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CBRS – Share and Share Alike

opening pic

Greetings from Lake Norman/ Davidson, North Carolina, where the college football season has started.  We took in the Davidson College home opener and the Wildcats (red jerseys) defeated Georgetown 27-20 to a crowd of more than 2,300.  It was an exciting part of the Labor Day weekend and a good win for the Cats.

 

This week’s Sunday Brief focuses on the potential of Citizens Broadband Radio Service (CBRS) to change the telecommunications landscape.  We will also have an update on C-Band spectrum auction news.  First, however, a quick follow up to last week’s article on AT&T’s system and network architecture changes.

 

Follow-up to last week’s AT&T article

We had greater than expected interest concerning last week’s TSB including receiving several background articles that we had not uncovered in our research.  One of the most important of these was a blog post by AT&T Senior Vice President Chris Rice on their Domain 2.0 developments that was posted on August 21.  In this article, Chris describes their major architectural change:

 

We started on a path for a single cloud, called AT&T Integrated Cloud (AIC). This was our private cloud, meaning we managed all the workloads and infrastructure within it. Originally, AIC housed both our network and several of our “non-network” IT workloads and applications.

But we quickly learned it wasn’t optimal to combine both types of workloads on a single cloud. It required too many compromises, and the IT and network workloads needed different profiles of compute, network and storage.

We opted for a better approach: Create a private cloud for our network workloads, optimize it for those workloads, and drive the software definition and virtualization of our network through this cloud approach and through the use of white boxes for specific switching and routing functions.

 

The change to last week’s article is subtle but not insubstantial:  AT&T’s network cloud (formerly AIC) is optimized for network traffic loads and functions (but still built on white box/ generic switching and routing), while non-network functions are operated in the public cloud through Microsoft and IBM.

 

john-donovanIt’s important to note that the executive champion of this cloud strategy, John Donovan, is going to be retiring from AT&T on October 1 (announcement here).  We have included an early speech he gave on AT&T’s Domain 2.0 strategy in the Deeper post on the website.  John brought engineering discipline to AT&T’s management, and, while the parlor game of his replacement has begun, the magnitude of his contributions to Ma Bell over the past 11+ years should not go unnoticed.

 

CBRS – Share and Share Alike

When we put together a list of Ten Telecom Developments Worth Following in mid-July (available on request), we were surprised by a broad range of CBRS skepticism in the analyst community, especially given the breadth of US wireless carriers playing in the CBRS alliance.  “Nice feature” or “science experiment” was the general reaction.  Many of you chose instead to focus on the C-Band auctions, which are important and addressed below.

 

After some reflection, we have come to the conclusion that the most important feature of CBRS is neither its mid-band position (3.5 GHz), nor the mid-band spectrum gap it fills for Verizon Wireless (more on that below), but the fact that at times all of the spectrum band can be shared.  Customers receive the benefits of an LTE band without a costly auction process.

 

If you are intimately familiar with CBRS, you can skip the next couple of paragraphs.  For those of you new to TSB or the industry, here’s a copy of the slide we used to describe CBRS in the Ten Telecom Developments presentation to start your education:

cbrs top 10 slide

 

 

The commercialization of shared LTE bands is pioneering and one of the reasons why it has taken nearly a decade to move from concept to commercialization (the original NTIA report which identified the CBRS opportunity is here).  This does not appear to be a singular experiment, however, as Europe is proceeding with shared spectrum plans of their own in the 2.3-2.4 GHz frequencies (more on that here).

 

To enable this sharing mechanism in the United States, a system needed to be developed that would prioritize existing users (namely legacy on-ship Navy radar systems) yet allow for full use of the network for General Authorized Access (GAA) users when prioritization was not necessary (opening up to 150 MHz of total spectrum for GAA which could power 5G speeds for tens of millions of devices nationwide).  A great primer on how CBRS generally works and how spectrum sharing is performed is available here from Ruckus, a CommScope company and one of five Spectrum Access System providers.

It’s important to note that the Environmental Sensing Capability (which determines usage by priority) and the Spectrum Access System (which authorizes, allocates and manages users) are two different yet interoperable pieces of the CBRS puzzle.  And, while the ESC providers have been approved by the NITA (CommScope, Google, and Federated Wireless), the SAS providers have not been approved (more on that here in this Light Reading article).  While all of the SAS providers have not been made public, it’s widely assumed that they include the three ESC providers mentioned above.

 

Delays in the SAS approval process have not kept the CBRS Alliance from heavily promoting a commercial service launch on September 18 (news release here).  This event will feature FCC Commissioner Michael O’Rielly, Adam Koeppe from Verizon, Craig Cowden from Charter, and others who will celebrate the Alliance achievements to date and place the development as a central theme going into 2020.

 

CBRS Use Cases:  Not Everyone is Waiting for Private Licenses

The myriad of CBRS use cases mirror the different strategies for telecommunications industry players.  Here are four ways carriers are using CBRS in trials today:

 

  1. CBRS as a last mile solution for rural locations (AT&T and rural cable providers MidCo Communications mapMidCo and Mediacom Communications). In the MidCo configuration, outdoor Citizens Band Service Devices or CBSDs (see picture above) are placed in proximity to potential (farm) homes passed (see nearby map of MidCo territories in the Dakotas and Minnesota).  Per their recent tests, MidCo was able to connect homes up to eight miles from the outdoor CBSD.  They estimate that CBRS will add tens of thousands of homes and businesses to their footprint (they serve 400K today so every 10K new customers is meaningful).  Good news for an over the top service like Hulu, Netflix, and YouTube TV and bad news for DirecTV and Dish.

 

AT&T has been testing CBRS as a similar “last mile solution” in Ohio and Tennessee using equipment from several providers including CommScope (ESC, SAS) as well as Samsung (network).  These trials are expected to wrap up in October.  If AT&T can find a more effective last mile solution for copper-based DSL in rural areas, revenues and profitability will grow (by how much depends on Connect America Fund subsidies and service affordability).

 

AT&T has been mum on their trial progress to date.  In June, however, AT&T asked the FCC to allow them to turn up antenna power in these markets to test various ranges and speeds (bringing the power allowances to a similar level of the WCS spectrum that AT&T already owns and operates in the 2.3 GHz spectrum frequency).  This was met with strong opposition by a coalition of providers, and it’s not clear that AT&T’s request was ultimately granted.  More on the AT&T request and response can be found in their FCC filing here, and in this June 2019 RCR Wireless article.

 

  1. CBRS as an additional LTE service for cable MVNOs (Altice, Charter, Comcast). It’s no secret that cable companies are eager to continue to grow their wireless presence within their respective footprints (and corporate is equally as eager to improve profitability and single carrier dependency).  CBRS would add a secure option that is seamlessly interoperable with other LTE bands to create an alternative to their current providers (Verizon, Sprint, etc.).  It also provides a new “secure wireless” service for small and medium-sized businesses which can be deployed with Wi-Fi.  A cheaper alternative for out-of-home wireless data?  Count cable in.

 

We spent some time a few weeks ago talking about the evolution of Verizon plans, specifically how their cheapest unlimited plan now includes no prioritized high-speed data (article here).  Is CBRS a better alternative to deprioritized LTE?

 

The short answer is “not yet.”  LTE Band 48 is only available across the most expensive devices, and, presumably, if customers can shell out $1000-1500 for a new device, they can probably afford extra LTE data allowances above 22-25 Gigabytes (see previous article linked above).  Notably, the new Moto E6 (budget-minded Android device) includes neither CBRS nor Wi-Fi 6 (specs here).  The new ZTE Axon 10 Pro phone does not include Band 48 or Wi-Fi 6 (specs here).  The OnePlus 7 Pro, however, does include Band 48 but not Wi-Fi 6 (specs here).  And, if rumors are to be believed, the upcoming Apple device announcement in a couple of weeks will disappoint everyone – no 5G, no CBRS even though the new device will likely support the 3.5GHz spectrum band in Japan, and likely no Wi-Fi 6 (which is why the Apple Card will likely be used to offer attractive financing options).

 

This leaves cable companies with a good selection of Samsung and Google devices that can use CBRS (Galaxy Note 10, Galaxy S10 5G, upgraded Pixel 3X and 3XL, and likely the upcoming Galaxy 11 release).  For cable to win on this front, they may need to provide plan incentives to influence the pace of upgrades and request this band for Moto and low-end Samsung devices.

 

  1. CBRS as a mid-band LTE outdoors/ public venue solution for Verizon. It is no secret that Verizon is going to use CBRS GAA as a part of their carrier aggregation solution (see this August 2019 article from Light Reading for more details). Such a solution is usually not designed for greater throughput in rural markets alone – Verizon clearly sees some form of CBRS as a portion of their overall licensed/ un-licensed solutions portfolio.

 

The question that will be answered in the next quarter or so is whether CBRS is valuable enough to be a part of Verizon’s licensed portfolio (e.g., they buy 20 or 30 MHz worth of private CBRS licenses, or whether they use the GAA portion in the same License Assisted Access (LAA) manner as they use 5.0 GHz Wi-Fi).  It’s likely that if CBRS is important, they will be at the auction table.

 

It appears that the C-Band (3.7-4.2 GHz) license quantity and auction schedule is in flux, if the latest report from Light Reading (and the corresponding New Street Research analysis references in the article) is true.  This also impacts Verizon’s near-term interest in CBRS PALs.

 

Verizon’s interest is important as they can drive manufacturers to quickly include Band 48 in devices.

 

  1. CBRS as an indoor and/or private LTE solution for wireline. One lesser-discussed option for CBRS is as a private LTE indoor solution for enterprises and building owners.  While we touched on this option for cable companies (who will undoubtedly drive business ecosystem development), this could also have ruckus cbrs routerinteresting implications for companies like CenturyLink (Level3), Masergy, and Windstream.  Ruckus, a traditional Wi-Fi solutions provider now owned by CommScope, already has an indoor unit for sale here (picture nearby).  The implications for in-building coverage are significant because 3.5 GHz does not overlap with existing deployed frequencies (including existing 2.4 GHz and 5.2 GHz Wi-Fi solutions), and, as a result, will not increase interference that deploying an AWS (1.7/ 2.1 GHz) or EBS/BRS (2.5 GHz) might create.  With solutions as cheap as industrial Wi-Fi and minimal interference concerns, there might be more value created with CBRS indoors than outdoors.

 

Bottom line:  CBRS is a real solution for rural broadband deployments and will attract the interest of large and small rural providers.  CBRS will be important to wireless carriers when Samsung and Apple join Google and Facebook in building a robust ecosystem.  This is a good/great but not an industry-changing technology.  If the first commercial applications are successful in 2019 (the odds are good), demand for Private Licenses will be significant (if not, expect more pressure to resolve C-Band spectrum allocation issues quickly).

 

What makes CBRS great is dynamic spectrum sharing among carriers.  Should that continue with all new frequencies auctioned (including C-Band), you should expect to see competitive pressures grow in the sector, particularly with private LTE/ indoor applications.

 

Next week we will provide the first of two third quarter earnings previews, focusing on wireless service providers ahead of the Apple event.  Until then, if you have friends who would like to be on the email distribution, please have them send an email to sundaybrief@gmail.com and we will include them on the list.

 

Have a terrific week!

 

The Value of a Good Value

2013-07-26 12.12.08Greetings from soggy Atlanta, mild St. Louis, and red-hot Dallas.  I took this picture Friday morning to remind us all of the value of entrepreneurship.  eTrak, a PAG client, was in the process of readying a multiple hundred-site order, and had to move into the Board Room to finish up the process to hit the customer desired due date.  “These schools want our product badly,” said the eTrak President Bill Nardiello.  The excitement yet exhaustion of the team showed early Friday morning – it’s likely they were there through the night to meet the shipping deadline.

This is why Adam Smith classified entrepreneurship as one of the factors of production (along with land, labor and capital).  Someone has to take the first step.  In personal and commercial asset tracking, eTrak took the risk and is now beginning to reap the rewards.  Many of you are probably remembering a similar time in your business right now – and smiling.

I also led with the picture because we are discussing the value of a good value this week and the possible implications for AT&T.  Nowhere else was this more apparent than in Google’s launch of their Chromecast product (more on the product including a cool commercial here).  For those of you who missed the announcement and overall hoopla, Google offered Chromecast + three months of Netflix for $35.  The Netflix service could be applied to new or existing service.  Predictably, many current Netflix customers saw the device as an $11 computer-to-TV connection product as a result.

Google Chrome device

The results were astounding.  Amazon:  Out of Stock.  Best Buy:  Out of Stock.  Google Chrome Store:  Ships in 3-4 weeks.  The sellout happened in days (really hours), not weeks.  It happened after all of the Netflix promotional coupons had been used up, so most buyers were paying a full $35 for wireless/ cordless streaming.  It was kind of Black Friday meets mid-July doldrums.  We needed something (other than Windows RT clearance sales) to get excited about this summer, and Chromecast was it.

On top of this, Apple announced earnings this week.  If you read their conference call transcript (as well as that of Verizon Wireless), it’s very apparent that the iPhone4 (free with 2-year contract at Verizon, AT&T, and Sprint) is an important introductory product to new smartphone users.  While Apple focused their conference call comments on the value being generated abroad from the pre-paid/ no contract developing world (where 3G networks are the norm and LTE is emerging but not ubiquitous), it’s very evident that even in North America, the value of a good value (free iPhone 4 devices with a corresponding 2-yr contract) is very important.

kindle fire hd with lteThis concept is not new if you work for Amazon.  The Kindle and Whispernet products were based on the value of a good value mantra – just look at all of the price reductions that have occurred on the standard Kindle hardware product.  Amazon bundled the cost to the carrier to download a book into its price – this was a radical concept in 2007.  The carriers (Sprint and later AT&T) priced services to Amazon at a wholesale or per kilobyte level.  If the Kindle had to carry a separate MRC because of the wireless carriers’ historical bias to sell subscriptions, it would never have become the electronic reading standard.

The Amazon model has eluded tablets and laptops.  No one appears willing to take the risk and embed a wireless carrier chipset in every new Google Nexus 7 (a stunning device, BTW, and going on my wish list).  With the advent of shared plans, wouldn’t this be the time to try one embedded SKU?  Maybe with just an LTE as opposed to a 2G/3G/LTE integrated chipset?  Would the value of “free” carrier connectivity drive additional postpaid connections and shared plan usage?

With this lingering question, we turn to AT&T’s earnings which were announced Tuesday afternoon.  AT&T had a very good quarter with 551,000 postpaid net additions, with nearly 75% of that total being tablets.  In addition, they added 484,000 connected devices, the strongest showing since the end of 2011.  884,000 total net additions have no voice or text ARPU.

With the Sprint iDEN network turndown at its last (and heaviest) quarter, it’s highly probable that absent the iDEN network bluebird and tablet additions, AT&T would have posted negative postpaid net adds for the quarter:

AT&T reported retail postpaid net additions: 551,000

AT&T reported postpaid tablet net additions: 400,000

Retail postpaid net additions less tablets: 151,000

Est. iDEN net additions:  300,000

Retail postpaid net adds less tablets and iDEN    (151,000)

Based on Verizon Wireless’ comments on the relative insignificance of iDEN to their retail postpaid gross adds picture, the 300,000 iDEN number is probably conservative.  In addition, AT&T made comments on the conference call that the second quarter was the “best ever” for business net additions.  Overall, it must have been a tough quarter for AT&T’s consumer smartphone business (particularly for the iPhone given T-Mobile’s April launch), even with an aggressive trade-in program that drove up customers under contract but drove down quarterly margins.

AT&T implemented the upgrade program with purpose, however.  The LTE network is robust but new (and therefore under-utilized).  Rather than run a “double your data” promotion, they chose to allow customers to upgrade their phones at discounted rates while they trade in their old smartphone to AT&T.  They did this prior to changing their handset upgrade parameters to 24 months (from 20).  As a result, there are millions of new customers who likely own an LTE-capable phone.  Assuming the customer uses exactly the same amount of data, AT&T will achieve $2.50-3.00 in additional profitability per Gigabyte consumed (and more if the upgrade triggered conversion to a shared data plan).

All of the benefits of these upgrades will be felt on a full quarter basis in Q3.  This will drive up ARPUs and profits.  It will also likely accelerate device attachment IF AT&T can create a compelling, Chromecast-like offer.  How can AT&T use their market leadership to realize extraordinary gains?

Start with the Kindle Fire HD.  We know from this week’s Amazon earnings that Kindle sales are good on a global basis, but could stand to be better in the US.  Leveraging the success of the smartphone trade-in program, why not have a Kindle trade-in program that allows all current Kindle owners to trade up to a new 3G (Kindle reader) or a 4G (Kindle Fire) version?  The Kindle Fire could then be added to a Mobile Share plan like a Samsung Note or an Apple iPad.  Or, if the customer is not an AT&T customer today, a $59 for 10GB annual plan could be offered.  Separating the Kindle/ AT&T relationship is less important than it was five years ago, and Amazon and AT&T could benefit from LTE’s ubiquity and speed.  It would also be an easy and cost effective way to allow customers to experience AT&T’s new network.  This low-cost, low execution risk opportunity is probably worth several hundred thousand retail postpaid conversions over the next six quarters.

After Kindle, move on to HotSpot adoption.  Google’s Chromecast success played to two deeply rooted needs: 1) The need to effortlessly connect to the television (“works every time” from YouTube to the TV), and 2) Frustration with the rising costs of content in the cable model.  Free(r) and easier access to shared web content on existing in-home devices is now possible with a one-time $35 purchase.  Other solutions exist, but not for $35.

AT&T has an even easier model – they have installed a valuable yet widely unused component in every one of their smartphones.  It’s called a HotSpot.  73% of AT&T’s postpaid base uses a smartphone, and 35% of them are using an LTE device (thanks to things like 2Q’s aggressive trade-in program).

HBO_Cinemax_Free_Preview_Weekend-300x168

The HotSpot is a premium service, like HBO or Cinemax or MLB Extra Innings.  Why not have a “free weekend” for all (LTE) HotSpot customers?  This would certainly be a social media darling; would it be enough incentive to get the 40% or so of smartphone customers who don’t know how to activate an AT&T HotSpot off the couch and learning?  Bolder yet, what about in conjunction with U-Verse to increase service bundling (maybe HBO to go)?  The possibilities here are endless, and there’s no extra equipment to sell.  The data network is largely empty on the weekends (I have speed test history from my AT&T Samsung Galaxy SIII to prove it) and social (and traditional) media will market it for you.

Finally, AT&T needs to leverage the fiber-fed buildings that they are installing as a result of project VIP.  They announced that they would have 250,000 business locations covered by these buildings at the end of 2013.  This probably equates to 40,000 or so actual physical structures, or about 2x the current footprint of tw Telecom.  While strategic business revenues are on the rise (up more than 15% in the second quarter and an $8 billion annualized revenue stream), the rest of the business market is suffering.

With each VIP building added, AT&T achieves a lower unit cost and opens up the door to new integrated revenue opportunities.  Wireless coverage (including Wi-Fi) can immediately be addressed through deployment of in-building solutions.  Storage and backup solutions can be implemented which never leave the AT&T network (adding new meaning to the term “private” cloud).  Location-aware devices can be pinpointed to the room, and not within a large radius, for emergency management services.  And the quality of the video surveillance system – it would be best if you stayed away from these buildings as the cameras have 41-Megapixel quality.  VIP presents many opportunities to tap into latent business demand beyond faster speeds, provided customers are presented with the value of a good value.

Bringing Amazon devices into the AT&T Postpaid fold, driving HotSpot adoption through HBO-like Free (LTE) Weekends, and maniacal focus on the best possible customer experience (and AT&T market share) for each of the VIP fiber-fed buildings provides the basis for differentiation against Verizon.  It sets AT&T above the T-Mobile fray, and drives incremental value without changing pricing plans or new product development.  It also establishes AT&T as the price/ performance leader across wireless and wireline.

Positioned correctly, AT&T could drive the same hysteria as Google just accomplished with Chromecast and erase some of the past memories of network failures (worth watching this Daily Show link – caution: Daily Show language).  The components are there.  Will AT&T take the risk?  Stay tuned.

Next week, we’ll add Sprint earnings to the mix and see what that means for T-Mobile.  Until then, if you have friends who would like to be added to this email blog, please have them drop a quick note to sundaybrief@gmail.com and we’ll add them to the following week’s issue.  We will also be posting some additional analysis to the www.mysundybrief.com blog site.  Have a terrific week!  

Everyone Gets a Headline This Week

dallas weatherGreetings from Dallas, where the traditional summer heat is breaking for two days (Minneapolis is forecasted to be 10 degrees warmer today and 15 degrees warmer tomorrow than Dallas).  However, there is no break from the blistering pace of telecom news that occurred this week.

On Friday, AT&T announced that they were acquiring Leap Wireless for $15 per share in cash.  The transaction, including the acquisition of $2.8 billion in net debt as well as proceeds from the sale of the Chicago “A Block” 700MHz spectrum, is valued at just under $4.2 billion.  While this transaction represents an impressive premium to Leap’s closing share price on Friday, it’s one fifth of the amount MetroPCS was willing to pay for Leap’s assets just six years ago (see the Fierce Wireless article here.  It’s a “What were you thinking?” moment for the Leap Board).

Leap Wireless (a.k.a, Cricket) has a lot of spectrum, particularly in the AWS band, that AT&T can pair with its spectrum portfolio to produce a large LTE coverage area.  Here’s the AWS coverage areas for Leap (the hashed area is the result of Denali Holdings’ win of the Great Lakes spectrum band) as well as for Cingular:

leap wireless aws licenses including denali

cingular wireless aws licenses

While is important to note that the large swaths of blue above are not in the same AWS block, they are in the same band.  This improves AT&T’s coverage in the Great Lakes area, and complements AT&T’s 700MHz LTE coverage in the Eastern US.  For a good spectrum band chart, click here for Phone Scoop’s tutorial.

That announcement dropped late Friday, and it’s nearly certain that there will be another bidder for the Leap Wireless asset.  Regardless, this transaction will drive up spectrum values for remaining holders of 700MHz, 1900MHz, and AWS spectrum bands.  C-Spire, US Cellular, Ntelos and other smaller (private) companies will be receiving phone calls.  It’s a good day to be an asset owner.

It’s not a good day, however, to be a smartphone provider.  This week, we learned just how bad sales of the Blackberry Z10 were in the second quarter as AT&T commenced a fire sale on the newly released Blackberry.  Here’s the listing on Amazon – $49.99 (down from $199.99).  Best Buy has the Blackberry Z10 listed at FREE.

blackberry z10This does not appear to be because the phone itself is defective.  Over 225 people have reviewed the device on www.verizonwireless.com and it is clear that those who own the phone adore it (4.4 stars out of 5.0; 85% or reviewers recommend the phone).  However, it lacks enthusiasm from shartphone switchers, at least compared to the other new phone entrant, the Nokia Lumia 928.  It’s one of the highest rated devices on Verizon Wireless with 4.8 stars and a 95% recommendation level.

Blackberry’s CEO, Thorsten Heins, referred to “lessons learned” at Blackberry’s annual shareholder meeting this week.  One of those lessons learned is that the bar for switching phone manufacturers and operating systems is very high.  Blackberry has a real price point problem on its hands as they ready the US rollout of the Q5 in a few months.  Not much room for a “scaled down” version of the Z10 or the Q10 with pricing for the Z10 at or nearly free.  There are many chapters left to unfold with Blackberry, but the Z10 launch will be remembered as one of the most taxing times in the Canadian company’s history.

On the opposite end of the spectrum comes the super-premium Nokia 1020.  As one reviewer put it, “You can sum up Nokia’s just-unveiled Lumia 1020 in three words:  41, mexapixel, camera.”  Nokia held a pretty well attended launch in New York City this week, where reactions to the camera were generally positive.  C|Net proclaimed, “The Lumia 1020 puts the mega back in megapixels.”  However, there are concerns that there is too much camera focus in this model, and more than one analyst worried that it could relegate Nokia to the “niche” market.

nokia lumia 1020

I think there is a much larger market for image capture than many expect, especially with the social media-focused crowd.  This is a phone that consumes LOTS of data (even with a 5 MP “shrunk for social” version of the picture, there’s the potential for many more uploads), and with the blogosphere continuing to demand higher resolution photography, there are many who will want this device.  The accessories are fantastic.

Admittedly, this is not a device for everyone, and Nokia will need to balance this with a lineup that satisfies a palate of diverse smartphone budgets and interests.  Without a doubt, Blackberry owns the keyboard phone.  And now, without a doubt, Nokia owns the picture phone.  They are both feet in the very large and unforgiving doors of smartphone incumbency.  If Nokia can turn the corner on (business) applications, and then offer free Gigabytes of wireless data usage over AT&T for new 1020 buyers, we could have a challenger to the Galaxy S4 in the making.

In case you missed the significance of the last statement, let me reiterate:  Smartphone differentiation, particularly for challengers, can be achieved with a) more storage (Microsoft Drive) and also b) application-driven subsidy (e.g., first 500MB of data charges to and from Microsoft Drive are free for the first year).  AT&T can accommodate these changes today, and I would not be surprised if a “limited time offer” is extended to new Lumia 1020 users to allay fears about the increased data usage a 41MP/ 5 MP phone can drive.

As Nokia moves to change its position in the US phone market, their chief partner, Microsoft, announced a substantial restructuring on Thursday.  The chief outcome of the reorganization was a functional structure, led by four engineering-focused groups:  OS, Apps, Cloud, and Devices.  This change should help Nokia as they integrate the Lumia product line into the Xbox2 and other products Microsoft will introduce.

There have been many debates about Separate Business Units (SBU) versus functional organizational models.  Clearly, Microsoft sees a more integrated software/ hardware future (which seems to be the trend), and the change from traditional PC to Mobile/ Tablet computing is occurring at a very rapid rate.  However, the SBU function allowed Microsoft to be competitively focused in the Enterprise space against business-oriented companies like Oracle and Cisco.  This is not impossible in a functionally-aligned organization, but it’s certainly a lot harder to hear the voice of the customer when there is no division “lead” with P&L authority and responsibility.

microsoft org leads

The New Functional Leads at Microsoft

Also, Windows 8 has not been wildly embraced, which goes to show that too much change can backfire.  At the end of June, Microsoft announced Windows 8.1, which contains a host of features specifically designed to ease the transition from Windows 7 to Windows 8.  A full recap of the Windows 8.1 features is here.  Any reorganization should be able to definitely answer the question “How will Microsoft’s customers benefit?”  I’m not sure that the Windows user community benefits from this reorganization.  If anything, it’ll result in more changes with less regard to the velocity of the user impact which could backfire on Microsoft’s PC-based business.

Microsoft’s reorganization helps apps.  It definitely helps their consumer business, especially Microsoft Drive integration.  But will it improve customer interest in Windows, and will it create a more competitive Enterprise presence?  That appears to be seen.

If spectrum-driven acquisitions, super-premium smartphone announcements, and the reorganization of one of the most important forces in technology aren’t enough, we had individual and family pricing plan changes announced from two of the four largest US wireless carriers this week.  Given the length of this week’s article, we’ll devote the entirety of next week’s Sunday Brief to an economic analysis of T-Mobile’s JUMP (Just Upgrade My Phone) and Sprint’s Unlimited, My Way plans.

Until then, if you have friends who would like to be added to this email blog, please have them drop a quick note to sundaybrief@gmail.com and we’ll add them to the following week’s issue.  Have a terrific week!