When should I switch to Verizon?

For more than a year, I’ve been mulling over which mobile platform (and carrier) to choose, given that my original choice has reached the end of the line — and so I’m gonna have to pay switching costs anyway.

I’ve been with Sprint for more than a decade. Since 2001, I’ve had a series of Palm OS smartphones since buying a Kyocera QCP-6035. My next phone is not going to be a Palm, given that the company has doubled down on the Pre, which was too little and too late.

It’s also not likely to be Sprint. Sprint is like other carriers in requiring a monthly data plan subscription with smartphones; however, it’s unlike the others in requiring a data plan for all phones on the family plan, and only one person (me) in our household needs a data plan.

I’ve been tempted by the iPhone and in fact would have bought an iPod Touch last summer if they’d updated the product instead of peddling a warmed over 2008 model. My one problem with the iPhone has always been AT&T.

While contemplating this, I saw the recent issue of Consumer Reports which notes that AT&T has the worst service of the big four mobile operators, while Verizon Wireless has the best. This is particularly true in the three major California markets — San Francisco, LA and San Diego — where I make 99+% of my calls and probably 100% of my data usage. (Of course, this only reinforces the recent advertising war between the two carriers.)

Sprint is only slightly better than AT&T in nationwide satisfaction, but at least (as I’ve found) it roams to Verizon. T-Mobile is second only to Verizon, but roams to the problematic AT&T network; it also has a spotty 3G network and its devices are incompatible with AT&T’s 3G services in the 850 MHz band.

So barring a workaround to Sprint pricing, my next phone will be on the Verizon network. Of the major smartphones platforms, BlackBerry is too business oriented, Windows has no attraction whatsoever, and Symbian is absent from CDMA. Although BlackBerry is #1 in US market share, two other platforms have bigger app stores.

In other words, as for so many others, it’s down to iPhone vs. Android.

On Verizon, I could wait for the mythical Verizon iPhone (rumored for June), or the Nexus One (promised for “Spring”), or buy a Motorola Droid now.

This has me leaning towards Android. My former student Rahul points out that Android isn’t particularly good for Exchange or games, neither matter to me. (My daughter might disagree on one of these.) On the other hand, the fact that OS X 10.5 won’t sync with Google’s addressbook would be a problem — since I refuse to use 10.6 — but fortunately there’s an app (workaround) for that (which I’ve already tried out.)

With a dataplan, I want a real keyboard, so on paper the Droid looked interesting. Sunday I went to Costco to try the Droid again. However, as even Motorola‘s CEO admits, it has a terrible keyboard.

Also at Costco, the T-Mobile Motorola Cliq certainly has a better keyboard than the Droid. On Sprint, the Samsung Moment has the best keyboard of these three phones. Or I could wait for the promised Droid upgrade — at which point the CDMA iPhone may already be shipping.

So that’s my dilemma. I’d be curious to hear from owners of smartphones with a slide-out keyboard (except for those drinking Luke Wilson’s Kool-Aid.)

What’s really odd for me is that on Mac vs. Windows, I’ve been 110% Apple for 26 years, despite paying a premium price and having a limited selection of products. On iPhone vs. Android, the limited selection of Apple products is worse (effectively one model), and so it looks like I’ll choose the non-Apple solution, even though it’s clearly inferior on ease of use. Perhaps it‘s because a PC is a general-purpose device while a phone (for now) is just a phone (Sorry, David.)

On the other hand, it could go the other way. My MacBook Air is not going to make it to 4 years (our college-mandated replacement cycle.) When it it dies, if Apple continues to ignore the netbook, I may end up buying a Windoze machine that’s uglier, equally speedy but one-third the price. If nothing else, I could install Safari, Firefox, iTunes and (sigh) Eudora, and have all the same apps that I’m using today.

Google's half-full glass of openness

A number of experts have been remarking that the NexusOne brings Google into more direct competition with Apple and the iPhone, ending a once cozy and complementary relationship between the two firms.

Google’s mobile strategy continues to get closer to Apple’s. Both are peddling mobile platforms, seeking users, operators and third party software providers. While Google’s OS is open source — and available via multiple handset manufacturers — it still is a hybrid open/proprietary strategy that competes with Apple’s own hybrid strategy.

Some analysts understand this better than others. Dan Moren of Macworld portrayed it thusly:

By putting its name on the Nexus One, Google has given the Nexus One a sort of primacy on the Android front, unifying the disparate elements of the Android movement: now it’s Google going head to head with Apple, not a strange amalgam of Google, Motorola, and Verizon. It’s as if Google has promoted itself to head of the Rebel Alliance opposing Apple’s Galactic Empire.

Ooo, there's a value laden metaphor if there ever was one! (NB: In Star Wars III, Lucas is much more sympathetic to the Empire’s control problems than he was in 1977 with Star Wars IV.)

A much more accurate characterization came from John Gapper of the FT

Yet Apple is not as closed as Google portrays it, and nor is Google as open. Instead, like the proverbial half-empty glass, Google is best regarded as half-open and Apple as half-closed. That is significant because it shows how such companies need to compete in a networked industry.

Google is fighting for its own interests as hard as Apple does. That is, at one level, obvious since they are both public companies that try to maximise revenues. Yet its insistence on not doing “evil” and its dismissive view of Apple and Microsoft obscures this.

Gapper’s point is that even if Google’s OS is open, it plans to make money off these phones through its control of search. Gapper had earlier observed that mobile phone value capture had shifted from European telecom manufacturers towards US Internet companies (e.g. Google), as well as Apple.

I agree with Gapper’s overall point this week that mixed proprietary/open strategies are both normal and reasonable. I also share his aversion to exaggerated claims of openness.

However, in thinking about some of my earliest research on openness — ironically a 2003 paper about Apple’s early open source strategy — I think Gapper has only half the story.

Gapper focuses on how (to use my 2003 term) Google is “opening parts”. Its mobile phone OS is open source, but other parts of the value proposition (e.g. search, maps, mail, etc.) are proprietary. Google shares its code, but not is advertising revenues.

However, to use the 2003 terminology, I think it’s clear that Android is also “partly open.” Truly open sponsored open source communities do more than just provide source code, but also share in the governance and technical direction. Someday Android may be open, but it’s not there yet.

While Gapper talks about the openness glass being half full, I think an equally important point is that for many companies it changes over time, and differs between markets and products.

The two most proprietary companies in the PC industry, Apple and Microsoft, had various degrees of openness over time and across product lines. Among mainframe companies, IBM was once the captain of proprietary IT strategies, but in the past 20 years has moved to embrace open source and make lots of money off of services. Sun claimed to be open — and in relative terms it was — but still did everything it could to create switching costs and proprietary rents. (NB: Google CEO Eric Schmidt spent 14 years at Sun as a manager and eventually CTO.)

So I think that the only realistic way to view Google is as a self-interested, profit-maximizing, semi-proprietary company that embraces openness when it suits its purposes. Consumers should (and do) welcome that many of its ad-supported services are free, but continue to remember that Google wants to keep its repeat customers every bit as much as Apple, IBM and Microsoft do.

CalPERS is strangely silent

Lord knows, CalPERS (my pension fund) has had its share of problems over the past two years, losing more principal than ever before. (Like most asset-speculating pension funds, if it doesn’t make enough money in the market, either employees or employers will have to raise contributions to pay for promised pensions).

Still, it is strangely silent on the Obama administration’s controversial plan (embodied in the Senate bill) to surtax 40% of employer-provided healthcare over a certain amount ($1,900/month for a family of four).

While framed as a charge on “Cadillac” plans for executives, in reality most of the revenue will come from large employee groups that have been able to negotiate generous (tax-free) benefits — i.e., unions. On Monday, the AFL-CIO finally noticed and opposed this provision.

But why CalPERS hasn’t said anything is beyond me. It is the largest pension fund in the country. Two years ago, it was the third-largest health insurance buyer in the country, but vaulted into second place last fall (after the Feds) due to the GM bankruptcy and downsizing.

So if anyone had an interest in the taxation of employee benefits — and the economies of scale to analyze such proposals — it would be CalPERS. Its web page even offers a collection of web pages related to national Health Care Reform.

But nothing appears about how the two-month-old taxation proposals would impact CalPERS members. How many state employees or retirees have plans that exceed the taxable threshold? Wouldn’t the CalPERS members want to know before their representatives vote on the final measure?

According to CalPERS statistics, in 2009 it paid $5.7b in healthcare premiums for 1.3m current or former public employees (both state and local). For state employees, it pays about 85% of the total cost (although only 80% for current employees).

Are many or most CalPERS employees under the “Cadillac” threshold? From the aggregate stats I’ve seen, it’s impossible to say. However, as an organization CalPERS strongly favors health care reform, and majority of its trustees are appointed or elected by union members or Democrat elected officials.

So is CalPERS hiding bad news to support a political agenda? Or is it too inept to figure out this is an important and relevant issue? Either way, it’s failing its fiduciary duty to beneficiaries and employers, who somehow between them would have to pay the incremental cost of any surtax.

Google wins, Motorola loses

The papers, the news, blogosphere etc. are all abuzz about the new Google Nexus One.

The “phone” is actually two different phones: an unlocked GSM phone for T-Mobile and an unlocked CDMA phone for Verizon due by June. Since the GSM phone will also work on overseas networks (but not AT&T’s 3G network), it’s not clear whether this phone is the one planned for Vodafone, or it will be yet a third phone.

The new phone doesn’t appear to be much different than any HTC Android phone, except that it has Android 2.1 and a 1 GHz processor from Qualcomm. (The first Android phone was also Qualcomm Inside).

The reviews have ranged from fawning to skeptical, but overall the phone appears to be an incremental improvement over existing phones. The business model — $530 unlocked or $180 with a T-Mobile subsidized contract — appears to be somewhat different, but unlocked phones have been available for years from Amazon or even my local Fry’s. (The former is how I bought my Nokia E65).

So why is Google doing this? The new OS and faster processors will be used by other vendors later this year. The unlocked model is certainly one that can be used by others. Does Google so want to get its brand out there that it has to have its own branded phone? (Having the Google logo on the back of most Android phones isn’t enough?)

One possibility is that this was an engineering (or ISV-oriented) prototype, developed for internal use, that someone decided to commercialize. Although I don’t know if it ever shipped, several years ago I heard that Nokia was working on an unlocked, reflashable handset for exactly this reason.

What is certainly happening is that Google is competing with its OS customers. I am not the only one who thinks this is a bad idea. (Android is nominally open source, but in terms of actual openness it is really provided a Google-led industrial consortium).

Who are its customers? Phandroid — a once-authoritative Android phone site — lists 15 other Android models currently available, although some of those are variants in different national markets. Three are from Samsung, two are from Motorola, one from Huawei and the remaining nine from HTC. Two are CDMA — the Motorola Droid and the HTC Hero), one is dual mode (Samsung Moment), and the remainder GSM.

Huawei has no choice, and HTC seems happy to let others rebrand its products, but what about Motorola and Samsung? (The Open Handset Alliance also includes LG and Sony Ericsson, leaving Nokia as the only top 5 handset maker not participating).

Is this a careful calculation that the major handset makers have no choice but participate? With Windows Mobile continuing its long slide, Motorola seems to have all its smartphone eggs in the Android basket. Samsung sells lots of Windows Mobile phones (BlackJack, BlackJack II, Jack) and has dabbled in Symbian and LiMo as well, but seems perfectly happy to sell its proprietary OS.

So the Chinese and Taiwanese makers will just grin and bear it, the Koreans will go on being platform agnostic (if not platform indifferent), and this gives Nokia even more reason not to join the OHA. (Not that was ever likely).

Which leaves Motorola as the one in the pickle. What should Sanjay Jha do about Android? His company already had limited brand visibility on Verizon, which is using “Droid” as its own subbrand for all Android phones from its various suppliers. Now it’s having to compete with its OS supplier.

The Japanese have an expression: “sho ga nai.” Roughly translated, it means: “ain’t nothing you can do about it.” While at Qualcomm, I’m sure Jha spent enough time selling Qualcomm chips in Japan to learn this expression, but that doesn’t make his problem any more tractable.

Razors that outlive the razor blades (and its maker)

Everyone always talks about how important it is to create a “razor and razor blade” business model. Although business jargon is often sloppily applied, this would normally translate into “get people to use your durable base unit and then sell them lots and lots of consumables.”

Best case, you can keep a struggling Fortune 100 company alive for a decade or more. Don’t believe me? Look up the role that inkjet and laser printer cartridges played for HP during the period roughly 1995-2005 as its enterprise and personal computing businesses were plunged into commodity price wars.

Normally the razor-and-razor-blade model assumes some form of incompatibility and switching costs. After all, the worst possible scenario would be to subsidize adoption of your hardware and then have it used to pad the consumables profits of another company.

Today we found an interesting antique “razor” that outlived the razor blade maker. When we sought to get passport photos, our local Mailboxes Etc. (now a “UPS Store”) used an OER PC-10 passport camera. It appears that OER took an off-the-shelf Polaroid back and added its own optics so that a single snap would print two near-identical photos.

(Note to the Millennials: Polaroid was a film-based photography company that provided instant photography before digital cameras were invented.)

By creating instant film, getting a passel of patents — and driving the evil Big Yellow out of the market with a $0.9 billion judgement — Edward Land’s once-famous company had the instant film market to itself. Unfortunately, the film business ain’t what it used to be, and unlike their Japanese rival (Fuji), both Polaroid and Kodak went into a long decline as megapixels replaced chemical reactions.

As a result of that decline, from 2006-2008 Polaroid decided to stop making cameras and then their film. No matter how long lived the cameras were, Polaroid wasn’t going to be around to profit from selling more razor blades, leaving a bunch of angry orphans. (Of course, the current Polaroid is a zombie company that was liquidated and the remainder purchased out of bankruptcy by a private equity firm).

Fortunately for our local MBE, Fuji is selling film packs that work with the 80- and 100-series Polaroid film. So, as my dad showed me 40+ years ago, you take the picture, count to 60, pull out the picture, count to 120 and then pull the transfer sheet off.

Thanks to this trailing edge technology, the State Department has two passport-size color photos of my daughter, and Fuji made a couple of bucks off the transaction. (Due to user error, it took 3 tries to get the picture right). Alas, if we’d taken the pictures at Costco, we could have had digital photos for one-third the price.