It’s finally happened, a few months ago AT&T’s CEO, Ralph de Vega was talking about how AT&T would have to eventually branch from their exclusivity from the iPhone (our blog). At this year’s CES, AT&T shocked critics with the announcement of supporting webOS devices on their network. The two webOS devices will be running on three handset manufacturers namely, Dell, HTC and Palm.
New devices for AT&T network
The focus will primarily remain on Dell and Palm. Both device manufacturers have recently entered the smartphone market with new devices clamoring for the same type of attention as the iPhone. Dell has entered the market after a long hiatus while Palm’s Pre and Pixi have been needed the endorsement of a growing network. Although already overloaded with the iPhone, it seems that the addition of the new webOS devices will add much needed diversity to the network. Although AT&T’s network has been facing issues iPhones utilizing the data bandwidth, the Palm Pre and Pixi less data hungry in comparison; a good point in comparison to the existing iPhones. The exclusivity component still remains for AT&T due to the exclusive launch of the Dell Mini 3 along with the agreement with Palm.
Network improvement
The AT&T Developer Summit re-emphasized the focus on how AT&T plans to improve their network with increased partnerships and cell phone tower construction. Ralph mentioned how quickly the mobile app market was growing and as a result there was a need to ensure a better 3G network for users.
The blame game continues with the AT&T and Apple with statements fired across from both parties blaming the poor service and issues that arise with AT&T’s network and Apple’s hardware. The result of much investigating and numerous firestorms from both sides, AT&T is in the limelight again for its network capacity. The problem that AT&T’s network faces is primarily related to the way the network is geared to handle data traffic. Although the network is optimized for voice calls, data traffic moves on a different spectrum. The overall effect is that when data traffic is flowing is that voice spectrum conflicts with the transmission of data. People have often complained about the poor quality of the network causing AT&T due grief about their network.
Nonetheless, AT&T was quick to blame the hardware of Apple’s iPhone. The primary complain was that the radio signal that the iPhone handles switches from active to idle rather than turning itself off. This means that the signal is constantly accessed causing a strain on the network. However, iPhone users in other countries have not complained about similar problems, therefore, it makes little sense that the iPhone is to blame. However, an anonymous tipster has said the following about the way the iPhone OS conserves the power:
“All iPhone apps, including Phone.app, cause the radio to switch from “active” to “idle” mode when accessing the network far more often than traditional phones do. This causes the signaling channel, responsible for such functions as SMS messaging, initiating, maintaining, or ending a phone call, voicemail notifications, and DHCP requests, to become overloaded.” – (Source)
iPhone exclusivity may come to an end – AT&T executives
AT&T Mobility CEO Ralph de la Vega released a rather controversial yet understandable statement regarding the exclusivity of the iPhone to AT&T’s network. He mentioned that the portfolio of phones and services extend beyond Apple’s iPhone. Surprisingly, it makes sense. Apple is still a very new entrant into the cellphone market in comparison to industry giants such as Nokia, Samsung, LG, Sony-Ericsson, and other Taiwanese competitors. Apple’s cult-like following and design elements are what have been the primary success factors for the phone itself.
Ralph’s statements are not necessarily shocking when placed in light of the new phones that have been developed to compete with the iPhone. The Palm Pre and HTC’s offerings alone offer technologies that are similar to the iPhone at price points that are extremely competitive. Apple has yet to develop a product that will overshadow the success of the iPhone. Firmware upgrades and improved wireless connectivity will only go so far in dealing with the competition that the iPhone faces. In addition to this, the exclusivity of the iPhone can only extend till the network supports the technology requirements of the existing AT&T network. With networks moving towards 5G capabilities, AT&T clearly needs to diversify to support the new phones that are being offered by competitors. As open technology standards move towards a standardized set of features on phones, Apple needs to remain ahead of the curve through it research and development.
Apple’s fortunes have been primarily focused on a cult-like fan following along with a matchless integration of the App Store and iTunes. Google’s recent capital expenditure on specialized technology firms which include SEO and social marketing specialists is indicative of revamping the Android Marketplace. With such firms onboard to revamp and develop new technologies, it seems that the Android Marketplace will soon be able to compete more efficiently and effectively in comparison to the App Store. This is a serious factor for AT&T to consider when the iPhone begins to saturate the smartphone market. By remaining excessively exclusive to Apple, AT&T may narrow its market unnecessarily missing out on opportunities to challenge other service providers in the United States. Resultantly, AT&T should begin revamping its product lines to address customers that require needs that are unable to be fulfilled by the iPhone.
Palm WebOS Development Conference in December 2009
Working overtime to push their smartphone OS into the open market, Palm has decided to organize a conference in December 2009 in an effort to lure developers to its platform and begin developing apps to market on their Open Catalog e-commerce program. A key development of this conference will ultimately be how Palm decides to charge developers and provide a business structure acceptable to all parties concerned. Palm has stated that,
“(It) will offer developers choices for getting their applications to market, as well as a transparency into the process that will help them promote and grow their businesses.” – eWeek
Previously the apps offered at the store were free, however, realizing that the iPhone OS along with Android and RIM’s BlackBerry OS were quickly gaining ground over webOS; Palm decided to increase its marketing and get support for webOS. Currently, Palm’s store had apps for free in their app store, which was a reason for some of the excellent home-brew apps that were available to customers. Secondly, Palm’s strategic decision seems to be changing; currently the webOS was only available on the Pre and the Pixi. Unfortunately the problem with luring developers now is that the profitability factor of the Pre is compromised.
Already Apple has created a competitive situation where it has successfully captured a number of developers. By allowing developers to keep 70% of the profit margin by taking a 30% royalty along with a $99 developer fee, Apple has created a very strong incentive for developers to move to their platform – (Source). Since the success of the app along with the overall marketing push of the app is from the developer side, most of the work is done by the developer and by letting developers retain profits; they market their app themselves. Currently, Nokia, RIM, Symbian, Qualcomm all charge heavily for developers to access their OSs’ and SDKs’; in comparison to the structure offered by Apple, they are rather draconian in nature.
Apple’s commitment to quality is reflected via the total control they exercise over the submission and review of apps. Not only do they maintain a standard for apps, but similar to any licensing authority, they have the ability to screen out potentially malicious developers who could exploit the iPhone SDK and OS. In retrospect, this is probably why there have been very few security breaches on the iPhone while other developers have used financial clout to screen developers. Although in the long run, it will become difficult to screen what could be potentially millions of apps, it will at least ensure that apps available for download are safe.
Coming back to Palm, they are in a key situation where they can clearly see how draconian approaches will result in poor support for webOS or could help lure developers away from a fairly crowded market into a lucrative business venture. This is dependent on two things:
1.Palm creating a development program that provides a similar incentive to Apple’s program while streamlining the overall development process,
2.Marketing the Pre more aggressively and ensuring that consumers start to realize the full potential of the phone.
Although the Pre is exclusive to Sprint’s network, recently Verizon and Google have teamed up to launch Android compatible phones on Verizon’s network. The Pre has some serious competition now in terms of AT&T’s and iPhone alliance along with the Google-Verizon collaboration. It seems like that the Palm team is at a crossroads, a careful long-term strategic decision here can definitely change the path of the Pre and Palm’s profitability or it could doom the Pre to the depths of obscurity.
What do you think? Will Palm emulate Apple’s current market structure or will it follow the routes of RIM, Symbian and Nokia? Leave your thoughts and comments below.
