apple now open things up with iPhone to seize market share or play the same game in the smartphone space? We think they’ll decide for the latter, but Google is a much smarter competitor than any Apple has faced before, and an Android success could establish Google as a broader alternative OS player, something that would hurt not only the iPhone but the Mac.

AT&T to jump to 4G, abandon HSPA+

AT&T has abandoned its HSPA+ (high speed packet access) plans in favor of a migration to 4G LTE, a move that isn’t at all surprising, given Verizon’s commitment to LTE and the extreme competition between the two companies. Sprint promoting 4G (via WiMAX) would have left AT&T at risk of being the only 3G provider of note in the U.S.

The big issue, we think, is likely the stress that the iPhone success places on AT&T’s cellular network. The move to 4G will have major repercussions in the infrastructure space because it will likely divert even more capex to the wireless side and to cell towers and RF modernization. It will also make evolved packet core a very hot metro issue, hot enough to change procurement plans for some operators.

Another impact of the decision will be to make the whole procurement zone purchase strategy of operators more important because wireless is likely to be its own zone and drive other product decisions, including FMC and VoIP.

Market pressure could cost AT&T Apple iPhone exclusivity

There’s growing speculation that AT&T’s honeymoon with iPhone may be coming to an end. Pressure from the government on the wireless industry is mounting, and Apple is no longer doing exclusive deals with iPhone. In fact, it can’t afford to.

With iPhone in the U.S. locked to AT&T, there’s too much of a risk that the U.S. market (the number-one smartphone market) will end up validating a host of iPhone competitors that might have little chance under normal circumstances. AT&T has relied on iPhone to gain some market share, however, and has won some Verizon customers. Since Verizon would be likely to get the iPhone next, the loss could send a bunch running back.

We’re hearing some speculation that Apple and Verizon will do a 4G deal, though, so the opening of the iPhone won’t be imminent.

Google and wireless regulation in the U.S.

There’s more debate on the smartphone VoIP front as both Google and T-Mobile deny there were any deliberate restrictions placed on Skype for the T-Mobile Android handsets. Google said there was no full-feature Skype implementation offered as yet for Android, and T-Mobile said it had put no pressure on Google to restrict VoIP applications.

All of this stems from the fact that Apple limited iPhone Skype to WiFi connections and blocked Google Voice (for, said Apple, reasons of lack of support for the iPhone’s distinctive GUI). We think these issues may combine with the Comcast net neutrality appeal to create some momentum for legislative intervention, though the FCC may also look into the matter. If the FCC takes action, it may help uncover just what basis the FCC will claim for regulation of net neutrality issues; the net neutrality principles published by the FCC were not part of an order and thus have no direct legal status.

Carrier handset antitrust review threatens LTE capex

The Department of Justice (DoJ)is apparently opening an inquiry into competitive practices in the telecom industry, a move that’s been tried before but failed because of turf objections from the FCC and its congressional supporters.

The likely target of the probe is wireless behavior, and in particular the special exclusive handset deals like the ones by AT&T and Sprint for the iPhone and the Palm Pre, respectively. There has not been any serious antitrust review of U.S. operators since the Telecom Act, and the chance such a move could come now will certainly strike fear into providers and will likely have some impact on capital spending plans.

At particular jeopardy is the LTE rollout, which is driven by smartphone deployment. Whether operators would move faster or slower if handsets were competitive is not clear, but because no regulation is likely for a year, there is a risk of “wait-and-see-ism” setting in. That would virtually guarantee provider capex would fall sharply in both 2009 and 2010.