Booming Gray Market Threatens Cell-Phone Industry
November 30, 2009
Gray is the new black. Just as trafficking in black market goods has eroded sales of consumer electronics, a burgeoning “gray” market for cheap look-alike cell phones now threatens the wireless handset industry.
Just ask the folks at China Unicom and Apple. When China Unicom recently began offering Apple’s iPhone for as much as $1,172, the company sold a measly 5,000 units its first weekend, according to Reuters. By contrast, when the iPhone 3GS was released in the U.S. earlier this year, it sold more than 1 million units in its first weekend. At full price, the phone flopped.
Part of the reason is that since 2007, the Chinese market has been flooded with iPhones sold in other countries and then modified, or “unlocked” so they work on other networks, before being sold for as little as $650. In other cases, Chinese consumers had already purchased low-priced, repurposed used phones.
But much of the blame lies with a burgeoning gray market for copycat phones, often made to look like the real thing but sold for a fraction of the price. “Anyone who’d buy an iPhone from China Unicom is insane,” says Charlie Wolf, senior analyst at Needham. Fewer than 5 percent of Chinese can afford China Unicom’s iPhones, says Neil Mawston, an analyst at consultant Strategy Analytics.
Knockoffs Make Up 13 percent of Handsets
Lackluster iPhone sales dealt a blow to China Unicom, which hoped the iPhone would boost subscriber growth the way it helped AT&T, the exclusive U.S. iPhone provider. It was also bad news for Apple as it tries to forge ties to wireless carriers in new countries, beyond the 64 where the iPhone is already sold.
The gray market extends well beyond China, however. In Africa, Eastern Europe, Latin America, and even the U.S., handset clones are on the march. Gray market phones may resemble the real thing but don’t carry warranties, and their makers often don’t pay licensing fees to such component makers as Qualcomm. Gray market phone shipments from China are up 43.6 percent, to 145 million units, this year, according to estimates by consultant iSuppli. They now constitute 13 percent of the global legal handset supply. In contrast, worldwide unit shipments of legitimate cell phones will decline 8 percent this year.
Many knockoffs are made in small factories across Asia. “You have all these little workshops, and they do some extremely creative things” to adapt phones to local markets, says Frank Meehan, CEO of cell phone maker INQ, which supplies carriers such as Hutchison Whampoa. “There are hundreds of them [in China), and they are springing up in India."
In the coming years, some smaller workshops could morph into larger enterprises turning out legitimate goods and competing with Nokia, Apple, and Samsung. "What's going to happen is, as these players develop the expertise, some of these players will start to enter the legal market," says Jagdish Rebello, senior director at iSuppli. "Legal handset manufacturers are extremely concerned."
Pickup in Sales of Used Phones
Some gray market handsets carry names similar to the mainstream brands but often don't work as well. "We discourage the use of phones acquired through unknown channels for a very simple reason: doing so may ultimately saddle the consumer with an incomplete experience and raise the possibility that what they are buying through gray markets is not a genuine Motorola product," Motorola said in a statement. Apple and China Unicom didn't respond to requests for comment.
In another trend that may erode revenue for handset manufacturers, sales of used phones have picked up as well. At CellularCountry.com, sales are up 3 percent to 5 percent this year, says CEO Doug Morgen. In fact, the Huntington Beach [Calif.] site, which currently sells 10,000 phones a month, is looking to open physical stores in California and Europe in the next six to 12 months. “Business is good,” Morgen says. “People are starting to buy more used; they need to cut their bills.”
To combat all these players, handset manufacturers have long tried suing gray market phone makers and various distributors. Others are starting to pressure component suppliers, such as MediaTek, believed by analysts to supply gray market phone makers. MediaTek did not return a request for comment.
But mainstream manufacturers and carriers may need to adapt their strategies to this changing marketplace instead and strive for agility, lower prices, and product innovation. “It’s very hard to fight it in courts,” INQ’s Meehan says. “They just need to get leaner and meaner. Look, it’s just competition at the end of the day.”
Droid via Verizon Gives iPhone Run for the Money
November 30, 2009
In the 2 1/2 years since the iPhone’s release, no other cell phone has come close to getting the same amount of hype — until now.
Enter Motorola’s Droid, a Verizon offering that represents the best refinement of Google’s Android mobile operating system to date. It doesn’t take long for it to prove that it’s better than nearly every other half-baked touchscreen phone out there.
But how does it stack up against the granddaddy of them all?
Let’s start with the basics. Droid comes with a 16GB memory card and sells for $199, though that’s after a $100 mail-in rebate. Apple’s 16GB model costs the same, though you don’t have to mess with the mail. Both require $30 per month data plans on top of the usual phone plan.
The Droid’s vivid screen is slightly taller than the iPhone’s, and the phone itself is a little bit thicker to accommodate the slide-out keyboard. Yes, you can use the physical keyboard at any time if you don’t like the touch keyboard, though the physical keyboard’s buttons are slick and don’t give much tactile feedback.
Navigating through the touch controls is smooth and easy, though Droid doesn’t support multitouch gestures like pinching. Everything is clean, convenient and easy to access, but as nice as the gestures work, they don’t recreate the same sense of fun that iPhone users get.
As advertised, you can have multiple applications running simultaneously, unlike Apple’s offering. This way you can have things such as instant messaging or Twitter running without having to open them separately.
And there are plenty of Android apps available to use, since Google already has 10,000 of them up and running. It’s maybe a tenth of the size of the iPhone’s offerings, but the selection is still varied and robust, not to mention growing.
In a direct attack on Apple and its merely average 3-megapixel camera, the Droid has been given a 5-megapixel lens. Flash and auto- focus help make the pictures and video look great, though the delay between pressing the button and getting the shot is relatively lengthy.
Droid’s Internet browser is fast, relatively easy to navigate and much more solid than the depressingly shoddy smart-phone average, with only the occasional page error. That said, the iPhone’s capabilities are even easier with multitouch, and I still haven’t encountered a page error on that device.
Droid’s music player is certainly serviceable and clean, though the iPhone’s media capabilities still make it the best digital music player period. GPS is included in Droid, with turn-by-turn built in and working well. Apps can give the iPhone that function, but they tend to be quite expensive.
So which phone comes out on top? Taken as a whole, I’d say the iPhone is still superior — but the Droid is a very close second and does a number of things better. If you don’t like AT&T or the cult of Apple, then Droid is a fantastic substitute.
SOURCE: Mobile Tech Today
The Best Smartphones on Every Carrier
November 27, 2009
For the first time ever, every major carrier in the US actually has smartphones worth buying, meaning you don’t have to break up to get a good phone. Here’s the best phones on each one, along with the best deals.
All pricing shown is with a new 2-year contract, and some deals may be temporary.
Read more
Sprint Goes Prepaid with Virgin acquisition
November 25, 2009
Despite widespread improvements in network coverage, customer service and handsets, Sprint Nextel has continued to lose both cash and customers. But instead of turning to the low-churn, high-end customers that have brought success to the likes of AT&T and Verizon Wireless, Sprint has placed its hopes on prepaid.
Today, Sprint closed its $483 million acquisition of Virgin Mobile USA, which was announced in July. What Virgin Mobile offers that a postpaid carrier can’t – at least in Sprint’s view – is growth.
“With continued growth in the U.S. prepaid segment, Sprint is further positioning itself as a leader,” said Dan Hesse, Sprint CEO, in a statement. “With Boost’s continued success and the iconic Virgin Mobile brand under one umbrella, Sprint will offer customers value and flexibility with great devices running on a dependable network with great coverage.”
In an earlier call with analysts, Hesse called prepaid a “potential growth engine.”
“Industry growth [is] more on the prepaid side, which is another reason that we are doubling down on the prepaid market,” he said. “We think there will be more growth there generally than in the postpaid market.”
There’s also a lot of competition out there, and Virgin Mobile is battling many of the same problems Sprint has been unable to resolve: customer defections and slumping sales. Like Sprint, Virgin has battled subscriber defections and a high churn rate. The prepaid carrier recently lost about 270,000 customers and its churn rate continues to hover over 5 percent. For its part, Sprint fell almost $480 million into the red and lost 135,000 net retail customers to other carriers in its most recent quarter.
The acquisition of Virgin Mobile leaves Sprint juggling three separate brands. It is speculated that Sprint will target younger prepaid consumers with the Virgin Mobile brand while using its Boost prepaid service for more mature subscribers, but there’s been no official word from the company around its postpaid brand differentiation strategies.
It will be some time before the effects of the Virgin Mobile acquisition become clear. Over the past year, Sprint has had both successes and missteps. For example, its launch of the Palm Pre rapidly fizzled out to just another smartphone release. On the other hand, Sprint’s $50 all-you-can-eat plan for Boost customers was a major game-changer for the prepaid industry.
The savvy Sprint demonstrated with the $50 plan for Boost will need to be extended to Virgin Mobile if the carrier is to survive in the highly competitive prepaid space. Sprint is pinning many hopes for the future on it.
SOUCRCE: Wireless Week
Survey: Most-Hated Wireless Company Isn’t AT&T, It’s Sprint
November 24, 2009
Color us surprised. After hearing endless complaints about AT&T, especially in discussions of the iPhone, we had a hunch that the big A must be the most hated telecom company in the United States. A survey suggests otherwise.
Global marketing firm J.D. Power on Thursday released results of its wireless customer care survey, which graded telecom companies based on responses from 12,000 customers who contacted their carrier’s customer care department within the past year. Sprint received the lowest grade, scoring 704 out of 1,000 customer satisfaction points. AT&T scored slightly higher, with 730 points. Meanwhile, Verizon, Alltel and T-Mobile tied for first with 747 points.
The study rated customer satisfaction on how well wireless carriers could service their customers by phone, visits to a retail wireless store and on the web. (No, the firm did not poll AT&T customers about Apple’s ban of Google Voice apps for the iPhone.) That’s a small slice of what we consider to be “satisfaction” with a carrier, but too often we hear about AT&T iPhone customers complaining about spotty 3G network performance, dropped calls, poor quality, and the list goes on. (Here at Wired.com we’ve conducted two telecom studies of our own, and the numbers did not look pretty for AT&T.) We expected a lot of peeved AT&T customers to contact customer care to complain, only to be disappointed because most of these problems are network-related and thus not immediately resolvable.
Though the results are a little bland with three carriers tying for first, we find interesting the rather significant point difference between Sprint and the rest of the carriers, even AT&T. We just don’t often hear anyone talk about Sprint. Sprint customers out there: Is your experience really that bad?
SOURCE: Wired
Does Cold Weather Injure Cell Phones?
November 24, 2009
You know that cold weather can make your cell phone sluggish, or make a fully charged one read low battery. But can cold weather do serious damage to your phone? We decided to find out, subjecting six phones to progressively lower temperatures until they stopped working. Then, for good measure, we dunked some of them in liquid nitrogen. What happens when normal gadgets meet extreme cold? Read on to find out.
We tend to assume that extreme cold and mobile devices just don’t mix. After all, cold temperatures can freeze liquid-crystal displays and slow the chemical reaction that gives lithium-ion batteries their charge.
But bringing phones into the cold is unavoidable—if you’ve ever gone skiing, or you simply live in Chicago, you’ve certainly spent hours in a freezing environment with nothing more than a layer of denim or a jacket pocket to shield your phone from the chill.
Exactly how cold can a phone get before it stops working? We decided to find out. For help, we called up our friends at Environ Laboratories, an environmental testing facility in Minneapolis used by the defense, aerospace and technology industries to simulate extreme conditions. We gave Environ a sample of six phones from various manufacturers. These models were the type of commodity phones that service providers often give away for free with new contracts—none was billed as “ruggedized” or designed to withstand extreme temperatures. Environ’s job was to freeze the gadgets in a temperature-controlled chamber (lowest possible setting: minus 100 F) until all six phones stopped working—no matter how much cold that required.
In other words, we decided to push these phones way beyond the limits of their design parameters and warranties. Beginning at 40 F (the equivalent of a brisk autumn evening in New England), we let each phone run for 30 minutes before bringing the temperature down by 10 degrees. We repeated this incremental temperature drop every half-hour until the phones stopped working. Once a phone died, we gave it one last dash of mercy by bringing it back to room temperature to see if warmth could revive it.
Other than minor hiccups (slight screen dimming, slow key response), none of the phones had any real problems down to minus 10 F, when the low-battery indicator popped up on one Samsung, despite the fact that it had recently been charged. At minus 20, the same phone shut off (plugging it in and turning it on quickly revived it), and the displays of some of the other phones were difficult to read.
Thirty below is where the real fun began, with five of the six phones experiencing serious battery or LCD problems—the display on a Nokia became an unreadable block of blue, while bizarre bars polluted another phone’s screen.
Another 10 degrees, down to minus 40, and all but one of the phones was rendered inoperable. The last phone standing, an old Motorola Krzr belonging to a PM staffer, actually remained functional until about minus 55 F, when its battery died.
Remarkably, none of the damage appeared to be permanent—all it took was a return to room temperature to bring all of the phones back to life.
Still, we’re electronic sadists, and we weren’t going to let our access to Environ’s environmental testing facility—and its vats of liquid nitrogen—go to waste. Sure, the coldest temperature ever recorded on earth was just minus 128.6 F (and the continental U.S. has never dropped below minus 70) but we couldn’t resist finding out how our toughest competitor could handle a dunk in a minus 314.7 F bucket of liquid nitrogen.
A New iPhone Worm is Here, And This Time it’s Malicious [WARNING]
November 24, 2009
November 23rd, 2009 | by Stan Schroeder
A couple of weeks ago, the first iPhone worm appeared, spreading on jailbroken devices with the SSH application installed (vulnerability being the fact that many users haven’t changed the default root password). As far as worms go, this one was quite benign, merely “rickrolling” users; i.e., changing the background image on the device to an image of Rick Astley.
Now, according to early reports of strange activity by Dutch ISP XS4ALL, and later confirmed by Sophos, there’s a new worm in the wild, and this one is far more malicious.
The new worm is called “Duh” or “Ikee.B”, and it uses the exact same vulnerability as the first one. The fix is thus identical – change the root password in the SSH application to something other than the default, which is “alpine”.
Failing to do so might result in very serious consequences. According to Sophos, Ikee.B is “designed to connect to a server in Lithuania and to follow orders from remote hackers.” It can find vulnerable iPhones on a wide range of IP addresses, including IPs in several different countries, for example the Netherlands, Portugal, Australia (
), Austria, and Hungary. Furthermore, it changes the root password on the iPhone to “ohshit” (as discovered by Paul Ducklin, head of technology in Sophos Asia Pacific.)
Users who haven’t jailbroken their iPhone or haven’t installed the SSH application are not affected by this vulnerability.
Google gears up for attack on mobile-phone market
November 24, 2009
The internet giant is about to launch a system offering free calls – along with the mother of all handsets.
Google is gearing up for an all-out assault on the mobile-phone market that will include a new, Google-branded handset and the first comprehensive Google phone service with unlimited free calls.
For the first time, a single company will control everything from the software in users’ phones to the services they use to make calls and surf the web.
The Googlephone promises to be one of the most advanced smartphones, with a large touchscreen display and a processor almost twice as fast as the one powering Apple’s iPhone 3GS. It will probably be the first phone to run a new version of Google’s Android software, codenamed Flan, offering high-speed 3-D gaming said to be as good as that of many handheld consoles.
According to Ashok Kumar, an analyst at Northeast Securities, a financial services firm, the Google-branded phone will be built by a third-party supplier, possibly the Taiwanese phone maker HTC, and will incorporate a processor from Qualcomm.
The real breakthrough, however, will come with the marriage of the Googlephone to Google Voice, the Californian company’s high-tech phone service. Google Voice gives US users a free phone number and allows unlimited free calls to any phone in the country — landline or mobile. International calls start from a couple of cents (just over a penny) a minute. Google Voice also uses sophisticated voice recognition to turn voicemails into emails, can block telemarketing calls automatically and offers free text messaging.
Google sounded its intentions two weeks ago when it purchased a small company called Gizmo5, which had developed technology to connect Google Voice with voice-over-internet (Voip) networks such as Skype. Now Google has the means to offer a complete, end-to-end phone service, with which consumers can make and receive calls between the Googlephone and other phones or computers anywhere in the world, and often for nothing.
“We’ve never had this situation, where a single vendor controls the entire stack, from the operating system right up to Google’s cloud services,” says Kumar. “It changes the competitive and bargaining dynamics like never before.”
Google declined to comment on its plans, however.
One victim of the Google juggernaut could be Skype, the internet phone service. Skype software uses a broadband internet connection to offer free voice and video calls to other Skype users, plus cheap calls to landlines worldwide. If Google can succeed in linking its Google Voice service to Skype and other Voip networks, it can lure users with the offer of free long-distance calling and a “real” phone number.
One of Google’s challenges will be to link the phone to mobile networks so that the company’s services can be offered not just over wi-fi-connected broadband, but also over a 3G link to the internet, resulting in a real call-from-anywhere device.
This could prove a problem, though: few phone networks will appreciate being frozen out of lucrative business such as voice calling and text messaging, and being reduced to a simple data pipeline for Google’s services.
Google could also antagonise the networks by selling its mobile phone directly to customers and inviting them to use their existing Sim cards, whatever network they are on. “Google wants the Googlephone to be carrier-agnostic,” Kumar predicts. This could push the price of the handset to well over £500, because the cost of smartphones is heavily subsidised by networks, which recoup the money by locking customers into their services.
The mobile networks aren’t the only enemies Google risks creating. Other phone makers now using the Android operating system, such as Samsung, Motorola and Sony Ericsson, might not take kindly to Google keeping the most up-to-date version of its software for itself.
Although the popularity of Android has grown quickly since its launch last year, it is still installed on less than 4% of the smartphones sold, and there are other free operating systems (Symbian, for instance) to which rival phone makers could switch.
Can Google have its Flan and eat it? We may not have too long a wait before finding out, because Kumar and other experts are predicting that the Googlephone will be launched in the US early next year.
SOURCE: Times Onlines
AT&T sues Verizon over ‘there’s a map for that’ ads
November 20, 2009
Whoa — we just got word that AT&T is suing Verizon for false advertising over Big Red’s “There’s a map for that” ads. We’re reading the complaint and motion to stop the ads right now, but here’s what AT&T says is the big problem:
In essence, we believe the ads mislead consumers into believing that AT&T doesn’t offer ANY wireless service in the vast majority of the country. In fact, AT&T’s wireless network blankets the US, reaching approximately 296M people. Additionally, our 3G service is available in over 9,600 cities and towns. Verizon’s misleading advertising tactics appear to be a response to AT&T’s strong leadership in smartphones. We have twice the number of smartphone customers… and we’ve beaten them two quarters in a row on net post-paid subscribers. We also had lower churn — a sign that customers are quite happy with the service they receive.
AT&T also says its network reaches about the same number of people as Verizon’s, so we’re thinking it’s a little miffed that it’s being portrayed as an also-ran here. We’ll update as we learn more, keep it locked!
Update: So this seems like a very narrow lawsuit, actually. As we’ve been told, AT&T thinks Verizon is trying to fool viewers into thinking that they can’t use any AT&T phone services outside of 3G coverage areas by showing two essentially different maps. Since Verizon’s entire network is 3G, the gaps in the red map are actual service gaps — but Verizon doesn’t show that the gaps on the AT&T map might be covered by AT&T’s huge 2G network. We can see how that could be misleading, but at some point you’ve got to compare apples to apples, and AT&T even says it has “no quarrel with Verizon advertising its larger 3G network” in its complaint, so we’ll see how the court reacts.
Update 2: Interestingly, Verizon’s already changed the ads once at AT&T’s behest, editing them to remove the phrase “out of touch” and adding a “Voice and data services available outside of 3G areas” small print disclaimer at the end. Apparently that wasn’t enough for AT&T, which says the ads still confuse non-technical viewers into thinking AT&T provides no service at all outside of its 3G coverage.
Update 3: Okay, we’ve read everything — there’s really not much more to this suit than the arguments over the maps. We’re thinking Verizon could have easily dealt with this by just using dark blue and light blue on the AT&T map to differentiate between 3G and 2G coverage, but at this point we don’t think Ma Bell is all that interested in anything except getting these ads off the air. All that said, it’s hard to deny that Verizon’s ads made a perfectly valid point: using an iPhone on AT&T’s network in New York or San Francisco is an exercise in frustration, regardless of whether you have 2G or 3G, and we’ve had zero problems on Verizon. Let’s just hope AT&T is working as hard to fight these ads with its actual service as it is with its lawyers.
SOURCE: Engadget
$3 Million of iPhones Stolen in Belgium Heist
November 19, 2009
A company named CEVA Logistics was housing somewhere between 3,000 and 4,000 iPhones in a warehouse when intruders climbed up a fire ladder and sliced a hole through the roof.
The hole was conveniently cut directly above the crates of iPhones.
An unknown amount of burglars managed to walk away with roughly 2 million euros worth of iPhones. And while they’re almost sure to make a decent buck off the black market sale, carrier Mobsistar has revealed that they have a list of all serial numbers from the caper and will be deactivating the phones accordingly
Source: Gizmodo
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