Saturday, April 25, 2009

Still a BlackBerry nation

This week I had a two-day trip to the Michigan State telecommunications center to deliver a talk (more later). Due to the difficulties of getting to Lansing from San Jose (or SFO), that meant six flights through five airports in a 42-hour period, including a circuitous routing home: LAN-ORD-LAX-SJC.

Because my talk was on the iPhone (as was the Q&A and much of the informal discussion), on the trip home I was thinking a lot about iPhone and smartphone usage patterns. But instead of the iPhone, what I observed was a remarkable overlap between BlackBerry owners and airline travelers.

I didn’t see the phone model of my seatmate on the first leg. On the second leg, I was among the last to board the flight to L.A. at O’Hare airport: walking onto the plane, three of the eight people in first class were intently reading on their cellphones — all BlackBerries. When I squeezed into my middle seat, the two guys on either side were reading on their BlackBerries. On the final leg to San Jose in a CRJ-70 with 2+2 seating, my only seatmate was reading something on a BlackBerry.

All of these BlackBerries had thumb keyboards — no Storm in sight. In fact, these were all standard width phones — no Pearls either.

When I hang out with tech types here in the Valley, the iPhone is it, and the BlackBerry is passé. This includes not just those in the industry, but also housewives and students who have the bucks to buy the pricey phone and its pricier data plan. That also applies to many tech-savvy college professors or grad students that I meet in my travels.

But when you look at the market share numbers, the BlackBerry is still killing the iPhone. Here is the IDC smartphone marketshare for the US, as released in dribs and drabs of press releases over the last 15 months.

The story, of course, is pretty simple. Apple has only one model, and so gets a huge boost when it comes out (and had a 2nd boost in Xmas 2007) but otherwise tapers off the rest of the year.

The other reason is that to launch the iPhone in the US, Apple gave one company an exclusive, thus limiting its sales. Clever distribution ploys aren’t going to get around the fact that Research in Motion sells through almost everyone (even MetroPCS) while Apple is only selling to the 28% of the market that is on or willing to be on AT&T.

This exclusive is of course a legacy of its 2007 revenue sharing model. In 2008 (when Apple added the majority of its countries), the norm appears to be multiple carriers. In a quick spot check, that’s two carriers in Chile ((unlike Claro and Movistar), India (Airtel and Vodafone), Italy (TIM and Vodafone) and Sweden (Telia and Telenor), three in Australia (Optus, Telstra, Vodafone) but only one in Canada (Rogers and its Fido subsidiary), Japan (Softbank) and Mexico (Telcel).

This leaves out the differences in the devices and usage. Both devices seems popular for Internet use (as opposed to Palms which are often used as just organizers). However, the BlackBerries seem to be about reading text while the iPhone seems more about surfing the web. (Both are obviously used for e-mail).

Apple has some hope. The 20ish young man next to me en route to LAX put his BlackBerry away when the plane took off, and spent the whole flight with his iPod Touch. He said he would have bought an iPhone but still had a contract on his BlackBerry.

In 2008, Apple added most of the interesting countries, so in 2009 it won’t be able to add countries (except China) that will significantly grow its global market share. This leaves two options for growing share in the rapidly growing smartphone segment that was up 22.7% last year. However, I have major doubts whether Apple will pursue either one.

One is to release a broader product line in 2009 — not just one model but many, as it did with the iPod. However, Apple seems loath to cannibalize its premium product, nor (I suspect) is it willing to tinker with the original vision (e.g. by adding a keyboard).

It may be that Apple will add other types of mobile devices to increase unit sales without regards to cellphone market share bragging rights. After all, Apple sells 3 iPod Touch units four every 4 iPhones worldwide, and all of these models are driving revenue to the App Store. The rumored Apple netbook might similarly be an iPhone OS device that doesn’t count towards cellphone market share.

The other option is to add additional carriers in those countries where it originally granted an exclusive. One problem is that it appears the exclusive doesn’t expire until until 2010. The other is that Apple COO Tim Cook explicitly said last week that Apple has no interest in CDMA, which rules out the majority of the US cellular market (Verizon-Alltel, Sprint, US Cellular, MetroPCS, Cricket). T-Mobile is less than half the size of either AT&T or Verizon.

So if the 2007 story was the iPhone’s initial foothold, and 2008 was global proliferation based on 3G support, I suspect that 2009 will be about proliferating new devices that are not necessarily phones. That will leave US a BlackBerry nation for at least a few more years.

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