That Sour Berry !!

These are troubled times in world economy. Bailout packages by governments across the world have failed to improve the macro sentiments overall. Its strange to believe how a bull economy can turn bearish in a matter of days wiping out some of the hallowed financial institutions of our times on its way. So is it the turn of Socialism again? No I am not attempting to answer this tricky question - I'd rather attempt to dwell on something more comfortable. Although the effects of economic slowdown have had limited effects on telecoms scenario, a prolonged recession can effect operators' growth plans. But as someone rightly said every situation is an opportunity. Valuations of many companies have tanked owing to free fall in stock markets and these are ideal times for some one sitting on excess cash (now is that as rare as a blue moon in these crazy times?). One of those who always seem to have that is Microsoft and with rumours of interest in Research in Motion - the makers of Blackberry, reemerging, the fight for market share in the Mobile OS is set to become all the more interesting.

With competition from Nokia's Symbian, Apple’s iPhone and most importantly, the Google Android platform, Microsoft’s mobile platform is facing its toughest environment yet. Recently it was revealed that the upcoming version of Microsoft’s mobile OS, Windows Mobile 7.0, would be delayed and will now release as late as 2010. The updated version, which the company’s partners had been hoping to have by early 2009, was aimed at giving Microsoft a bigger presence on the mobile stage. Although Nokia with its dominance in the handset is helping Symbian's cause and iPhone with its touch sensitive features is continuiung to wow customers worldwide, its the entry of Google's Android platform that has got Microsoft worried - with T Mobile's announcement that it has close to 1.5 million preorders for G1 adding to its worries. Over the years, Microsoft has pummeled countless rivals, including the heavyweights like I.B.M, Netscape etc. But it has never faced a rival as formidable as Google. Though, Microsoft is currently enjoying increased penetration levels thanks to the classic "first mover advantage" principle, Google appears to be much more superior in speed & smartness and seems to understand customers need better. Having exhausted the best of its ideas on how to deal with Google, it has realized the best way to compete with innovation is not to recreate innovation but to buy it. The same was true when it tried to buy Yahoo through a series of hostile bids earlier this year, the same was true for the Facebook investment, and the same is also true when it is trying to buy its way into dominance in the Mobile OS space through its apparent interest in Research In Motion - the makers of Blackberry.

Although there were rumours in the second half of last year about a possible buyout, with plummetting stock prices, new rumours are swirling that Microsoft which is much more comfortable with the valuations now and may test RIM's resolve by placing a bid close to current market price. Regardless of the authenticity of market talk, one must question the business sense behind the interest. Although this does possess some obvious advantages to both the companies - like providing Windows Mobile which has a sizeable consumer presence, a headway into enterprise customer base for its exchange & other business offerings and Blackberry with some much needed "touch screen" presence, but buying a company that makes hardware which doesnt run Windows Mobile pose many potential operational challenges. Also Blackberry supports multiple Email platforms and one has to doubt how interested will Microsoft be to support Lotus offerings on Mobile. Built on Linux platform, Blackberry is not strategic fit for Microsoft's Windows strategy for Mobile OS.

At the moment, there are too many complications for the deal to go through. Both companies can do much more individually than as an integrated unit. The acquisition might have made more sense about 5 years ago when Blackberry was smaller & less prevalent. Platform integration would have been a much easier task then. One does hope this rumour remains just that - a rumour not just to sustain the healthy growth in the Mobile OS industry but also because the industry is not ready for consolidation yet.

The "Capacity" conundrum

Its finally here. After months of delays, Sprint finally launched Xohm yesterday bringing an end to speculation about the brand and the service itself. As a long term sprint and WiMAX critic, one must admit being quietly surprised by what Sprint has managed to pull out. Xohm, in its initial few days after announcement evoked mixed reactions from different sections of the media. Some positive that the consumer will finally get to see wireless convergence earlier than they hoped and others neutral/negative partly because they were more concerned with cycle time of their "evolution" investments. Sprint through Xohm became the poster boy of WiMAX worldwide. Although operators in some emerging markets are betting on the technology on a much bigger scale, everyone in the ecosystem continue to link sprint's success to WiMAX's future or should we rather say WiMAX's survival.

If its about survival, then it must be said that Xohm managed to keep mobile WiMAX alive to fight another day. Yesterday, Sprint launched its first Xohm commercial WiMAX network in Baltimore with subsequent launches planned in atleast 5 other cities before the end of 2008. But as they say, the devil is in the detail. The network at launch is a notebook and home play network only with timelines still unclear about handheld Voice(with Sprint EVDO) and data (WiMAX & EVDO). The Initial launch however promises required QoS for VoIP. There is no commitment yet on Wi-Fi integration. Sprint at 2.5GHz has deployed around 170 cell sites in Baltimore alone with the number expected to go to 200 by the end of the year. Some reports say that this is 15% more than what Sprint deployed for a CDMA EVDO network. The number of sq km the network covers is still unclear but it has to be a long way off from Intel's original promise of 30 Km coverage per cell site. In building coverage is another important aspect with commitment of 2 to 4 Mbps of download speeds and upload speeds in upwards of 1Mb - and that is why Wi-Fi integration is all the more important for Xohm.

One area where Sprint surprised everyone was by removing the 5 Gb data cap. This they say goes with their strategy of positioning Xohm and WiMAX as more a "capacity" story than a "technology" or a "speed" story. This will not only differentiate it with the 3G lookalikes like HSPA or EVDO but also throw the gauntlet at LTE and its ecosystem. Once the service starts penetrating in other major cities of US, I think the likes of ATT, Verizon, T Mobile etc will do away with the download caps on their networks. At launch, mobile WiMAX service plans include a $10 day pass, $25 monthly home Internet service and a $30 monthly mobile service available on any WiMAX device and a $50 monthly service option covering two different WiMAX devices. If the network expands nationwide, this might be a good option, assuming prices will rise as coverage expands — and that the coverage is good.

For Sprint, Xohm launch could complement the Clearwire joint venture that it recently joined. Sprint will hope that Clearwire perfectly addresses WiMAX penetration concerns atleast in rural areas. What remains to be seen is if the American thirst for the Internet on the go will provide Sprint's Xohm with enough customers to pay the bills and turn it into a profitable venture. The Operators with wired access infrastructure are just beginning to realize that even wired bandwidth is not unlimited. Wireless is all about limited airwaves and it will face choc-a-bloc when subscriber numbers start growing. Further, it is also unclear what the merger with Clearwire will do to the business model, and really unclear if a data-only network, with VoIP at some point, can compete with existing networks that offer voice and data services. In the near future, a customer with a handheld will have 3 hotspots to connect to Wi-Fi, Xohm and the HSPA/EVDO base station. It would be interesting to see how much customers are ready to pay to connect to each of the 3 options. What would be more interesting to see is how Sprint succeeds in arresting its churn and ARPU decline through Xohm.