Endeavour Partners - Blog

Does the iPad herald a new age of connected devices, or is it “just a big iPod”?  Reviews have been mixed.

Apple's iPad: With WiFi for $499; with WiFi and 3G for $629

And even if you love it, will you be willing to pay the extra $130 upfront and $29.99 per month for 3G service, or is WiFi sufficient? (Particularly given that a 3G chipset adds only $7-10 to the BOM).

I suspect WiFi is sufficient, and that the price of 3G connectivity is too steep.  It is too steep, in particular, because in a new era of multiple connected devices each new device cannot come with its own expensive data plan.  It is one thing to pay for home broadband ($40-50) and a smartphone data plan (~$30).  It is another to add a netbook, a MiFi, a connected camera, an eReader, and/or an iPad and have each of these carrying its own contract.

Would you buy a separate data plan for each of these devices?

My family looked at netbooks for Christmas this year, and chose to buy without the subsidy and wireless broadband contract.  The most common use cases for netbooks and iPads are still likely to be in places with WiFi connectivity:  Home, office, hotel, café.  And if you own more than one connected device, then you are better off buying a MiFi portable WiFi hub (from Verizon or Sprint) and sharing 3G connectivity across multiple devices than having a 3G connection for each device.

With this in mind, it actually could make more sense for wireline broadband providers to subsidize netbooks and iPads and connected consumer electronics than for wireless companies to do so.  In our case, the netbook bundled with FiOS Internet or Comcast’s DOCSIS 3.0 service would have been more compelling than the 3G offer.  For the iPad, a purchase for less than $499 with WiFi and a bundle of pre-loaded apps and services (such as Verizon Media Manager or a Comcast TV Everywhere app) from a broadband service provider would be interesting indeed.

At 4G World here in Chicago, the debate is raging on about the potential value of femtocells.  One audience member asked yesterday, “If I already have a 20 Mbps broadband connection and a WiFi access point, then why do I need a femtocell?”  I think he was on to something, but it is interesting to go back in time a little and see how the relative business cases for WiFi and femtocells have changed as the market evolved.

This feels like a confession:  Three years ago, I was a proponent of femtocells as a solution for indoor coverage, particularly when compared to WiFi UMA.  Too few devices had WiFi, and it seemed unrealistic to expect many users to adopt a solution that required such a constrained selection.  Different family members or different personnel within an organization may have very different device preferences or be at different points within the replacement cycle.

By contrast, femtocells allow installation of customer premise equipment where it is needed, and the problem is solved.  Individual users don’t need to change their behavior, and if the costs were right, then it could be an attractive solution for many households and businesses.  But the costs were too high (I priced one at $300 at the time) and commercial availability was and still is limited.

Fast-forward three years and the market has changed dramatically:

1. Lead by the iPhone and RIM’s Blackberry, smartphones are rapidly gaining share – in developed markets, the majority of users will have one within two device replacement cycles
2. The challenge is no longer only about indoor coverage, but now also includes an immediate need for additional data capacity to support high bandwidth applications
3. Leading smartphones will nearly all be WiFi-enabled

The result is that homeowners and businesses no longer need to pay to install a femto cell, and users no longer need to be constrained to specialized, suboptimal devices.  For most people, WiFi coverage already exists in their home and office, and these same people are likely to carry a WiFi-enabled smartphone now or within two upgrade cycles.

These smartphones are also responsible for driving a massive increase in data traffic and clogging up 3G networks.  WiFi provides a mechanism for operators to offload 30% or more of this traffic without massive upgrades — and in advance of LTE networks coming over the next 3 years.

Device makers are scrambling to offer smartphones that match Apple’s iPhone as the key competitive benchmark (including WiFi).  Mobile operators are responding to increasing smartphone usage with investments in WiFi assets and improvement of seamless switching between WiFi and wide-area cellular to offload some of the associated explosion of data traffic.  The way the iPhone restricts high-bandwidth applications so they can only be used over WiFi is a good example of a first step in this direction.

Meanwhile, the level of investment in femtocells is small by comparison, involves a tough value proposition to customers, and is focused on solving a problem that is largely taking care of itself.

My money is on WiFi.

There’s a discussion on Mobile Innovation about ‘When will Femtocells go Mass Market?’

We think it’s now ‘if’, not when:

1. the market in the developed world is moving to smartphones
2. substantially all smartphones will have WiFi
3. WiFi is already pervasive in the enterprise
4. WiFi is widespread in the home

So, who needs the extra cost and expense of a femtocell, when the WiFi infrastructure is already there? Vodafone is asking £160 (= US$265, €183) for its femtocell, the Vodafone Access Gateway:

Vodafone Access Gateway

A Belkin N150 Enhanced Wireless Router for BT is just £70 ( = US$117, €80) – less than half as much:

Belkin N150 Enhanced Wireless Router

Part of the discussion was triggered by a new report from Juniper Research, which puts the numbers at just 15 million worldwide by 2012. That’s hardly mass market: it’s much less than 1% of subscribers in the developed world. It’s not enough to put any sort of dent in the smartphone surge shortfall.

So for femtocells, it’s becoming if, not when…

One of the big impacts of smartphones has been a resurgence in WiFi as noted by, amongst others GigaOM and ABI; we believe that pretty much every smartphone worthy of the name will incorporate WiFi, to enable a whole bunch of convergence use cases, such as connectivity within the home and office for convergence. This may well extend to public spaces as well; we think that there’s a compelling case to be made for ‘drive by downloads’ to unload the cellular networks laboring under the impact of the smartphone surge.

Our Cambridge (MA) office is at Cambridge Innovation Center, at One Broadway, which is a great space, and the importance of WiFi is driven home by a recent post on the blog:

people are beginning to rely much more on Wi-Fi than they had in the past, with some companies dropping wired connections entirely.  Some cell phones, such as the T-Mobile Blackberries our staff use, can now make and receive all their calls over Wi-Fi

There’s a great discussion of the challenges involved, and the outcome, for which are extremely grateful, of much improved reception and performance, thanks to Ruckus‘ BeamFlex (reviewed here)

After all the testing and analysis, one system stood head and shoulders above the others: the ZoneFlex system from Ruckus Wireless.  I remember in particular one of the graphs comparing the performance of the various systems under heavy load.  The other systems showed a jumble of jagged lines representing drop-outs, while Ruckus sailed smoothly through with none.

Another funny story from this effort was that after we were done, we had come to know some other support people very well, but didn’t have a read on the quality of Ruckus support.  Why?  Because we didn’t have to call them!

There’s a wider theme there that harks back to some of our early work with Virgin Mobile; the best customer service is the one you never need…