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Coming soon: the sub-$50 mobile

Operators call the tune on handsets

3GSM It is an annual tradition now that, at the cellular industry’s superevent, 3GSM, there should be a new wave of mutual attacks and recriminations between the handset majors and the largest cellcos. This year, however, it was clear how far the balance of power has shifted in favor of the operators and their desire to control the design and branding of the phone.

In 2004, Vodafone CEO Arun Sarin put the blame for the delays in 3G firmly at the door of the major phonemakers, particularly Nokia, while the Finnish company’s CEO Jorma Olilla bit back, claiming the operators’ networks had been unready for handset testing. But behind the bickering, Vodafone had made a major Uturn, agreeing that it would use Nokia devices in its initial 3G range, reversing a previous high profile decision.

This year, Vodafone once again hit out at the phonemakers for delivering the wrong products, but this time it was Nokia that was making a major climbdown in the background. Having been almost the last, and certainly the most determined, hold-out against the trend to make phones carrying the cellco’s brand more prominently than the manufacturer’s, Nokia has agreed to create such models after all, as it seeks to get back on track for the targeted 40 per cent market share that it believes will give it the solid basis for launching its more ambitious enterprise and software strategies.

In a remarkable change of tone, the head of Nokia’s mobile phones division, Olli-Pekka Kallasvuo, said: "Operator customization is at the heart of Nokia's strategy for mobile growth. For the first time, we will offer industrial design customization for global GSM operators who are keen to have exclusive designs for their customers.” A new design, the 6101, will be the basis of the operator defined models, with China Mobile the first to sign up.

Microsoft Peabody

The operator defined handset was once a trend on which Microsoft hoped to leap. Before Motorola, NEC and the others had agreed to make phones to cellcos’ specifications, Microsoft pushed its Windows Mobile system as the platform that would do just that at the high end of the market, via unbranded phonemakers such as its original partner BenQ. Its plans to build up mass for Windows Mobile in this way backfired when the whole industry took the same route and Microsoft was forced to embark on the long hard task of pushing its technology into the market. Now it is harking back to its original strategy, with a deal with Flextronics, the large Singapore-based manufacturer, to make a new Windows Mobile range.

The new platform, codenamed Peabody, is a blueprint from which a large number of different models can be designed to order. This is becoming an increasingly common technique in the mobile phone world to reduce costs and time to market, and takes Microsoft beyond the high end smartphone niche – currently only 3 per cent of all phones sold – into low cost, high volume devices. Peabody allows specifiers to mix and match various features, such as still and video cameras, Windows Media Player and integration with PC applications such as email. Customized elements, such as added security for corporate phones, can also be added.

This shows Microsoft following many high end handset makers – as well as SymbianOS, the operating system that has so far kept Windows Mobile in a niche – downmarket in the quest for market share. All the main players are working to bring some of the functionality of the smartphone to midmarket models, and constantly to reduce the prices to achieve mass uptake and to gain access to developing economies. Nokia is working with Texas Instruments on a single-chip handset platform that will support this move to offer more functionality at budget prices, and Motorola is doing the same with Freescale (see Wireless Watch February 3 2005). Now Qualcomm is also joining these other chipmakers in promising the wherewithal to make a low cost, highly functional handset.

Qualcomm and Motorola:

Qualcomm, which also has a single-chip initiative, says it is currently developing handset processors that will cost $10-$15 and will enable a 3G handset with a retail price of $50 by 2007.

Even that is beaten by the latest move from Motorola, which is promising a handset for under $40 wholesale, aimed at developing nations. The C117 phone, which Motorola showed off at 3GSM, was developed in partnership with the operator body, the GSM Association, and aims to overcome the main obstacle to cellphone ownership on a truly mass scale – pricing. Currently, the Association defines any phone under $100 wholesale as ‘low cost’ but the C117 could shift those pricing assumptions rapidly.

The pressure for the ultra-cheap devices has come mainly from Asia, where operators have to cover highly advanced mobile populations in areas like urban South Korea, side by side with very poor and undeveloped communities. The GSM Association says that, if the price can come down below $30 in the next year or two, it could open the market to 700m new users, taking the world total to around 2.2bn.

Series 60 goes mainstream

On the software side, Nokia is adapting its user interface and software development platform for SymbianOS, Series 60, to be suitable to the volume phone market rather than just smartphones.

This, it hopes, will help defend SymbianOS not just against Windows Mobile but also Linux, which is starting to make some impact on smartphones. The third edition of Series 60 will be available by the middle of the year and will support single-chip phones as well as dual-chip. The first handset based on the new edition will be for the enterprise, the key focus of the new release, supporting Nokia’s strong push into that sector and its hopes of establishing Series 60 as a corporate software platform.

Apart from modules optimized for business devices, other enhancements include a new music player; digital rights management 2.0 specifications; USB mass memory storage; and high quality multimedia rendering. The phone becomes a music player by inserting a USB memory, allowing quick transfer of content from the PC.

Copyright © 2004, Wireless Watch

Wireless Watch is published by Rethink Research, a London-based IT publishing and consulting firm. This weekly newsletter delivers in-depth analysis and market research of mobile and wireless for business. Subscription details are here.

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