The last 10 days are arguably some of the worst periods over the last 3 years when Apple has been selling the iPhone. The controversy over the iPhone4 Antenna has snowballed into a very major story throughout the blogosphere, and even in the mainstream media. Despite this, Apple announced that iPhone4 had sold 3 million units in just 3 weeks.
The iPhone4 is not even available all over the world yet. Even in the markets it is available in, the supply is way short of demand. And this sales record happened in some of the worst publicity periods for the iPhone4. I cannot imagine what the sales figure will be for the remaining 5.5 months of 2010 - but one thing is sure - I don't think ANY analyst will come even close to the final sales figure.
All the analysts looking for 8 million units a quarter to 11 million units a quarter are going to be blown away. I expect 12 million units in July-Sep quarter, and 15 million units in Oct-Dec quarter. And I think even these numbers are likely to be conservative - and only because Apple will find it difficult to make that many phones!
Remember just in Jan 2007, when the original iPhone was launched, Apple set a sales target of 10 million units for 2008 - and people thought that was an improbable target. They managed to reach that goal easily, and now they are doing over 10 million units a quarter!
And this is despite being available on just one carrier in the US, and not being present on the dominant carrier in China. With time the availability picture will definitely change. At that point, Apple could be doing 20M phones a quarter, and will be within kissing distance of 10% of global mobile phone marketshare!
Remember, 40% of Apple's revenues, and 50% of Apple's profits come from the iPhone already - and there is a clear path to potentially double both revenues and profits on the iPhone within just 2 years. So Apple's overall revenues and marketshare would go up by a third, even if other products just stay stationary. And considering the iPad still does not have any competition from other tablets, and considering the Mac is firing on all cylinders, the other product lines are also doing very well. Apple is also likely to convert AppleTV from hobby status to a full blown revenue line sometime soon.
We could easily be looking at $500 per share in 2 years time!
Sunday, July 18, 2010
Wednesday, June 9, 2010
Beginning of the end for Google
AdMob CEO and Founder complains iAd is not in best interest of consumers and developers. I guess he means it is not in the best interest of AdMob!
Google got the FTC to approve the AdMob acquisition citing competition from iAd - and now when they see the competition from iAd, they are whining! Can't have it both ways, Google!
And this is just the first penalty for backstabbing Apple - in time you will see Apple stepping on Google's toes a whole lot more.
Here is how I see it playing out -
- Developer interest in iPhone, is already high and is likely to get even higher as iPhone4 and the iPad kick some ass. Considering that there is still no good way to make money on Android, except for Ads, and considering that Ads piss off the users, iPhone comes off as a much better option for developers.
- iAd is already pulling in almost 50% of mobile advertising revenues even before the launch - just imagine what will be the scenario as AT&T exclusivity ends, and Apple launches the iPhone on Verizon, Sprint and T-Mobile. All of a sudden, Apple despite being bigger in market share will be growing faster than Android as well - that should take the wind out of Android sails, and reduce their momentum significantly.
- Apple will soon extend the AppStore to other areas as well - AppleTV is the obvious first choice, but I would not be surprised if Apple creates a simulator of some sort to allow running Apps from the AppStore on desktops and notebooks running Mac OS. This is easy, as there is already a simulator for MacOS as part of XCode. And the rumored Magic Trackpad should help with Touchscreen functionality as well. In any case, significant majority of Apps do not use multi-touch, and single touch can easily be replicated with just the mouse. And to really crush things, they should come out with such a simulator for Windows as well. If they can manage a simulator for Android, that would be the final nail in the coffin. In such a scenario, the AppStore could become the premium market to get Apps for any platform on earth. While this is far-fetched, it is not beyond the realm of possibility. In fact, I would be surprised if Apple is not already working on something like this for Mac OS and Windows.
- Once the AppStore becomes universal, iAd will be raking in way more of the advertising pie. And with such a big foothold in advertising, there is nothing stopping Apple from extending iAds to web search and advertising as well. Apple can already bring back Sherlock, and make Web Search itself an app.
- In parallel, Apple will continue initiatives like Reader on Safari 5 - which removes all ads from a website, and just presents the text in a much more readable format. Over time, initiatives like Reader will diminish the value of web ads massively. It is quite possible that when Reader gets sophisticated enough, that will be the DEFAULT mode for Safari, with the regular website as an OPTION! You can bet your last penny, that is one feature of Safari that Chrome will not copy!
- I would not put it past Apple to come up with an agreement with Microsoft to allow iAd on Windows Mobile 7, in exchange for having Bing on the iPhone. Possibly even pay MS $100M every year (or even more) for the privilege! After all, they will just be giving MS the money they get from Google!
- Apple will use their massive data center in North Carolina to become much bigger on Cloud Services. Likely to see a basic MobileMe become free, and supported by iAd, and a premium version that is paid, without ads.
- Apple will use the same data center to extend iTunes to become the YouTube of the world - they will just open up iTunes to allow anyone and everyone to submit content, have a proper mechanism using technology like Shazam to take care of Copyright issues. The submitter will have the choice to allow the content to be viewed for free, or paid. If it is free, it will be supported by iAd. iTunes already has fabulous searching and tagging functionality, and with iTunes Genius, they can do a much better job than Google can. For users, there will a simple option to enable or disable the free content, so that the clutter is manageable.
- iWork.com and App versions of iWork will easily supplant Google Docs - Once again, Apple could offer versions of these products for free, supported by iAd.
- As iAd gets big enough, it will pave the way for Apple to finally move AppleTV out of hobby status, and into a significant revenue stream. Customers can get an iTunes season pass for all the content on iTunes, either paying $49.99 per month, or $29.99 with iAd.
Google created Android as a way to get control over mobile web access. However, they will soon see that Android will turn out to be the reason why Google will lose - not just in Mobile advertising but probably in search advertising and desktop web access advertising as well!
Google might be a very big pony - but at the end of the day, it is a one-trick pony. And Apple can and should take away that one trick from them. To continue with the pony metaphor, with Google, Advertising was the cart, and Services were the horse - the services existed only to pull more advertising - whereas with Apple, Advertising will get its deserved role of being the horse, to move great services (the Apple cart). This is a major difference - Google was all about exploiting its services to get private information about the user, to help it target ads. Apple on the other hand is unlikely to try to make a profit from ads - they exist only to subsidize the content. They dont have to resort to being BigBrother, since they only want to break even on content.
Google got the FTC to approve the AdMob acquisition citing competition from iAd - and now when they see the competition from iAd, they are whining! Can't have it both ways, Google!
And this is just the first penalty for backstabbing Apple - in time you will see Apple stepping on Google's toes a whole lot more.
Here is how I see it playing out -
- Developer interest in iPhone, is already high and is likely to get even higher as iPhone4 and the iPad kick some ass. Considering that there is still no good way to make money on Android, except for Ads, and considering that Ads piss off the users, iPhone comes off as a much better option for developers.
- iAd is already pulling in almost 50% of mobile advertising revenues even before the launch - just imagine what will be the scenario as AT&T exclusivity ends, and Apple launches the iPhone on Verizon, Sprint and T-Mobile. All of a sudden, Apple despite being bigger in market share will be growing faster than Android as well - that should take the wind out of Android sails, and reduce their momentum significantly.
- Apple will soon extend the AppStore to other areas as well - AppleTV is the obvious first choice, but I would not be surprised if Apple creates a simulator of some sort to allow running Apps from the AppStore on desktops and notebooks running Mac OS. This is easy, as there is already a simulator for MacOS as part of XCode. And the rumored Magic Trackpad should help with Touchscreen functionality as well. In any case, significant majority of Apps do not use multi-touch, and single touch can easily be replicated with just the mouse. And to really crush things, they should come out with such a simulator for Windows as well. If they can manage a simulator for Android, that would be the final nail in the coffin. In such a scenario, the AppStore could become the premium market to get Apps for any platform on earth. While this is far-fetched, it is not beyond the realm of possibility. In fact, I would be surprised if Apple is not already working on something like this for Mac OS and Windows.
- Once the AppStore becomes universal, iAd will be raking in way more of the advertising pie. And with such a big foothold in advertising, there is nothing stopping Apple from extending iAds to web search and advertising as well. Apple can already bring back Sherlock, and make Web Search itself an app.
- In parallel, Apple will continue initiatives like Reader on Safari 5 - which removes all ads from a website, and just presents the text in a much more readable format. Over time, initiatives like Reader will diminish the value of web ads massively. It is quite possible that when Reader gets sophisticated enough, that will be the DEFAULT mode for Safari, with the regular website as an OPTION! You can bet your last penny, that is one feature of Safari that Chrome will not copy!
- I would not put it past Apple to come up with an agreement with Microsoft to allow iAd on Windows Mobile 7, in exchange for having Bing on the iPhone. Possibly even pay MS $100M every year (or even more) for the privilege! After all, they will just be giving MS the money they get from Google!
- Apple will use their massive data center in North Carolina to become much bigger on Cloud Services. Likely to see a basic MobileMe become free, and supported by iAd, and a premium version that is paid, without ads.
- Apple will use the same data center to extend iTunes to become the YouTube of the world - they will just open up iTunes to allow anyone and everyone to submit content, have a proper mechanism using technology like Shazam to take care of Copyright issues. The submitter will have the choice to allow the content to be viewed for free, or paid. If it is free, it will be supported by iAd. iTunes already has fabulous searching and tagging functionality, and with iTunes Genius, they can do a much better job than Google can. For users, there will a simple option to enable or disable the free content, so that the clutter is manageable.
- iWork.com and App versions of iWork will easily supplant Google Docs - Once again, Apple could offer versions of these products for free, supported by iAd.
- As iAd gets big enough, it will pave the way for Apple to finally move AppleTV out of hobby status, and into a significant revenue stream. Customers can get an iTunes season pass for all the content on iTunes, either paying $49.99 per month, or $29.99 with iAd.
Google created Android as a way to get control over mobile web access. However, they will soon see that Android will turn out to be the reason why Google will lose - not just in Mobile advertising but probably in search advertising and desktop web access advertising as well!
Google might be a very big pony - but at the end of the day, it is a one-trick pony. And Apple can and should take away that one trick from them. To continue with the pony metaphor, with Google, Advertising was the cart, and Services were the horse - the services existed only to pull more advertising - whereas with Apple, Advertising will get its deserved role of being the horse, to move great services (the Apple cart). This is a major difference - Google was all about exploiting its services to get private information about the user, to help it target ads. Apple on the other hand is unlikely to try to make a profit from ads - they exist only to subsidize the content. They dont have to resort to being BigBrother, since they only want to break even on content.
Tuesday, June 8, 2010
When function is form, and form is function
Apple announced the new iPhone yesterday - an event that was without its usual suspense because of the Gizmodo revelations. However, there were still some aspects of the announcement that were quite interesting.
To me, one of the most interesting changes in the new iPhone, is in the choice of materials used to make the case. Apple chose to use Glass panels on either side, banded together with a stainless steel side.
To most people, glass is a dicey material - when Apple launched the first iPhone with a glass touchscreen, there were several questions about whether the screen would survive a drop to the floor. However, we have seen that the glass used in the iPhone was quite durable. In fact, the aluminium backing on my phone got dented badly in some falls, but the glass stayed intact. Even now, my old iPhone still has no scratches on the glass. Same is the case with the 3GS - while the plastic got scratched a bit, the glass is good as new.
Considering this, it is not surprising that Apple decided to go with glass on both sides - the new phone looks absolutely stunning. So in a way, the glass not just avoided the scratches and dents, but also gave the phone a classy makeover.
Moving to glass also opens up some other options for Apple. Some time back we saw Apple filing for a patent for Solar Panels integrated into Touchscreens. See http://www.iphonefaq.org/archives/97797 for details. The glass back of the new phone gives apple a much better option to integrate Solar Panels - without impacting the touchscreen in any way. Quite obviously, Solar Panel in the touchscreen would have affected the display - putting it on the back of the phone should solve that problem.
Also, this opens up tremendous personalisation opportunities - when you order a phone from the Apple Store, what if you can upload a picture that Apple will print and insert behind the glass panel? Would be a lot more sophisticated than the inscribing options currently offered.
Let us not forget the stainless steel band - while it looks cool, it also doubles up as the antenna for the phone, while also strengthening the phone significantly.
Apple has once again shown that form and function go hand in hand.
To me, one of the most interesting changes in the new iPhone, is in the choice of materials used to make the case. Apple chose to use Glass panels on either side, banded together with a stainless steel side.
To most people, glass is a dicey material - when Apple launched the first iPhone with a glass touchscreen, there were several questions about whether the screen would survive a drop to the floor. However, we have seen that the glass used in the iPhone was quite durable. In fact, the aluminium backing on my phone got dented badly in some falls, but the glass stayed intact. Even now, my old iPhone still has no scratches on the glass. Same is the case with the 3GS - while the plastic got scratched a bit, the glass is good as new.
Considering this, it is not surprising that Apple decided to go with glass on both sides - the new phone looks absolutely stunning. So in a way, the glass not just avoided the scratches and dents, but also gave the phone a classy makeover.
Moving to glass also opens up some other options for Apple. Some time back we saw Apple filing for a patent for Solar Panels integrated into Touchscreens. See http://www.iphonefaq.org/archives/97797 for details. The glass back of the new phone gives apple a much better option to integrate Solar Panels - without impacting the touchscreen in any way. Quite obviously, Solar Panel in the touchscreen would have affected the display - putting it on the back of the phone should solve that problem.
Also, this opens up tremendous personalisation opportunities - when you order a phone from the Apple Store, what if you can upload a picture that Apple will print and insert behind the glass panel? Would be a lot more sophisticated than the inscribing options currently offered.
Let us not forget the stainless steel band - while it looks cool, it also doubles up as the antenna for the phone, while also strengthening the phone significantly.
Apple has once again shown that form and function go hand in hand.
Saturday, May 29, 2010
AppleTV Reinvented
Some things Apple could do to dramatically redefine TV.
- Buy EchoStar - current market cap $1.8B - Apple could possibly buy it for $2.5B + debt. With EchoStar, they get nationwide Satellite Network, as well as IP to Sling Media. Convert Apple TV to be the Set-Top box for Dish Network. This is likely to be the easiest option for Apple, rather than negotiate with cable networks.
- Change to iPhone OS4 - opens up entire App Store.
- iPodTouch with IR Transceiver as Universal Remote. Should be usable as Remote, Keyboard, Microphone (for Video Conference) etc. EPG should be displayed on the iPodTouch.
- Multi-player gaming - AppleTV should be capable of creating an ad-hoc network with multiple iPodTouch units, for multi-player gaming.
- Offer an optional iControl unit for $99 - basically, iPodTouch with minimal flash, minimal RAM, lower end processor, 480x320 multi-touch OLED display.
- Open up USB port, with support for Web Cam and external storage. Video Conferencing would be a great application. External storage only for Personal Media - cannot be used for DVR.
- Offer an optional motor-panning 1080P iSight camera for $199 (panning and zoom controllable using the iControl remote).
- Instead of using low power A4, use full power chips, or even dual A4 chips, to support 1080P seamlessly, including 1080P videoconferencing (if customer has adequate bandwidth).
- Local DVR Functionality. DVR to be controlled from EPG on iPodTouch. DVR requests, etc to be stored on MobileMe - so user can setup recording remotely. User can also delete shows from MobileMe remotely, to clear up space on the local disk.
- Cloud DVR Functionality - customer can pay $10 extra per month to have access to ANY SHOW he wants, available at anytime streamed from the cloud. Cloud DVR shows would be available only for 1 week. If user wants longer term recording, he can copy content from Cloud DVR to local DVR. If the user does not want Cable TV, he can just pay $30 per month and get all his programs from the Cloud DVR, along with targeted rich interactive ads using iAd. But he won't get any live content - like Sports, news, etc.
- Integrated support for PlaceShifting (SlingBox functionality) - using MobileMe. Moment user logs into MobileMe and wants to watch either Live or recorded content, the local stream is turned off. Any content that is also available on the cloud would be streamed from the cloud rather than the source AppleTV, for bandwidth efficiency.
- Sell 3rd party licenses for Game Controllers - Steering wheels, Joysticks, Tennis Rackets, etc.
- Sell 3rd party licenses to integrate AppleTV directly into consumer electronics.
- YouTube competitor - Create a free videos section within iTunes, where users can upload their own videos for sharing with others. Customers can optionally also charge for their uploaded videos, with the usual 70:30 revenue sharing. Apple already has massive library of copyright content, it would be easy to use technology like Shazam to see if any user uploaded content violates copyright of any other content. With such a check, studios would prefer iTunes over YouTube. Can be integrated with rich interactive iAds, for revenue.
- Package AppleTV with 2 iControl units and one iSight HD camera for $599 - or for $199 with 2 year Cable TV contract at $49 per month or $399 with 2 year Cloud DVR only contract.
The main idea is to make full use of the ecosystem that already exists - and create cross-selling opportunities for other parts of the ecosystem. For instance, if the user wants remote DVR functionality or place shifting functionality, he/she has to get MobileMe. For the remote, s/he has to get iPodTouch. Since the unit supports multi-player gaming, there is an incentive to get multiple iPodTouches for the entire family. Cloud DVR would use iTunes. Interactive targeted advertising using iAd would dramatically change the way people look at advertisements. Could even support features like instant feedback on ads - so that the marketer knows how the ad is being received, by which demographic.
- Buy EchoStar - current market cap $1.8B - Apple could possibly buy it for $2.5B + debt. With EchoStar, they get nationwide Satellite Network, as well as IP to Sling Media. Convert Apple TV to be the Set-Top box for Dish Network. This is likely to be the easiest option for Apple, rather than negotiate with cable networks.
- Change to iPhone OS4 - opens up entire App Store.
- iPodTouch with IR Transceiver as Universal Remote. Should be usable as Remote, Keyboard, Microphone (for Video Conference) etc. EPG should be displayed on the iPodTouch.
- Multi-player gaming - AppleTV should be capable of creating an ad-hoc network with multiple iPodTouch units, for multi-player gaming.
- Offer an optional iControl unit for $99 - basically, iPodTouch with minimal flash, minimal RAM, lower end processor, 480x320 multi-touch OLED display.
- Open up USB port, with support for Web Cam and external storage. Video Conferencing would be a great application. External storage only for Personal Media - cannot be used for DVR.
- Offer an optional motor-panning 1080P iSight camera for $199 (panning and zoom controllable using the iControl remote).
- Instead of using low power A4, use full power chips, or even dual A4 chips, to support 1080P seamlessly, including 1080P videoconferencing (if customer has adequate bandwidth).
- Local DVR Functionality. DVR to be controlled from EPG on iPodTouch. DVR requests, etc to be stored on MobileMe - so user can setup recording remotely. User can also delete shows from MobileMe remotely, to clear up space on the local disk.
- Cloud DVR Functionality - customer can pay $10 extra per month to have access to ANY SHOW he wants, available at anytime streamed from the cloud. Cloud DVR shows would be available only for 1 week. If user wants longer term recording, he can copy content from Cloud DVR to local DVR. If the user does not want Cable TV, he can just pay $30 per month and get all his programs from the Cloud DVR, along with targeted rich interactive ads using iAd. But he won't get any live content - like Sports, news, etc.
- Integrated support for PlaceShifting (SlingBox functionality) - using MobileMe. Moment user logs into MobileMe and wants to watch either Live or recorded content, the local stream is turned off. Any content that is also available on the cloud would be streamed from the cloud rather than the source AppleTV, for bandwidth efficiency.
- Sell 3rd party licenses for Game Controllers - Steering wheels, Joysticks, Tennis Rackets, etc.
- Sell 3rd party licenses to integrate AppleTV directly into consumer electronics.
- YouTube competitor - Create a free videos section within iTunes, where users can upload their own videos for sharing with others. Customers can optionally also charge for their uploaded videos, with the usual 70:30 revenue sharing. Apple already has massive library of copyright content, it would be easy to use technology like Shazam to see if any user uploaded content violates copyright of any other content. With such a check, studios would prefer iTunes over YouTube. Can be integrated with rich interactive iAds, for revenue.
- Package AppleTV with 2 iControl units and one iSight HD camera for $599 - or for $199 with 2 year Cable TV contract at $49 per month or $399 with 2 year Cloud DVR only contract.
The main idea is to make full use of the ecosystem that already exists - and create cross-selling opportunities for other parts of the ecosystem. For instance, if the user wants remote DVR functionality or place shifting functionality, he/she has to get MobileMe. For the remote, s/he has to get iPodTouch. Since the unit supports multi-player gaming, there is an incentive to get multiple iPodTouches for the entire family. Cloud DVR would use iTunes. Interactive targeted advertising using iAd would dramatically change the way people look at advertisements. Could even support features like instant feedback on ads - so that the marketer knows how the ad is being received, by which demographic.
Friday, May 21, 2010
In other news, pot calls kettle black...
Just read an unintentionally hilarious article on AppleInsider - http://www.appleinsider.com/articles/10/05/21/google_compares_apple_to_big_brother_from_iconic_1984_ad.html
Some executive at Google reportedly called Apple "Big Brother" in a reference to the famous 1984 commercial that announced the Mac.
Hilarious, because I don't think he could have put his foot in his mouth more effectively, and more publicly. Considering all the news around Google's privacy violations, and all the attempts by Google to ingrain itself in pretty much every single aspect of our lives, it is quite obvious who Big Brother is. In fact, the surveillance society referred to in the 1984 book eerily resembles Google.
I guess he refers to Big Brother not in a surveillance kind of way, but more about the fact that Apple does not give any choice to the developer or to the user. Steve Jobs decides how things should be, and that is the way things will be. Like as if Google gives its users all the flexibility they want. I remember years back when I signed up for GMail, I did not like the conversational style of GMail - and wanted to revert to the regular email style that you see in Yahoo, Hotmail, etc. Guess what - Google decided for me that GMail would stay conversational - no option to use regular mails. I haven't checked lately, but I wouldn't be surprised if that is still the case!
At least, the choices Steve Jobs makes are acceptable to the vast majority of end-users. It is usually only the tech geeks who feel crippled by Apple's restrictions. There are things that I have wished were different with Apple, but for the most part, things just work. Of all the people complaining about a non-replaceable battery, I wonder how many of them ACTUALLY carry a spare battery? The dramatic success of the iPhone has showed that the "restrictions" in the iPhone haven't really affected demand for the product.
Google acts and operates as if they are champions of Open Source, and everything they do is open. However, even a cursory look at Google reveals that the only things that are Open at Google are things they don't expect to make money on - and all their crown jewels are safely locked inside a proprietary safe.
There is another interesting comment this guy made - "If Google did not act, we faced a Draconian future where one man, one company, one device, one carrier would be our only choice. That's a future we did not want." The thing is, Google bought Android in 2005, well before the public launch of the iPhone. Quite obviously, they knew about the iPhone by 2005, and *specifically* bought Android to combat the launch of the device. If this is not an act of corporate espionage by Eric Schmidt, I don't know what is.
In fact, I firmly believe that Apple is very close to launching a major change in plans for AppleTV - launching a subscription model for iTunes content, together with tie-ups for live News and Sports broadcasts. This would finally offer users a viable alternative to CableTV. Google, by virtue of Eric Schmidt's board seat, obviously knew this was coming, and this is the motivation behind yesterday's announcement of GoogleTV. We will see more such vaporware announcements from Google, over the next few months - but thankfully, will end soon, because Apple realized the folly of having Eric Schmidt on the board last year.
Point 6 of Google's charter says - it is possible to make money without doing evil - and their motto is "Do no evil". I think Google needs to look at the mirror and see if they are living up to their ideals. They have clearly shown that they are OK with evil if it serves their interests - see their actions in China, and how they changed their minds only when they got bitten. Their track record of IP/copyright violations, is also indicative of the same malaise.
Some executive at Google reportedly called Apple "Big Brother" in a reference to the famous 1984 commercial that announced the Mac.
Hilarious, because I don't think he could have put his foot in his mouth more effectively, and more publicly. Considering all the news around Google's privacy violations, and all the attempts by Google to ingrain itself in pretty much every single aspect of our lives, it is quite obvious who Big Brother is. In fact, the surveillance society referred to in the 1984 book eerily resembles Google.
I guess he refers to Big Brother not in a surveillance kind of way, but more about the fact that Apple does not give any choice to the developer or to the user. Steve Jobs decides how things should be, and that is the way things will be. Like as if Google gives its users all the flexibility they want. I remember years back when I signed up for GMail, I did not like the conversational style of GMail - and wanted to revert to the regular email style that you see in Yahoo, Hotmail, etc. Guess what - Google decided for me that GMail would stay conversational - no option to use regular mails. I haven't checked lately, but I wouldn't be surprised if that is still the case!
At least, the choices Steve Jobs makes are acceptable to the vast majority of end-users. It is usually only the tech geeks who feel crippled by Apple's restrictions. There are things that I have wished were different with Apple, but for the most part, things just work. Of all the people complaining about a non-replaceable battery, I wonder how many of them ACTUALLY carry a spare battery? The dramatic success of the iPhone has showed that the "restrictions" in the iPhone haven't really affected demand for the product.
Google acts and operates as if they are champions of Open Source, and everything they do is open. However, even a cursory look at Google reveals that the only things that are Open at Google are things they don't expect to make money on - and all their crown jewels are safely locked inside a proprietary safe.
There is another interesting comment this guy made - "If Google did not act, we faced a Draconian future where one man, one company, one device, one carrier would be our only choice. That's a future we did not want." The thing is, Google bought Android in 2005, well before the public launch of the iPhone. Quite obviously, they knew about the iPhone by 2005, and *specifically* bought Android to combat the launch of the device. If this is not an act of corporate espionage by Eric Schmidt, I don't know what is.
In fact, I firmly believe that Apple is very close to launching a major change in plans for AppleTV - launching a subscription model for iTunes content, together with tie-ups for live News and Sports broadcasts. This would finally offer users a viable alternative to CableTV. Google, by virtue of Eric Schmidt's board seat, obviously knew this was coming, and this is the motivation behind yesterday's announcement of GoogleTV. We will see more such vaporware announcements from Google, over the next few months - but thankfully, will end soon, because Apple realized the folly of having Eric Schmidt on the board last year.
Point 6 of Google's charter says - it is possible to make money without doing evil - and their motto is "Do no evil". I think Google needs to look at the mirror and see if they are living up to their ideals. They have clearly shown that they are OK with evil if it serves their interests - see their actions in China, and how they changed their minds only when they got bitten. Their track record of IP/copyright violations, is also indicative of the same malaise.
Wednesday, May 12, 2010
For a few dollars more...
Right in the middle of the 3G auction, the government announced that 2G operators having more than 6.2MHz of spectrum will have to pay spectrum fees decided based on 3G auction prices. This announcement makes absolutely no sense - it will spell the end of the mobile revolution in India - because 2G operators would be forced to jack up prices. And if prices are jacked up, then we wont see 20M mobile users per month being added.
The reason why Indian operators are able to succeed at such low costs, is because they dont care about ARPU - they just care for overall revenues to be high, which they acheive by increasing penetration. In the current scheme of things, license costs are a percentage of revenue - 10%, 8% and 6% of revenues depending on the circle. So as long as the fixed costs are covered by the revenue, operators are profitable. But the moment they are forced to pay massive costs for spectrum, this model will not be viable - the amount of revenue they have to make to get profitable would go up dramatically. This means they can no longer be ambivalent about falling ARPU - they would be forced to increase ARPU. At higher ARPUs, significant number of customers would be priced out of the market.
Quite obviously, this is a bad policy for the government to adopt - so the only reason they are doing this, is because this will make 3G spectrum more valuable. If 2G operators ANYWAY have to pay for the spectrum at the same rates as the 3G spectrum, they might as well bid for 3G spectrum - so operators who chickened out of bidding at the higher levels would now consider bidding for 3G.
I expect that soon after the auction concludes, we will see a rethink by the government, and they will leave 2G spectrum pricing untouched. But the winners of the 3G spectrum would be in trouble, because they would have already bid extremely high for 3G spectrum, and cant back out just because 2G spectrum is not being charged for!
At these high prices, the 3G winners would find that they have to price 3G data access prohibitively high - and will not be able to attract large number of customers for 3G, and so they are stuck in a very unprofitable situation. If they price it low, they can attract a lot of customers, but they might still find it difficult to service the debt that they took on to bid for the 3G spectrum.
In a lot of ways, this is similar to killing the goose that lays the golden eggs.
The reason why Indian operators are able to succeed at such low costs, is because they dont care about ARPU - they just care for overall revenues to be high, which they acheive by increasing penetration. In the current scheme of things, license costs are a percentage of revenue - 10%, 8% and 6% of revenues depending on the circle. So as long as the fixed costs are covered by the revenue, operators are profitable. But the moment they are forced to pay massive costs for spectrum, this model will not be viable - the amount of revenue they have to make to get profitable would go up dramatically. This means they can no longer be ambivalent about falling ARPU - they would be forced to increase ARPU. At higher ARPUs, significant number of customers would be priced out of the market.
Quite obviously, this is a bad policy for the government to adopt - so the only reason they are doing this, is because this will make 3G spectrum more valuable. If 2G operators ANYWAY have to pay for the spectrum at the same rates as the 3G spectrum, they might as well bid for 3G spectrum - so operators who chickened out of bidding at the higher levels would now consider bidding for 3G.
I expect that soon after the auction concludes, we will see a rethink by the government, and they will leave 2G spectrum pricing untouched. But the winners of the 3G spectrum would be in trouble, because they would have already bid extremely high for 3G spectrum, and cant back out just because 2G spectrum is not being charged for!
At these high prices, the 3G winners would find that they have to price 3G data access prohibitively high - and will not be able to attract large number of customers for 3G, and so they are stuck in a very unprofitable situation. If they price it low, they can attract a lot of customers, but they might still find it difficult to service the debt that they took on to bid for the 3G spectrum.
In a lot of ways, this is similar to killing the goose that lays the golden eggs.
Tuesday, May 11, 2010
Barking up the wrong tree!
Last week, the Indian government announced a ban on Chinese Telecom equipment. While this has been discussed for quite some time now, the news of the ban still came as a surprise, because it takes a lot of guts by the government to come up with such a confrontational move.
The rationale for this ban is that Chinese Telecom imports could jeopardize India's security - while no one bothered to explain how security could be jeopardized, I guess the main worry is about things like sabotaging equipment, using a timebomb that is already present in the software, or sending instructions to disrupt functioning of the equipment as part of a regular software update. In the event of a war between India and China, it will be extremely foolish for India to rely on Chinese telecom equipment - even for civilian use.
However, what is the guarantee that American equipment has no security issues? Or for that matter Swedish equipment? Or Israeli equipment? While it is unlikely that India will fight a war with the US, Sweden or Israel, security considerations are not just about wars. What about spying, corporate espionage, etc?
Indian telecom market has grown to be one of the most significant markets in the industry. We add over 20 Million mobile users each "month" - this is the population of Australia! We spend tens of billions of dollars every year on telecom equipment. In fact the amount of money India pays for telecom equipment each year to foreigners dwarfs how much we pay foreigners for defence equipment. When it comes to defence, we have technology transfer clauses, we have requirements for domestic manufacturing, etc - because we realize that we have to be in control of the equipment eventually, and cannot afford to depend on outside help forever. When it comes to telecom equipment, why are we not insisting on such clauses? Telecom equipment is as important for our national security as defence equipment is.
Most telecom equipment is purchased by private sector telecom companies - but the government can atleast set the agenda when it comes to purchases by BSNL. What if BSNL insists that 10% of any contract has to be locally fulfilled by Indian partners. Or gives incentives for local procurement of the equipment? In fact if TRAI can step in and ban Chinese Telecom equipment purchases even by private telecom operators, why not mandate that private telecom operators have to procure 10% of their requirements locally? And mandate that this 10% should not be passive equipment like cables, towers, etc - but active equipment like Switches, base stations, etc. Because this industry does not even exist in India, they can start small, and slowly scale up the local content over time.
If we really care about security, it is in our long term interest to set up a thriving domestic telecom infrastructure industry. Initiatives like banning the Chinese will not work in long term - India is a big enough market, and Chinese equipment has a big enough price advantage, that it becomes attractive to setup dummy entities in some other jurisdictions to bypass these artificial restrictions. Do you expect Indian customs officials to pore through base station components and firmware to determine the origin of the product?
There is another important reason for India to encourage a domestic telecom industry. The Nano project by Tatas has shown that Indian engineering is second to none, and is best suited to create products specifically targetting Indian markets. Indian requirements are dramatically different from requirements in Sweden, US, etc. Nokia has done a great job customizing their product for the Indian market when it comes to handsets, but when it comes to infrastructure equipment, India uses pretty much same equipment as the rest of the world. One problem caused by this one-size fits all approach is the power situation. Power is not reliable in India - so towers need to have power backup solutions, generators, etc. Also because of extreme heat and dust in India, airconditioning requirements are also higher. The power backup needs to be capable of handling airconditioning requirements as well - so it adds very significantly to the cost of the deployment.
Maybe a solution engineering specifically for Indian conditions would do away with the requirement for Air-Conditioning. Maybe someone can create a solution that uses much lesser power. These solutions would be much better suited for Indian conditions, and would reduce the cost of deployment. The best part of this example, is that it is not a hypothetical example. Sloka Telecom - an Indian startup has created WiMAX base stations that do not require any air-conditioning, and use very little power, so that power backup requirements are lowered quite significantly. This makes the cost of deployment lower, and allows the operator to recover his investment at much lower ARPU.
Whether the ban on Chinese equipment stays or goes, it is high time India put policies in place to promote domestic companies to create telecom infrastructure. We should ensure that at least some of the billions of dollars that we spend on telecom each year comes back to us.
The rationale for this ban is that Chinese Telecom imports could jeopardize India's security - while no one bothered to explain how security could be jeopardized, I guess the main worry is about things like sabotaging equipment, using a timebomb that is already present in the software, or sending instructions to disrupt functioning of the equipment as part of a regular software update. In the event of a war between India and China, it will be extremely foolish for India to rely on Chinese telecom equipment - even for civilian use.
However, what is the guarantee that American equipment has no security issues? Or for that matter Swedish equipment? Or Israeli equipment? While it is unlikely that India will fight a war with the US, Sweden or Israel, security considerations are not just about wars. What about spying, corporate espionage, etc?
Indian telecom market has grown to be one of the most significant markets in the industry. We add over 20 Million mobile users each "month" - this is the population of Australia! We spend tens of billions of dollars every year on telecom equipment. In fact the amount of money India pays for telecom equipment each year to foreigners dwarfs how much we pay foreigners for defence equipment. When it comes to defence, we have technology transfer clauses, we have requirements for domestic manufacturing, etc - because we realize that we have to be in control of the equipment eventually, and cannot afford to depend on outside help forever. When it comes to telecom equipment, why are we not insisting on such clauses? Telecom equipment is as important for our national security as defence equipment is.
Most telecom equipment is purchased by private sector telecom companies - but the government can atleast set the agenda when it comes to purchases by BSNL. What if BSNL insists that 10% of any contract has to be locally fulfilled by Indian partners. Or gives incentives for local procurement of the equipment? In fact if TRAI can step in and ban Chinese Telecom equipment purchases even by private telecom operators, why not mandate that private telecom operators have to procure 10% of their requirements locally? And mandate that this 10% should not be passive equipment like cables, towers, etc - but active equipment like Switches, base stations, etc. Because this industry does not even exist in India, they can start small, and slowly scale up the local content over time.
If we really care about security, it is in our long term interest to set up a thriving domestic telecom infrastructure industry. Initiatives like banning the Chinese will not work in long term - India is a big enough market, and Chinese equipment has a big enough price advantage, that it becomes attractive to setup dummy entities in some other jurisdictions to bypass these artificial restrictions. Do you expect Indian customs officials to pore through base station components and firmware to determine the origin of the product?
There is another important reason for India to encourage a domestic telecom industry. The Nano project by Tatas has shown that Indian engineering is second to none, and is best suited to create products specifically targetting Indian markets. Indian requirements are dramatically different from requirements in Sweden, US, etc. Nokia has done a great job customizing their product for the Indian market when it comes to handsets, but when it comes to infrastructure equipment, India uses pretty much same equipment as the rest of the world. One problem caused by this one-size fits all approach is the power situation. Power is not reliable in India - so towers need to have power backup solutions, generators, etc. Also because of extreme heat and dust in India, airconditioning requirements are also higher. The power backup needs to be capable of handling airconditioning requirements as well - so it adds very significantly to the cost of the deployment.
Maybe a solution engineering specifically for Indian conditions would do away with the requirement for Air-Conditioning. Maybe someone can create a solution that uses much lesser power. These solutions would be much better suited for Indian conditions, and would reduce the cost of deployment. The best part of this example, is that it is not a hypothetical example. Sloka Telecom - an Indian startup has created WiMAX base stations that do not require any air-conditioning, and use very little power, so that power backup requirements are lowered quite significantly. This makes the cost of deployment lower, and allows the operator to recover his investment at much lower ARPU.
Whether the ban on Chinese equipment stays or goes, it is high time India put policies in place to promote domestic companies to create telecom infrastructure. We should ensure that at least some of the billions of dollars that we spend on telecom each year comes back to us.
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