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The Wireless Propagator: The Dual-Mode Choke Hold
Conspiracy theories abound regarding a variety of topics, from alien crash sites in Roswell, N.M., the true perpetrator of President John F. Kennedy's assassination, and Microsoft's domination in the consumer and enterprise desktop market. So it should come as no surprise when telecom watchdogs start banging their drums concerning the relative dearth of cellular handsets with integrated Wi-Fi--also called dual-mode phones--in the U.S. marketplace. For all the success of home Wi-Fi sales, publicity surrounding metro Wi-Fi networks, and the customer base of both pure-play VoIP providers such as Vonage and Packet8 and 'digital phone' providers such as Time Warner, Cox, and Comcast, it's somewhat ironic that dual-mode handsets haven't seen greater success in the United States.
In are recent feature on Vo-Fi (single-mode, Wi-Fi-only phones) I extracted some numbers from recent Infonetics reports that show that 2006 will have enjoyed roughly a $500 million in revenue tied to 'Wi-Fi phones'. But Infonetics is predicting that dual-mode sales will increase dramatically, from $53 million in 2005 and $380 million in 2006 to over $3 billion in 2009. Dean Bubley of Disruptive Analysis predicted in a 2005 report that 30 million dual-mode phones would be sold in 2009. With those kinds of numbers it would seem that the penetration of dual-mode is inevitable, but a statistic from Infonetics points out a geographical skew: Asia Pacific leads in revenue for dual-mode phones over North America.
In fact, a quick search on Google quickly reveals several dozen dual-mode phones, but few of them are readily available in the United States. There are a few notable exceptions: Cingular 8525 (aka HTC TyTn), HP iPAQ h6315/h6340/hw6900 series, Motorola MPx and the Symbol MC70. These all have built-in keyboards and none of these are candy bar phones. And how many dual-mode phones are sold directly by the wireless carrier to the end-customer?
According to Vivek Khuller, CEO of DiVitas Networks (www.divitas.com), the lack of Wi-Fi enabled mobile phones is a direct result of the wireless carriers' purposeful manipulation of the supply chain. DiVitas recently visited us at our Syracuse University RealWorld Labs to demonstrate their mobile-to-mobile convergence (MMC) offering (you'll be able to read the review in a late-April issue of Network Computing magazine). Their solution requires a dual-mode handset that supports voice services over both cellular and Wi-Fi. Unlike the now-defunct SCANN solution, DiVitas is taking a device- and wireless carrier-agnostic approach. One of the reasons that SCANN failed is that the wireless carriers didn't feel comfortable with a third-party solution that shifted premium minutes off their network to a private or third-party network such as Wi-Fi, where there was no direct revenue tied to those minutes.
DiVitas makes no friends with the wireless carriers in their marketing materials: one of their key points is that their solution helps control costs, not by limiting calls, but by using Wi-Fi to carry voice while in the office, hotspot, or home. According to different sources, anywhere from 30 percent to 60 percent of calls are either placed in the office or in the vicinity of a Wi-Fi access point. Khuller described one executive at financial services firms that spends approximately $800 to $900 per month on cellular services. He claims that wireless carriers in the U.S. are doing anything they can to preserve, if not enhance, their revenue stream--and making dual-mode phones easily available at retail outlets would work against that.
We've been told multiple times that the carriers dictate device design parameters--features, functions, and shape--and some of those choices restrict customers. For example, Verizon Wireless has been successfully sued for disabling some of the advertised Bluetooth features, specifically file sharing, in Motorola's v710 phone. This meant that customers were forced to use Verizon Wireless' cellular (and expensive) network to move files between their phone and PC. The Nokia E61, a very popular dual-mode phone that has been used by BT, Truphone, and others for its quality Wi-Fi services, has not been formally introduced to the U.S. market. Instead, Cingular worked with Nokia to create the E62, a Wi-Fi-neutered equivalent. According to Khuller, Nokia will not be offering customized versions for carriers in the future, and other sources have stated that Nokia will include Wi-Fi as a standard component in their enterprise-centric phones.
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