Monday, July 13, 2009

Lower Cost + Better Service = BOOM!

Sprint has announced that it will demand that its suppliers include WIFI in handsets. This is one of those inevitable, forced moves that lower the price of technology to consumers. The public often thinks that businesses set the price for goods and services. In reality, if consumers will not pay the price, the good or service is discontinued or the price comes down to what the consumer will pay. More frequently, some consumers pay the high price but others balk until a competitor offers a better deal and then the whole industry must adopt the lower price. Yes, the price for mobile Internet service is coming down. T-Mobil is offering their high usage plans for $30 per month less than AT&T iPhone plans. It has to be that some of the extra charge by At&T is extra profit for having a lock on iPhones. As other phones approch or pass the quality of the iPhone the price spread will narrow by the lowering of the AT&T price.

Verizon's initial response to the announcement was that they already offer numerous handsets with built-in WIFI. This is kind of like a car dealer saying I can sell you a Cadillac or a Buick but I'll charge you a big premium for the Cadillac because it has power windows. There was a time when power windows only came on luxury cars. It was amazing how much higher the price of the luxury cars; a price that had little to do with the actual cost of adding features such as power windows. Sooner or later, the dam broke, power windows were added as a feature on lower priced cars and they consistently outsold those without, until such windows were added to other low priced autos as well. Dealers contniue to offer high priced luxury cars but power windows is no longer the excuse for any part of the price difference. Today most cars have power windows as standard equipment and the cost, including installation of power windows is less than the cost of the old hand cranked windows. (Most consumers do not realize how much the price of a new car has tumbled over the past 20 years. The hours of work needed to buy the average new car continues to fall.)

Within a sort time, perhaps only 2 or 3 years, most cell phone traffic will be going through WiFi Routers and high speed land lines. This will allow cell phone companies to handle the huge surge in volume that is coming while selling all the more cell phones.

Many services that most of us currently access through our personal computers are rapidly being moved to cell phones. Things like an Internet search is not a new service but it will be new to billions of cell phone users over the next few years. Dramatic advances in computer translation of text to speech and vice versa will also dramatically increase traffic. The settlement reached between the music industry and providers of Internet music streams will dramatically increase the amount of time consumers listen to "their private Internet radio stations". The resolution of the settlement between Google and book publishers will mean that many hours will be spent reading books, magazines and newsletters that have been transmitted to "cell phones". It seems unreal but under the developing pricing plans, consumers will listen to a wide variety of music free of charge but will pay a few cents extra per minute after they max out their data plan.

After the Internet 1.0 bubble popped, there were hundreds of thousands of miles of "dark cable" stretched around the globe. By selling cell phones that look for the nearest WiFi connection in lieu of the nearest cell phone tower, fewer launches of very expensive satellites will be made and thousands of miles of dark cable will be lit. Cell phone companies will initially get the same price from the customer for sending the call, even though the expensive tower and satellite is not used. Don't take the point of the tower wrong, the demand for towers does not go away. Indeed, in many instances, the addition of a WiFi compatible antennae on a tower will make that tower all the more important. Still, much of the tremendous growth in traffic is going to hit a home based, work based or Starbucks based WiFi reciever and zoom out to a transmitter in another home, restaurant or work place. In other words, cell phones are being made with two modes, similar to having a car equipped with both an FM radio and an AM radio. AM radios were once the only game in town, but over the years, FM took the greater market share. In like manner, cell radios are going to be partially replaced by WiFi radios. WiFi radios (and the coming enhanced versions) are cheaper, faster and can carry much more traffic!

If you have not gotten your Google Voice free phone number, you should apply now. Google Voice is offering a significant productivity enhancement to billions of people. Companies, such as Cisco, have worked on unified message services for many years, as has Google and Grand Central before the Google purchase, but this work is just now ready for a huge global payoff. The serice is much more than a sophisticated call screening, call routing and call answering machine. It is also a text to voice translator and more. Never before has it been routine for words spoken in English to be heard in another language and for the hearer to respond in his language while being heard in English. Biblical radicals will see this as another sign that Armageddon is upon us but the savings to consumers will be enormous because the lowest cost producer of goods will be more easily found.

How about GOOGLE WAVE for disruptive technology! If you have not watched the developers video about Google Wave you should do so ( It will be months before Google Wave is available to the public but adoption rates will be rapid once it is available. Why not? Instead of sending your family and friends something similar to a telegram, you will invite them to come sit down in your living room to have a chat or to play a card game with other invited friends. Email is old, 40-year old technology; in a few years, those who use email will be the equivalent of those who still drove horses in the 1930's or model T in the 1940's.

Lower cost for better service means dramatic growth in use. Lower costs + Better service = BOOM!