Five Important New Terms to Know About 5G

In yesterday’s Techpinions column, Bob O’Donnell did a great job of providing a 5G Status Report, based in part on having attended the Qualcomm 5G Workshop in San Diego and the 5G Americas Analyst event in Dallas last week. I had the opportunity to attend the same two events, and thought I’d use the opportunity to build on Bob’s piece with a bit of a different take on 5G.

So far, initial 5G deployments are mainly focused on the EMBB (Enhanced Mobile Broadband) pillar of 5G. Basically, faster download and upload speeds that are averaging 3-5x better than typical LTE speeds. The one unique ‘use case’ for 5G so far is fixed wireless access (FWA), deployed mainly by Verizon in very limited parts of five cities, with the objective of providing a competitive alternative to fixed broadband.

But the real promise of 5G, over the long-term, rests on the other two ‘pillars’ of 5G: Massive IoT, and Ultra Low Latency. The capabilities to open up new markets and new use cases are highly dependent on the next ‘phase’ of 5G, in what’s called 3GPP Release 16 (R16), which will likely be approved in 2020, with commercial availability of some of its aspects arriving in 2021.

In preparation for that, here are five important aspects that will be critical in the development of 5G opportunities beyond enhanced mobile broadband. Be prepared – they’re a mouthful.

Ultra-Reliable Low-Latency Communication (URLLC). Now say that five times quickly, with all the dashes in the right places. This is a critical feature of 5G that delivers latencies of below 10 milliseconds (ms) and perhaps below 1 ms. These low latencies are better than what can be accomplished today on many fixed networks. They open up important use cases in the consumer realm, such as in gaming and AR/VR, as well as important new enterprise sectors, such as motion control in manufacturing or the factory floor.

Dynamic Spectrum Sharing (DSS). Notwithstanding the fact that this acronym will yield a very different (and less fortunate) type of thing in search results, DSS means that operators can reuse existing LTE bands for 5G, and that 5G NR and LTE can operate on the same band, simultaneously, with a simple software upgrade. This is going to be very important, for two reasons. First, it will enable operators to get to broader 5G coverage quickly, rather than relying exclusively on new 5G-centric bands. Second, this is a hedge against mmWave. It would allow Verizon, for example, whose 5G strategy is mmWave centric, to have broader options for its 5G deployment strategy, especially in advance of new mid-band spectrum becoming available.

Time Sensitive Networking (TSN). Supports time synchronization and dual connectivity, and gives deterministic performance. This means guaranteed packet transport with low and bounded latency, low packet delay variation, and low packet loss. This is a key requirement for some of the Industrial IoT application and use cases, such as manufacturing/factory floor. Although there are some aspects of TSN present in LTE, there are significant enhancements embedded within the URLLC specs of R16. Those who are looking seriously at the Industrial IoT sector should familiarize themselves with TSN

Coordinated Multipoint (CoMP). CoMP allows connections to several base stations at once (eNodeBs in LTE parlance). CoMP started to be used more aggressively in LTE Advanced, as a way of improving service at the cell edge, by utilizing multiple eNBs, boosting the signal and reducing interference. But CoMP takes on even greater importance in 5G. Whereas Massive MIMO is increases capacity and coverage extending to the cell edge in a macro environment, CoMP delivers some of those same capabilities for a small cell environment. Which is why CoMP is also sometimes referred to as ‘Distributed MIMO’. The capacity gains enabled by 5G CoMP will be important in small cell based enterprise and venue deployments, and the latency improvements will have application in the Industrial IoT realm.

5G NR-U. Just when you thought you understood the distinction between 5G, 5G NR, 5G NSA, and 5G SA, along comes 5G NR-U [unlicensed]. Over the past several years, there have been important developments in the use of unlicensed spectrum to expand mobile connectivity, notably LAA and MulteFire. R16 will include an LAA version of 5G NR in unlicensed spectrum (5G NR-U) that relies on a licensed anchor, as well as a standalone version of 5G NR-U that can be used by carriers and/or any entities that don’t control any licensed spectrum of their own. This will be another tool for private/enterprise deployments. Even more importantly, there’s potential harmonization with Wi-Fi 6, which itself employs many of the characteristics of 5G. Wi-Fi and cellular have always been a bit of a binary discussion. But the potential for cross-fertilization of Wi-Fi 6 and 5G is an under-recognized area of opportunity.

A 5G Status Report

Few technologies are expected to have as big an impact as 5G—the next generation wireless broadband connection standard—and now that we’ve finally started seeing the first 5G-enabled devices and real-world deployments, it’s worth taking a look at where things currently stand and how they’re likely to evolve.

Fortunately, I’m now in a much stronger position to do that as the result of two different 5G-focused events I attended last week. Qualcomm’s 5G Workshop at their headquarters in San Diego emphasized core 5G technologies and the work that the company has done to evolve and integrate those technologies into semiconductor-based components. Specifically, they highlighted their work on 5G modems, RF (radio frequency) transceivers, RF front ends for fine tuning the raw radio signals, and systems that integrate all three components into complete solutions. The 5G Americas analyst event in Dallas (TX) provided the telco carriers’ and network infrastructure equipment companies’ angle on the status of today’s 5G networks throughout the US and Latin America. It also included a session with FCC commissioner Michael O’Reilly that dove into the hot topic of radio frequency spectrum issues in the US.

The two events dovetailed nicely and offered an interesting and comprehensive perspective on today’s 5G realities. What became clear is that although 5G will eventually enable a whole wealth of new applications and possibilities, for the near-term, it’s primarily focused on faster cellular networks for smartphones, or what the industry likes to call enhanced mobile broadband (eMBB). Within that world of faster 5G cellular networks, there are two very important and widely recognized sub-groups that are divided by the different radio frequencies within which they each operate: millimeter wave frequencies (typically 24 GHz and higher—so named because their wavelengths are measured in single millimeters) and those collectively referred to as sub-6, shorthand for frequencies below 6 GHz. (As a point of reference, all current 4G LTE radio transmissions are done at frequencies below 3 GHz.)

Though it might seem a bit arcane, the distinction between frequencies is an extremely important one, because it has a huge impact on both the type of 5G services that will be available and the equipment necessary to enable them. Basically, millimeter wave offers very fast performance, but only over short distances and within certain environments. Conversely, sub-6 frequencies allow wider coverage, but at slower speeds. To make either of them work, you need network equipment that can transmit those frequencies and devices that are tuned to receive those frequencies. While that seems straightforward, the devil is in the details, and there are a wide variety of factors that can impact the ability for these devices and services to function properly and effectively. For example, just because a given smartphone supports some millimeter wave frequencies doesn’t mean it will work with the millimeter wave frequencies used by a given carrier—and the same is true for sub-6 GHz support. Bottom line? There’s a lot more for people to learn about the different types of 5G than has ever been the case with other wireless network generation transitions.

Just to complicate things a bit more, one of the more interesting take-aways from the two events is that there’s actually a third-group of frequencies that’s becoming a critical factor for 5G deployments in many countries around the world—but is still waiting to be deployed in the US. The C-Band frequencies (in telecommunications parlance, typically the frequencies from 3.5 GHz to 4.2 GHz), though technically part of the sub-6 group, offer what many consider to be a very useful compromise of both better performance and wider coverage than other frequency options above and below that range. In the US, the problem is that this set of frequencies (which happen to measure in the single centimeter range, though that does not seem to be the origin of the C-band name) is not currently available for use by telecom carriers. Right now, they’re being used for applications in defense and private industry, but as part of its spectrum modernization and evolution process, the FCC is expected to open up the frequencies and auction them off to interested parties like the major telcos in 2020.

Another interesting insight from the two events is that there are some important differences between the theory of what a technology can do and the reality of how it gets deployed. In the case of millimeter wave, for example, Qualcomm showed some impressive (though admittedly indoor) demos of how the technology can be used in more than just line-of-sight applications. The initial concern around this technology was that you needed to have a direct view from where you were standing with a smartphone to a millimeter wave-equipped cell tower in order to get the fastest possible speeds. With the Qualcomm demo, however, people were able to walk behind walls, and even into conference rooms, and still maintain the download speed benefits of millimeter wave, thanks to reflections off walls and glass. When asked why early real-world tests of 5G devices didn’t reflect this, the company essentially said that the early networks weren’t as dense as they needed to be and weren’t configured as well as they could be. Carrier representatives and network equipment makers at 5G Americas, however, countered that the reality of outdoor interference from existing 4G networks and the strength of those signals meant that—at least for the near term—real-world millimeter wave performance will be limited to line-of-sight situations.

An interesting takeaway from the demo, and the subsequent conversations, is that millimeter wave-based 5G access points could prove to be a very effective alternative to WiFi in certain indoor environments. Faster download speeds and wider coverage mean that fewer 5G small cells would have to be deployed than WiFi access points in a given building, potentially leading to lower management costs. Plus, technologies have been developed to create private 5G networks. As a result, I think millimeter wave-based 5G indoor private networks could prove to be one of the sleeper hits of this new technology.

Even though most of the current 5G efforts are focused on speeding up cellular connections, it became clear at both events that there are, in fact, a lot of interesting applications still to come in industrial environments, automotive applications, and more. Another important point that was emphasized at both events is that the initial launch of 5G is not the end of the technological development process, but just the beginning. As with previous cellular network generations, the advancements related to 5G will come in chunks roughly every 18-24 months. These developments are driven by the 3GPP (3rd Generation Partnership Project—a worldwide telecom industry standards group originally formed to create standards for 3G) and their release documents. The initial 5G launch was based on Release 15. However, Release 16 is expected to be finalized in January of 2020, and that will enable a whole other set of capabilities, all under the 5G umbrella. In addition, a great deal of work has already been done to start defining the specifications for Release 17, which is expected sometime in 2022.

The bottom line is that we’re still in the very early stages of what’s expected to be a decade-long evolution of technology and applications associated with 5G. Initial efforts are focused on faster speeds, and despite some early hiccups, excellent progress is being made with much more to come in 2020. The two conferences made it clear that the technologies underpinning next generation wireless networks are very complicated ones, but they’re also very powerful ones that, before we know it, are likely to bring us exciting new applications that we’ve yet to even imagine.

Amazon’s Strategy Deficit and Alexa’s Endgame

For the second year in a row, Amazon had a fall devices launch day where voluminous devices were indeed launched. What appears to be a throw it at the wall and see what sticks strategy may very well be much more tactical than observers realize. It is certainly true, not all of the devices Amazon launched will sell in any significant volume, the larger point to be made is about Amazon furthering their lead with Alexa and the Alexa ecosystem of consumer electronics.

The Strategy Deficit
It is no secret Amazon missing the mobile revolution hurt. Fire Phone was a decent idea, but one of the key lessons Amazon learned was what happens if you are not a player with a dominant platform in a computing cycle. Sure, Amazon could have worked with Google and shipped a smartphone loaded with Google Services, but they deemed at the time the trade-offs were not worth it. Now, hindsight being 20/20 I could argue Amazon should have done worked more closely with Google as Android has evolved to a point where it’s current implementation allows for a great deal more flexibility in third party services integration then it did years ago. Meaning, had Amazon stuck it out with Google, they may very well be in a position today to have a smartphone that played nice with Google but was still loaded with best of breed Amazon services. But, again, hindsight is 20/20, and that is not how it played out.

I’ve seen some argue, Amazon can still do this and launch a smartphone, with many voice-first features, but honestly it is too late for that. Instead, Amazon is focusing on the lesson learned of not having a dominant platform and working to make that dominant platform Alexa for the next wave of computing devices.

Rightly, Amazon knows something beyond the smartphone is coming. What that is, we have theories but still don’t know, and the reality is smartphones will be with us for a long time still. Amazon not having a strong presence on smartphones, beyond e-commerce, is the strategy deficit they are dealing with. And while their strategy is clear, try to make Alexa the default platform on all connected consumer electronics beyond the smartphone, there is a broader point about the potential for success but also the risk.

Alexa’s Endgame
Alexa everywhere is the endgame, and the default platform for voice is essentially Amazon’s strategy. Yes, a product like the Echo Loop or Frames raises questions of value proposition, but to be honest, many were not convinced a talking speaker would work as well.

The other thing to consider when looking at Amazon’s new Echo Lineup is how much of this hardware strategy is a best first customer example more than it is a volume sales example. Take their Microwave, or Oven as an example. Those products are best first customers of the Alexa platform for a cooking appliance, and Amazon’s true end goal is that all Microwaves and ovens have Alexa built-in as the default voice-first platform. That is a future I believe is highly likely. With this perspective, the broader goal of some of these Amazon hardware products is to show potential wearable technology companies the value for putting Alexa in their solution as the default voice platform. I do not expect Echo Loop or Echo Frames to sell in significant volume, but if more wearable companies come to Amazon to put Alexa in their wearable, or face/head-worn computing device then this becomes a much more productive strategy for Amazon.

What is fascinating about this is how I can see a world where this works out fabulously for Amazon and one where it doesn’t work at all and Amazon’s Alexa is not the default platform for the post-smartphone era. It is perhaps possible as well that I’m entirely overthinking this and Amazon simply wants Alexa to deepen engagement with Amazon services and commerce platform, but as of now, it seems like they have much larger ambitions for Alexa as a voice computing platform.

Google and Apple are not going to sit still, but there is no doubt in my mind the overwhelming perception by the industry and consumers is that Alexa is the leader when it comes to capabilities and how Google and Apple continue to compete and as the world begins to invest the platforms that will drive the next generation of consumer electronics.

At OC6 Facebook Pushes Virtual Reality Forward

The buzz around Virtual Reality has faded for many, but this hasn’t dampened Facebook’s enthusiasm for the technology. After spending two days at the company’s Oculus Connect 6 conference, it’s easy to see why Mark Zuckerberg and the Facebook team still see a bright future for VR. They talked about the recent success of its Oculus Quest headset and made a handful of interesting announcements around better content availability, upgrades to existing hardware, and the path to increased commercial adoption. It also announced its next attempt at a VR-based social app called Horizon. I found the company’s story around three of four of those topics compelling.

Bringing Go and Rift Content to Quest
During his opening keynote, Zuckerberg said that sales of the Oculus Quest—Facebook’s newest standalone VR headset—have exceeded the company’s expectations. That’s not a terribly meaningful metric for the outside world, but I can tell you that in IDC’s 2Q19 numbers the Quest helped Facebook capture more than 38% of a 1.5-million headset worldwide market, with astounding year-over-year growth.

Perhaps more importantly, he and other executives went on to note that people are using the new headsets more often, and for longer periods of time, than any of the other Oculus headsets. This includes the lower-cost standalone Oculus Go and the PC-tethered Oculus Rift and new Rift S. Sales of software on the Quest are also taking off, and Facebook announced that it already represents about 20% of the more than $100M in Oculus app sales to date.

To feed that growth, Facebook is taking steps to make sure that existing content for both the Go and the Rift will run on Quest in the future. When I discussed my initial experience with the Quest, I lamented a good, but not great, app selection. In addition to trying to bring more developers into the ecosystem, the company is also working to bring more existing content to the Quest.

The first step—bringing Go content, much of which began life as content for the Samsung made Oculus Gear VR—is a straightforward process, as the earlier hardware is less capable than today’s Quest. Effective September 26, Facebook has made many of the most popular Go apps available on the Quest.

Even more interesting: Facebook is working to bring popular apps that run on the Oculus Rift and Rift S to the Quest. Those apps utilize the additional horsepower of the connected PC to run on the Rift headsets, while the Quest utilizes a mobile processor with less horsepower under the hood. To address this, Facebook announced a new technology called Oculus Link which will let Quest owners connect their headset to a PC using a Type C cable to utilize the PC’s processing and graphics.

Frankly, it’s a brilliant move. I’d argue that today’s Quest is among the best VR experience in the market, but its mobile chipset means it can’t drive the same level of resolution as a tethered system. The upside is the Quest feels more immersive because you’re not constantly dealing with the PC tether. With Oculus Link, Quest owners can have the best of both worlds: The ability to play in standalone or in tethered modes. Better still, the upgrade will be free. Quest owners will need a high-end Type C cable to make it work. While many of us have these cables, few will likely have one long enough for this job. Facebook will sell a premium cable when the upgrade rolls out in 2020.

VR Without Controllers
Perhaps the most notable technical announcement at the show was that in 2020 Oculus will bring hand-tracking technology to the existing Quest headset utilizing the existing integrated cameras. That right, no additional add-on cameras or room sensors required. During the keynote, and in later track sessions, various Facebook executives lauded the numerous advantages to using hand-tracking over today’s touch controllers. Chief among them: a more frictionless input modality, improved social presence, and enhanced self-presence. Yes, when you can see your own hands—sans controllers—the entire experience is more immersive.

In addition to driving interesting new gameplay options, and to create improved social interaction opportunities, I also heard from several large companies about the advantages of hand-tracking when it comes to soft-skills enterprise training. For example, when learning how to handle challenging HR situations in VR the training is more lifelike when the trainee is not holding on to touch controllers during the exercise.
There will still be plenty of VR situations where hand-held controllers will still be necessary, or even a better experience, but bringing hand-tracking to the Quest has the potential to drive a big shift in how people use the headset. And I’m heartened to see Oculus leveraging the existing hardware and bringing it to existing customers without the need to buy new accessories. The company’s willingness to continue to iterate on the platform will make both consumer and commercial buyers more willing to invest in the Quest.

Focus on Commercial Use
Until now, I’d say that the folks at HTC’s Vive team have done a better job of telling a strong commercial story, especially as it iterated on the Vive Pro hardware to bring more training-centric capabilities. At Connect, however, Oculus talked a great deal about Oculus for Business, its commercial platform currently in beta and set to launch in November. The company is putting together a very compelling commercial story that will take advantage of the strong capabilities of the Quest hardware.

I sat in on a session where Oculus walked attendees through the steps necessary to take a company from proof of concept to pilot to deployment. I’ll write more about this in a future column, but for now, I’ll say Oculus is asking the right questions and thinking about all the right things. Perhaps the biggest challenge it faces is convincing enterprise organizations that it knows how to help deploy and manage commercial hardware and software at scale.

To that end, Facebook announced that it would have a trusted channel partner network that includes a shortlist of big companies in that space including Synnex and TechData. Perhaps just as importantly, it is also currently working on standing up an ISV (independent software vendor) program with existing companies that have experience in deploying commercial VR solutions, who have handled pilots or deployments with Global 2000 customers, and who have experience with VR training, simulation, or collaboration use cases. In other words, Facebook has realized that it doesn’t have all the answers when it comes to commercial VR and it’s wisely looking for the best partners to help it address the areas where it still needs to learn.

On the Horizon
Facebook made a lot of interesting announcements this week at Oculus Connect. And the 90-minute session by John Carmack, which including an unvarnished postmortem on what went wrong with the Gear VR, is a must-listen for anyone who follows this market. But the one announcement that failed to land with me is the one where Facebook is likely spending the most money and effort: The launch of Facebook Horizon.

Facebook describes Horizon as “an interconnected and ever-expanding social VR world where people can explore new places, play games, and build communities.” It sounds interesting, on paper. But even watching the video, which shows increasingly lifelike (although still legless) avatars interacting in a perfectly rendered digital world, I kept thinking, “but what are you going to do in there?” It’s not clear to me that Facebook knows the answer to that.

Facebook Horizon will launch into beta in 2020, and the company hasn’t said when it would roll out to a larger audience. I’ll withhold judgment on Horizon until I’ve had a chance to experience it myself. Perhaps the company will surprise me. I did, however, think it was telling that during his talk even Carmack acknowledged Facebook continues to struggle to figure out the right way to do social in VR.

In the meantime, I’m very much looking forward to seeing Facebook roll out all the other updates to Oculus Quest. More apps, support for PC tethering, and integrated hand tracking should all help drive the market forward in meaningful ways. And I’ll be watching as the company ramps up to launch Oculus for Business later this year.

Amazon’s Event and Its Fifteen Alexa Incarnations

Based on my experience last year, I was expecting Amazon’s event to be packed full of products, and it was. Yet, the more I listened to Dave Limp walk us through everything new, the more it was clear that there was only one product around which not just the event, but the entire line of devices is focused on, and that is Alexa. I know, you might think I am stating the obvious here, but what I mean is that Amazon considers Alexa the actual product they sell. If you think about it this way, it becomes much easier to understand why we see Amazon invest in so many hardware categories. This approach makes Amazon a very different hardware vendor and not just because they are prepared to break even. What we saw at the event where devices that did one of three things: expanded use cases for current users, lowered the barrier of entry for new users and helped Alexa get outside the home.

The Elephant in the Room: Privacy

Before getting to the new hardware, Dave Limp addressed the privacy concerns that were raised in the press over the past few months. Aside from reiterating the ability users have to delete any recording, he also introduced new ways in which consumers can interact with Alexa to find out more about why Alexa does certain things.

These two simple utterances: “Alexa, tell me what you heard?” and “Alexa, why did you do that?” help Amazon do three things:

  • Educate users on why and how things happen. Asking Alexa why music started playing and being told someone in another room on another device asked to play such music, or asking Alexa why she was answering when you did not actually mean to engage and have Alexa explain she heard her name when you might have said Alex, all help users understand how the underlying technology works. It turns some of what might be perceived as secret magic into a rational explanation, increasing transparency.
  • Make users feel more in control, not just of their own data but also in their relationship with Alexa.
  • Finally, it continues to build trust and bond through the exchanges as it is Alexa who is explaining to them what is happening.

Ultimately, Amazon and all other providers of digital assistants will continue to be scrutinized, and rightly so, as we put more and more of our lives into their hands. Finding the right balance between wanting users to share data to improve performance and relevance while being very transparent about how such data is used will remain a key driver of trust, engagement, and loyalty.

Driving New Points of Engagement and Creating New Points of Entry

Amazon added new features such as the voice of Samuel L. Jackson, the Food Network Kitchen (great pairing with the new Amazon Smart Oven) for cooking classes, and new smart alerts for Alexa Guard. These all aim at growing engagement for current users by finding new things to do with their devices and Alexa. New accessories like the Echo Glow, also help to add value to devices, like an Echo Dot, that you might already have in your kids’ bedroom. Possibly the simplest of products among what announced was the Echo Flex. An extremely affordable wireless-smart speaker that can add Alexa’s functionalities in those rooms where you want Alexa’s brains and voice but for which you do not wish to make a significant investment.

The opportunity to appeal to new customers comes in the form of a new Echo Dot Clock, Echo Show 8 and the Echo Studio. I think it is fair to say that sound had not been Amazon’s strongest value proposition with its Echo devices. While it had improved with newer generations, consumers bought Echo devices for their functionality first and then for sound. The new Echo Studio aims to change that thanks to a collaboration with Dolby that benefits both the hardware and the new Prime Music HD service by adding Dolby Atmos sound. The quality of the sound is impressive, and as you would expect, Amazon is making sure Echo Studio also works with your TV either as a single speaker, a pair or with your subwoofer. The best way I have to describe the sound is that it is incredibly immersive, letting you hear instruments you did not realize were there before. The main difference with stereo is that the music is not coming from two specific points, but the different sounds that make up a track are all around you.

The quality of the sound coupled with the aggressive price point of $199 will put pressure on other smart speakers that had been differentiated based on sound. HomePod, in particular, will feel the pressure, given Apple Music subscribers can access the service through Echo devices. As I doubt Apple will play on price, I am curious to see if there could be an interest in differentiating their sound quality even more by embracing Dolby Atmos for an HD version of Apple Music.

Taking Alexa out of the Home

Alexa continues to dominate in the home, but things are quite different once we leave, and we rely on our smartphones for most of our day. Amazon is undoubtedly aware of this, and much is done to make Alexa more readily accessible when we are out and about. The Echo Buds, a Bose collaboration, free Alexa from the smartphone giving us access to navigation, music, and search. The deal with GM also brings Alexa outside the home as her functionality is added to Chevrolet, Buick, GMC, and Cadillac cars that are 2018 and newer and have compatible infotainment systems.

These new devices coupled with an earlier announcement for simplifying multi-wake-word support speak to Amazon’s desire to limit frustration and make consumers pick Alexa because of the superior experience not because it is the only choice. The outside world is much more unpredictable than our home both in terms of context and requests, which is something Alexa still needs some practice on. The more entry points Alexa will have throughout the day, the more value she will deliver. Other two products launched under the “Day 1 Editions” program will also help Alexa be with us all day: Echo Loop and Echo Frames both aimed at being with us all day.

Continuing to Learn

The “Day 1 Editions” Echo Loop and Echo Frames are not developers’ products, but rather ready to ship products offered on an invitation-only basis to a selected number of customers.

Echo Frames are a voice-first experience delivered through prescription glasses. Rather than convincing people to wear glasses all the time, Echo Frames are aimed at people who have to wear glasses and might be interested in using them as a vehicle for voice-first interactions.

Echo Loop is a ring that you can tap and talk into to access Alexa more quickly than reaching for your phone. While many were expecting a smartwatch, I find Amazon’s interest in experimenting with different wearables fascinating as we know how hard it is to be successful in the smartwatch market that mostly remains an Apple Watch market, especially in the US. The way you would interact with Echo Loop is quite similar to how you use Apple Watch to access Siri. Interestingly I thought that cupping my hand close to my ear to listen to Alexa’s voice coming from the ring or putting my hand in front of my mouth as if I was yawning to speak to her was much more natural than raising my wrist to speak to Apple Watch although Alexa’s voice was much fainter than Siri’s.

The feedback loop that Amazon will create with these customers who will approach usage in a very open-minded way, similar an early adopter, will be extremely useful to Amazon to finesse the products both with features and use cases and ready them for more mainstream customers.

Amazon ended the list of new announcements with the introduction of a new wireless protocol called “Amazon Sidewalk targetted at extending the working range of low-bandwidth, low-power, smart lights, sensors, and other IoT devices. By extending the range using the unlicensed 900mhz spectrum, customers will be able to place smart devices anywhere on their property even without a Bluetooth, Wi-Fi, or cellular connection. An ambitious project that has opportunity way beyond the consumer market, something Microsoft should keep an eye on.

Why Breaking up Facebook May Not be a Good Idea

While the rhetoric in Washington around breaking up high tech companies has become louder during the presidential campaign, it turns out that many American voters are in favor of this too.

This Statista chart shows that well, over 65% of Americans favor breaking up big tech.

Called the “tech lash,” some major tech companies like Facebook, Twitter, and even Apple have faced some type of anti-trust scrutiny recently and calls for breaking them up in one form or another.

There is a lot of controversy around the breakup argument, but in the case of Facebook, a break up might not actually be a good thing.
Facebook has a formula that produces great revenue at the cost of hosting both good and bad material. And the bad material actually makes them more money than the good.

It is plausible that if you split them up, each as its own entity would be even more motivated to expand their own platforms using Facebook’s revenue models and could grow their programs to add more good and bad content. Facebook’s good content comes from allowing us to connect with family, friends and even long lost acquaintances. They let us see what each other is doing, look at peoples vacation pictures, and share in the even mundane things of life. But the bad comes in many forms like commentary, news feeds and false ads and have split us up into narrow audiences, and some people only gravitate to the bad. Ironically, Facebook’s revenues get propped up more from bad content than good content.

A better way to address the problems of Facebook would be to increase regulation on bad content, including falsified accounts, false news stories, illegal ads, hate commentary, and more. Facebook by themselves are doing a bad job at this, and they need to be forced to keep as much bad content as they can off of their sites.

I actually believe Facebook’s CEO, Mark Zuckerberg, understands that his company may need regulatory help, and has said so publicly. He fears to be the one to crack down on hate speech, accounts that are on the bubble that share false information or are used for inciting any action that could harm Facebook users. He knows that his quelling of some of this content would render cries of restricting free speech and would prefer the government play the role of bad cop through some form of regulation that allows him to legally restrict the kind of content that can be posted on Facebook.

The government needs to identify what is bad content and force them to be removed or perhaps even taxed if necessary, to keep any of these sites from expanding their reach by promoting bad content at will. Breaking Facebook into three companies with no regulation is not a good way to keep the bad from growing on each of these platforms in the future. In fact, it could make the problems worse if each group becomes even more powerful without proper checks and balances.

At this stage of the election cycle, politicians are bound to get on their soapboxes and push for tech company breakups. But breaking them up without proper regulations may not be worth it. Unchecked, spin-off companies could continue to use a formula for hosting good and bad content and possibly make our world even less safe, and even more divided.

Revised Galaxy Fold Adds New Twist to Fall Phone-a-Palooza

Though the leaves may not have started changing color, there’s another sure sign that we’ve entered fall: the barrage of smartphone and other personal device announcements from major manufacturers around the world. Technically, it started in early August at Samsung’s Unpacked event in New York, where they unveiled their Note 10 line of smartphones. The bulk of the announcements, however, are happening in September, most notably Apple’s iPhone 11 line. Looking ahead, the announcements should extend at least until October, given Google’s own pre-announcement of the Pixel 4.

The most recent phone announcement isn’t actually a new one—it’s the relaunch of the Samsung Galaxy Fold with a hardened, re-engineered design. The original Galaxy Fold never shipped to the public because of a number of serious issues with the foldable display that popped up with early reviews of the first units. Though it was clearly a PR disaster for the company, to their credit, they made the difficult decision to delay the product, make the necessary changes, and are now re-releasing it.

I was fortunate enough to receive a review unit of the first edition and, as a long-time fan of the concept of foldable displays, was pleased to discover that in real-world usage, working with a smartphone-sized foldable device truly is a game-changing experience. I also had absolutely zero problems with the unit I received, so was very disappointed to have to return it. Happily, I now have the revised version of the Fold and while it’s obviously too early to say anything about long-term durability, it’s clear that the new Fold design is better conceived and feels more rugged than the original, particularly the redesigned hinge.

Samsung has been very careful this time around to warn people to be cautious with the device and frankly, the early problems with the first generation will probably serve as a good warning to potential customers that they need to treat the Fold a bit more gingerly than they do a typical smartphone. Now, we can certainly argue whether a nearly $2,000 smartphone ought to be this delicate, but the re-release of the Fold says a number of things about the state of foldable technology in general.

First, the plastic material currently used to make foldable displays is still not anywhere close to the level of scratch resistance that glass is. Companies like Corning and other display component manufacturers are working to develop more hardened foldable displays, but if you’re eager to embrace the future now with a foldable device, current material science is going to limit devices to softer, more sensitive screens. An important implication of this is that Samsung made the correct decision in choosing to go with a fold-in design on the Galaxy Fold. Fold-out designs like the Huawei Mate X and the Royole FlexPai aren’t likely to survive more than a few months of regular usage. (Unfortunately for Huawei, that’s the least of their concerns as the lack of Google Services on any of their new devices—including Mate 30 and Mate X—is going to severely handicap their opportunities outside of China.)

Second, we need to think differently about the inevitable tradeoffs between functionality and ruggedness on these new devices. While even the revised design might not be able withstand running an X-Acto blade across the screen or dropping sand into it—though let’s be honest, who’s going to do that to a nearly $2,000 smartphone—as long as the devices prove to be functional over an extended period of regular usage, that will keep most all potential customers happy. The key point to remember is that people who want a radical, cutting-edge device like Fold are interested in it because of the unique experiences it can enable. Having started using it again, I’m still excited at how incredibly useful it is and how innovative it feels to open the device and start using a tablet-sized screen on a phone-sized device. Simple perhaps, but still very cool. In fact, given all the challenges that the initial device faced, it’s pretty amazing that so many people are still interested in the new Galaxy Fold. Clearly, the lure of foldability is still quite strong.

Plus, Samsung themselves has acknowledged the potential challenges the device faces and added two additional services to ward off concerns people may have. First, they’re providing a special concierge level service for Galaxy Fold owners that gives them access to a set of dedicated support personnel who can walk people through any types of questions they have with the phone—a nice touch for an expensive device. Second, the company is offering to replace any potentially damaged screens for $149 for the first year of ownership. While that’s not cheap, it’s certainly appears to be a lot less expensive than what it will cost Samsung to have to perform that repair.

Finally, I believe the official relaunch of the Fold will mark the beginning of a wide range of commercially available products with foldable displays and start to get people thinking about the creative new form factors that these screens enable. Lenovo, for example, has previewed their ThinkPad foldable PC, which is expected to ship around this time next year—showing that foldable screens won’t just be limited to phone-size devices.

There’s no question that the Galaxy Fold is not yet a mainstream device, but it’s equally clear to me that people who want cutting edge device experiences will be drawn to it. I, for one, am eager to continue my explorations.

Formed Opinions on Apple Watch Series 5

I’ve been using an Apple Watch Series 5 for almost a week now, and while there have been a few others smartwatches with always-on displays, I have not been able to try them. Apple Watch is the first smartwatch with an always-on display that I have used, and it certainly feels like a big step forward for the category.

Before Series 5, and as nice as an always-on display would have been on prior Apple Watch’s, it wasn’t exactly clear to me if the display turning off an not always visible was a gigantic pain point in my day to day life. Over the past week, it has been interesting to note my behavior change now being able to glance at my Apple Watch and see the display without having to turn my wrist over. It turns out there was more friction in a display turning off than I previously thought. That being said, I disagree with a few of the ways Apple has implemented a few things with the always-on display.

As I watched Apple announce the Series 5 and the always-on display, there was something that immediately stood out in my mind as a point of curiosity about how they would solve the problem of privacy. Being so privacy-focused, as Apple is, I was curious how they would solve the problem of someone with a clear line of sight of my Apple Watch could see who was calling or texting me.

While it would have been clever for Apple Watch to hide notifications until you look at them like they do with iPhone where the message is hidden until you unlock your phone, I quickly concluded this would be tricky with no FaceID solution on Apple Watch. I was curious to see if they even addressed this, as I was going to be quick to point it out if they didn’t.

It turns out Apple has a very clever solution to this, but its one that I think needs to have more user control than Apple allows today.

What happens, if there is anything on your screen like a phone call, message, etc., when you aren’t looking at your Watch, and your wrist is facing outward, the screen blurs out so what is it is not visible. Now in the context of a text message or phone call, something where I do want there to be some privacy, I completely appreciate this solution. However, in my week with the Series 5, I’ve come to the conclusion this is not always necessary.

For example, if you are using Apple Maps and getting directions, when you turn your wrist away from you to put on the steering wheel, for example, the screen blurs out, and you can no longer see your directions. I first noticed this pain point while driving with my Apple Watch hand on the wheel and my cup of coffee in the other hand. I was getting directions and wanted to glance at my Watch to see what I needed to do next, and the screen was blurred out so I couldn’t see it. Thus, I had to move my hand awkwardly inward while still holding the wheel in order to let the directions on my Watch to become visible.

Granted, this was what I had to do before, and it was not a pain point I realized before. Now that I knew I could, or should be able to, glance at my Watch without having to put my wrist in an awkward position while driving it was a bit disappointing it didn’t work as I expected it to in this context.

Another example was when I was out walking my dog while also holding a cup of coffee in my other hand. I was listening to music as I walked Nala and sipping my coffee having a good ol’ time. A song came on that I wanted to know the name of, and I tried to glance at my Watch, but the screen was blurred out. Holding my coffee in this hand, I was not in a position to turn my wrist all the way over in order to reveal the display fully and see the song. It was a bit frustrating.

In both those contexts of directions or music, I don’t particularly care about the privacy aspect of someone being able to see what I’m listening to or directions I’m needing. You can imagine the directions one causing some friction if you are walking in a city and have both hands occupied but can’t turn your wrist over.

It seems to me that some people may want their privacy protected at all times, which is why I think it would be nice if Apple let me determine what apps I want to blur out when my wrist is pointed away from me and which ones I don’t.

The way Apple is handling glanceable information when your wrist is pointed away from you is just the time. Which is important, because the time should be visible, but it generally is in the apps I mentioned like the music and directions screens on Apple Watch. But, right now, when you point your wrist away from you, the privacy mode makes it, so all you can glance at is the time. In general, I think this can evolve to allow for more control by the individual to determine what apps or experience are not sensitive and do not need to be blurred out for privacy as my Watch becomes visible to others.

One other thing this led me to think of is if the always-on Apple Watch display is a step closer to Apple having an always-on iPhone display experience. Something similar to many Android phones that always show the time and some general information like how many texts, or emails you have.

Apple’s Meaningful Improvements and the Industry Trend

A few weeks ago, I wrote about the tech industry at large being in a bit of a lull. What I pointed out is simply the time-proven observation of what happens with innovation in mature markets. In the early days of new technology, as we saw with PCs and smartphones, for example, we see year over year leaps in innovation. Advances that felt like jumps forward instead of little steps. Once a category matures, the advances feel less like leaps and more like iterative steps.

But in the case of both categories, a careful analysis would show a much more refined approach to innovation and one that focused more on the things that feel meaningful, solving pain points, more than enabling something entirely new. I like this perspective because it helps us understand the cycle from invention to iteration and how consumer behavior, their needs, their pains, evolve, and eventually get solved. It’s interesting, as a part of this perspective to realize that the yearly cycle of leaps forward ending up creating new behaviors that end up leading to pain points that eventually get solved in the latter part of the maturity cycle through meaningful iteration. I also see no reason to believe this observation changes with whatever innovation cycle we see next.

What’s Meaningful?
I don’t mean to make it sound like the last few years of iPhone iteration were not meaningful. But I think you could look at the last few years of devices and argue this year’s advancements were particularly meaningful. Having used the iPhone 11 Pro and Apple Watch Series 5 for a few days, I’ll talk about how I see these improvements as being particularly meaningful.

First, it’s important to note, as this will be relevant in future iPhone content I write, that I downsized from the Max sized iPhone to the 5.8″ screen-sized non-Max iPhone 11 Pro. I’ve used the Max sized iPhone since it first came out like the iPhone 6 Max and until now never looked back. I wrote at the time the 6 and 6 Max came out that I did not anticipate liking the Max more than the smaller sized iPhone 6, but I did, and I stuck with it. Until now.

Part of this was simply my maturing behavior. My logic for the Max size was how mobile I am and how much work I do on the go. I didn’t want to take my Mac with me everywhere, so the Max size let me do quite a bit of work while on the go. Now, thanks to the improvements in iPad, I bring my iPad Pro with me on the road and to meetings, and because of that, I am comfortable moving to a smaller sized iPhone. Again, the key point here was both meaningful iteration in iPad and my changing behavior with workflows that enabled me to alter my device preference. I make this point, to show that behavior is not static and what is a core computing device and what is a companion computing device can change over time as meaningful iteration happens in the market both at the hardware, software, and even cloud computing levels.

Going back to what the meaningful improvements with the iPhone 11 family, I look at things that a regular consumer will appreciate, value, and understand as a pain point. It comes down to the battery, screen (both on Watch and iPhone), and Camera.

Battery. While the iPhone XR already had exceptional battery life, the iPhone 11 should do even better in real-world testing. The biggest battery gains look to come in the iPhone 11 Pro and Pro Max. Apple touts the Pro Max as the longest battery life ever in a smartphone with 5 hours more than Xs Max and iPhone Pro with 4 hours more than Xs. I never ran out of battery with the XS Max, and I think I’m at the top in terms of mobile usage of anyone out there. My only concern with downsizing was the battery life, but with the battery life gains Apple has in the 11 Pro this year, I’m able to go a day on the 11 Pro, and I know I would not have made it a day with iPhone XS.

Again, battery life is a real pain point for the mainstream consumer. Most consumers constantly rank battery life as one of their biggest issues with their smartphone and gains in battery life solve real pain points and will be seen as extremely meaningful.

Screens: I’ll start with the iPhone screen being promoted as the toughest glass in a smartphone. This is quite the claim since. When I looked at Apple’s battery life claim for iPhone 11 Pro Max, the wording was specific and said, “longest battery life in an iPhone.” It did not say the longest battery life in a smartphone. With the screen, Apple is saying it is the strongest glass in the category, not just of all iPhones. I think Apple can make this claim for a few reasons. First, nearly every smartphone manufacturer is using Corning’s glass solution on their smartphone. Corning’s Gorilla glass is the gold standard for strength, so OEMs not using this don’t have much claim from what I’ve seen. Apple has its own custom screen collaboration with Corning, so both would know if this is the strongest glass solution to date on a smartphone. I will be very curious to see some third party testing on these screens, but Apple seems confident even using this feature as a main selling point in a recent commercial entitled “it’s tough out there.”

Living with a cracked screen is a thing, and more people live with cracked screens than you think. I’m fairly involved at my daughters High School and go to many athletic events both home and away. I honestly can’t keep track of how many kids I see using cracked iPhones. It’s amazingly common. Both my girls cracked their iPhone XS screens, and we had to have them replaced. If this promise holds for Apple, and they have a new standard in screen durability, it is no doubt meaningful to many.

Lastly, the always-on-display of Apple Watch Series 5 is a great example of meaningful improvement. I’ve been using a Series 5, and you don’t realize how meaningful an always-on-display in a smartwatch is until you try it. I guess, overall, I didn’t realize how many times I was in a situation where I wanted to look at my Apple Watch and could not turn my wrist over. It seems like a small improvement, but it is is quite large in actuality.

Camera: Yes the iPhone is not the first smartphone with a ultra-wide-angle lens. Nor is it the first smartphone with an enhanced mode for better photos at night. But for Apple customers, these are firsts, and they will be very well received by customers who get the new lineup. I’m personally finding the ultra-wide lens much more useful in day to day photos than 2X zoom and Night Mode, easily my favorite feature of Google’s Pixel phones, is incredible.

What I’ve found, personally, about both the camera system the Pro, including Night Mode, is the peace of mind that in any situation I’m going to get the photo I want. I have a multitude of options as well at any time for both the still and video modes for creativity. The 11 Pro camera system covers an incredibly wide range of photography use cases, and that is why I think it is labeled the Pro line. iPhone 11 has everything but the telephoto, which I think is incredible and why the 11 will easily be the best seller this year.

If I had to pick the two most meaningful improvements, it would be the battery and the camera solutions. Those are the things I think consumers will notice the most and appreciate in their everyday use. But it goes back to solving problems in meaningful ways and recognizing most humans will appreciate that more than a giant leap forward that causes new behavior. There will be a day when we will get there again, but its farther off than you think.

CBRS Launch: An Important Day in Wireless History

It might not rank up there with the introduction of the iPhone or the launch of 4G LTE., but yesterday marked an important day in the history of wireless services, with the launch of Commercial Deployment Citizens Broadband Radio Services (CBRS). This has been years in the making, and is testament to a combination of innovation, persistence, and a level of public-private cooperation that we probably all wish was more prevalent. I’d like to use this column to explain why CBRS is significant, how it will used, and what the roadmap looks like for the next couple of years.

CBRS utilize 150 MHz of spectrum in the 3.5 GHz band, so it’s sort of ‘mid-bandy’. Half of the spectrum will be made immediately available in what is known as the ‘General Authorized Access’ (GAA) layer. In GAA, the spectrum is unlicensed, similar to Wi-Fi. Companies  — mainly service providers, but also venue operators and enterprises who are certified — can request to use a certain number of channels for a specified amount of time and in a certain area. This ‘spectrum sharing’ database will be administered by one of five companies who have been chosen by the FCC to be Spectrum Access Systems (SAS) Administrators: Federated Wireless, Google, CommScope, Amdocs, and Sony. Any customer that wants to use CBRS must sign up with one of the SASs.

Although CBRS is launching later than originally planned, it is important to step back and acknowledge getting to this point marks a significant accomplishment. The genesis of CBRS goes back to 2012, when the President’s Council of Advisors on Science and Technology (PCAST) released a report, “Realizing the Full Potential of Government-Held Spectrum to Spur Economic Growth”. This report envisioned the need to provide a framework for spectrum sharing. This means that the spectrum would not be owned by any one entity, or auctioned off in the manner that has been prevalent since the mid-1990s. So, the idea was hatched to use the 3.5 GHz band, which has been historically (but sparingly) used by the U.S. federal government, principally the Dept. of Defense. Notably, 3.5 GHz is being adopted for 5G in China and other parts of the world. The FCC, and key participants across the service provider, vendor, and public sector ecosystem developed the idea to create the SASs. And in order to allow the military and other government agencies to continue to use the spectrum, the SASs would also operate an Environmental Sensor Network, which is equipment installed to detect the presence of federal incumbent radar transmissions in the 3550-3650 MHz portion of the 3.5 GHz band.

Over the past few months, the SASs have been certified and the ESCs have been tested. The CBRS Alliance, which consists of key players across the ecosystem, has branded CBRS services as OnGo, which pertains to LTE in the CBRS spectrum. A special event was held in Washington, D.C. on Wednesday, where key participants in the development of CBRS were acknowledged, and some of the Initial Commercial Deployments (ICDs) were announced. The ICDs must run for a minimum of 30 days, after which the SAS Administrators must file a report on their experiences.

OK!! So how will CBRS be used and what is the significance? It should be noted that CBRS is best suited to small cells and in-building type deployments as there are limitations on the power output of the equipment. The use cases depend, to a certain extent on the service provider. The incumbent mobile operators will use CBRS to augment LTE speed and capacity. The spectrum will be incorporated into ‘Carrier Aggregation’ techniques that combine channels across a service provider’s spectrum holdings. AT&T and Verizon, particularly, have been equipping their cell sites (especially small cells) with 3.5 GHz radios to support CBRS. And, in a boost to CBRS, the iPhone 11, which becomes available on September 20, supports CBRS (Band 48), as does the Samsung Galaxy 10, select other high-end smartphones, and a number of other devices such as mobile hotspots.

CBRS could also be very useful for cable companies, who could augment their hybrid MVNO/Wi-Fi hotspot based wireless service with 3.5 GHz services in select cities. Wireless Internet Service Providers (WISPs), which operate fixed wireless networks in mainly rural areas, could augment their services using CBRS.

I also see venues, such as stadiums and convention centers, as likely early adopters of CBRS. These are the types of entities that need the significant, but temporary, boost in capacity that the CBRS framework is made for. There has also been a lot of discussion about enterprises using CBRS to deploy a private LTE network. Initially, they’re likely to do so in conjunction with service provider partners, but eventually, companies could obtain licenses to operate CBRS themselves.

If this initial wave of CBRS is successful, a compelling roadmap lies ahead. The FCC has set a goal for making the other half of the 3.5 GHz spectrum available through an auction of what’s called Priority Access License (PAL) in June, 2020. PAL will allow for longer license terms, larger coverage areas, some expectation of license renewal, and the ability for an owner to make some of its spectrum available on the secondary market. We also expect that the 3.5 GHz spectrum could be upgraded to 5G, although that is unlikely for at least a few years. Truth be told, CBRS is yet another tool in the toolbox that enables a service provider to improve the LTE experience to the extent that it looks like 5G. Finally, if CBRS is proven successful, it’s envisioned that some future 5G millimeter wave (mmWave) bands might be designated for spectrum sharing.

Finally, at this notable moment in the history of wireless, congratulations are in order to some of the key players who had the vision and persistence to make CBRS a reality: FCC Chairman Tom Wheeler (and current Chairman Ajit Pai who saw it through); Iyad Tarazi, CEO of Federated Wireless, one of the few startups in the game; and the 150-member CBRS Alliance, which developed specifications, helped negotiate the choppy waters of the GAA and PAL license schemes, developed numerous case studies, and developed the OnGo brand and certification program; and numerous vendors who played an instrumental role in evangelizing CBRS and then developing solutions including Google, Ericsson, Boingo, Commscope (which owns Comsearch and Ruckus Wireless).

And with all the negative stuff going on in Washington and with Big Tech, it’s nice to have this positive and optimistic moment, where the public and private sectors came together to make something happen. Companies who are also competitors worked together on the CBRS Alliance and with the FCC, DOD, and the NTIA to develop specifications and work out tough issues regarding license terms. This is also a moment of U.S. technology leadership. The concept of a spectrum sharing regime, and some of the technology used to develop and implement it, is a model that’s already being considered in several other countries.

The History behind Apple’s Irish Offices

In 1988, I was invited to go to Ireland on a project for a client to work on creating a European HQ for this company. In the process, I was introduced to the Irish Development Agency (IDA), an organization created by the Irish Government to promote business opportunities for companies outside of Ireland.

In my first meeting with IDA officials, they explained why their division was created. It turns out that the Irish universities were graduating thousands of engineering and business students each year, and there were not enough Irish companies who could hire them. This was especially true when it came to companies who could hire students trained in science and engineering majors. These students were leaving Ireland to go to work for tech companies in the US, UK, Germany, and France. They called it a brain drain and were anxious to lure tech companies, as well as new business ventures, to Ireland to try and stem the tide of their students leaving Ireland for greener pastures.

At the time, they had some minor successes as Apple, Microsoft, and Lotus agreed to put outposts in Ireland. However, these were mostly distribution centers, and they did not have the demand for technical skills or students with advanced degrees. As part of our meeting with IDA, we toured Apple’s small facility back then in Cork, Ireland as well as a larger one that Microsoft had established near Dublin.

At first, the Irish Development Agency gave these companies tax breaks on property and equipment, but as the tech market heated up, they needed to sweeten the pie and extended their incentives to include tax breaks on business costs and even profits.

While IDA targeted many companies with these incentives, and actually landed HP, they really wanted Apple to anchor their new program. Interestingly, at the same time, the Scottish Development Agency created a similar program and landed Compaq as their anchor company and pursued similar outreach to companies outside of Scotland.

By the early 1990s, IDA and Apple developed a closer tie, and they refined the kind of tax incentives that would make Apple choose Ireland as their European HQ.

Keep in mind, all of this took place before the EU was formalized and Ireland and Scotland developed their own set of rules and regulations that govern how each country handled their various business partnerships and program incentives back then.

In 2014, the European Commission began a probe into how all of the EU countries handled their tax breaks as it pertained to the various economic development programs. It took two years, but eventually, the Commission concluded that the tax rules between 1991 and 2007, applied to Apple, were artificially lowered and the EU contended Apple underpaid taxes due to Ireland.

According to Will Goodbody, at RTE News:

“Essentially the Commission claimed that the tax rulings rubber-stamped a method of determining the taxable profits for two companies based in Ireland – Apple Sales International and Apple Operations Europe.

The Commission concluded that those head offices only actually existed on paper, and as a result, could not have generated such profits.
These profits were not, as a result, subject to tax in any country under specific provisions of the Irish tax law which are no longer in force, it found. The result of all this, it said, was that Apple only paid an effective corporate tax rate that declined from 1% in 2003 to 0.005% in 2014 on the profits of Apple Sales International.

The Commission ruled that the tax treatment here in effect enabled Apple to avoid paying tax on nearly all the profits it generated from product sales across the EU Single Market because all sales were booked in Ireland rather in the territories where they were actually sold.
As a consequence, the European Commission ordered Ireland to recover €13bn in unpaid taxes over the period 2003 to 2014, plus the interest.”

If you want more details on this case here are a few other links that cover it well. Link, Link.

Apple and Ireland have appealed this judgment and presented their view and rebuttal to these charges to an EU court over the last few days. To be safe, Apple has put $13.1 billion in escrow and has already accounted for it in their financials in 2017-2018.

Apple and Ireland adamantly believe the EU Commission case is based on flawed logic and told the court that directly over the last two days.

While a tax payment is at stake for Apple, there is a bigger stake in play that impacts American companies deciding to put roots in EU countries or expand current operations as their market grows in the EU.

Even though Ireland could reap a huge tax windfall if the EU Commission wins, they are highly against this EU Commission ruling for many reasons.

First and foremost, they entered into this deal with their eyes open, and Apple delivered as promised. Apple has spent hundreds of millions of dollars on buildings, infrastructure and employs 6000 workers in Ireland. Moreover, they add to Irelands GDP and, like other tech companies who established businesses in Ireland, bring the kind of tech jobs that kept many of these graduates from leaving Ireland. Ireland also wants to disprove claims that Ireland acts or acted, as a tax haven.

From Ireland’s standpoint, Apple delivered.

Second, this ruling challenges Ireland’s sovereignty when it comes to setting their own business dealings. This is a huge deal to them, and this is at the core of why they are so against this Commission’s ruling.

The other big thing at stake is the issue of other American companies investing in EU countries in the future. If a company comes in and does a local deal, and the EU prevails with their Commission’s ruling, they set a precedent that at any time they could either nullify the deal or change its terms in favor of any new EU rules and regulations. That means a lot of companies could stay away from future investments in Ireland and other EU countries. Ireland wants to show to multinational investors and companies that it is a safe and predictable place to do business.

Regardless of the outcome of these courts findings, you can expect the losing side to appeal. A decision from this EU court is due by the end of 2010, but it could take years before this legal tussle concludes. Too much is at stake for both sides, and neither will go down without a huge fight.

Cloud Adoption and What It Says about Enterprise Investment

Earlier this week, I attended Google Cloud’s Anthos Day in New York. After launching Anthos in the spring at Google Next, Google shared its progress, both on customers and partners’ acquisition as well as launched a new part of the platform that aims at making apps management in a hybrid cloud environment as simple as possible.

As I was sitting listening to speaker after speaker talk about the investment that either themselves or their customers are putting into transitioning current apps to the cloud or redesigning them for the cloud, I was struck by one thought. There is a stark contrast between the way that enterprises think about the part of their infrastructure that runs the business and connects to their customers versus the part that empowers their workforce. How is it that enterprises are prepared to redesign, or refit applications that are core to their business and they’ve been using in some cases for decades, all in the name of digital transformation, increased agility, improved security, and a future-proofed business, and yet we don’t often see the same treatment granted to hardware and applications that are core to their workforce?

I’m sure that even the broader Google must find it quite frustrating to see what enterprises are prepared to do when it comes to cloud and yet how long it took for G Suite to establish itself as a productivity suite in the enterprise that was cloud-first. Even more frustrating must be the discussion that some IT managers still have about whether or not Chromebooks or iPads can be a real alternative to PCs.

Workforce vs. Customers

Why such a difference in approach? It’s an interesting question and not one I have a straight answer for. But I started to think about what factors could play into this reality. This is particularly interesting to think about, at a time when we hear more and more enterprises say that they want to give their employees, the right hardware and applications because this has become critical to acquire as well as retain talent. Yet not many companies seem to go beyond “cosmetic” tweaks and truly drive a more impactful change that builds the foundation for a modern workplace.

When it comes to the way people work, I’m left to think that this increased focus on employees’ user experience is more a marketing campaign than a fundamental mindset shift that, better tools, drive not only engagement and satisfaction but also better business results. If an organization lacks that deep understanding of what drives such satisfaction and engagement, how can they think to understand what those attributes are in a customer or partner context? First-line workers and knowledge workers are, after all, internal customers of the IT department and partners of the business.

I have some ideas as to why such an investment is different.

First, I think you would agree with me that customers and partners are seen as core to the success of the business and an engaged and satisfied workforce is a nice to have, but the need just does not drive change in the same way.

I also feel that when it comes to IT infrastructure that is core to the business, there is usually a clear owner, both as far as driver and accountability. When it comes to the workforce, sponsors differ, and so does the burden of accountability. Sometimes it might be HR, some time is a direct manager, but more often than not the change is not driven by IT unless cost-cutting is behind it.

Possibly the strongest reason for such a disparity, however, can be found in how success is measured. When you invest in change, how do you measure success? Even more important: how do you measure return on investment? With partners and customers, the numbers are much more straightforward: cost savings, increased revenue, higher client satisfaction, and retention, and the list goes on. How do you measure the impact that a productivity suite change can have on your business, aside from any immediate savings?

To me it is interesting to consider how when it comes to cloud, organizations that see the most success are those that use the transition to cloud as a launchpad for assessing their business infrastructure, solutions, and processes. They use the transition to actually modernize their business. At a minimum, they look at what can be modernized, and what cannot and assess whether or not the applications that cannot be modernized are necessary to the business or if there are alternatives.

One would hope organizations learned from their move to mobile. In the beginning, the first businesses who embraced mobile were those who believed it could be a differentiator for their business, especially in a B2C environment. In other words, mobile was driven by the need to address customers’ needs and meet customers where they were. Only later companies started to embrace mobile as a way to provide a better environment to their workforce. Cloud, even more so than mobile, impacts both B2B and B2C from the very start and touches both the business and the way the business is run. If we are moving apps workloads into the cloud, why can we not move workflows that our employees face every day to a cloud-first and mobile-first environment? And if we are ready to evaluate the work environment why don’t we take the same approach that Anthos is applying to application modernization and provide the right tools that deliver on agility, manageability, and security with no compromise on simplicity. It might not be easy, but if as an organization, you are not prepared to make that your ultimate goal, it will never be achieved.

5G and the New Foundation of the Internet

I’d like to offer us to think a little differently about 5G than what most of the headlines are focusing on. The absence of 5G in Apple’s new iPhone’s drove some nonsense headlines, and commentators seemed to jump on the iPhone’s lack of 5G for 2019 as a missed opportunity. While I understand the desire to market 5G as an advantage from Apple’s competition, the reality is in most major markets in the world, 5G is not ready for the iPhone.

This early in a technology transition, most global networks are simply not ready to handle the scale to 5G Apple could bring given they would ship more 5G devices than any vendor by a magnitude more in just a matter of months. Friends of mine in telecom have confirmed my suspicion that the 5G networks are just not ready for that kind of scale. Yes, perhaps China is different, and while a fair point, Apple would not make a 5G variant of the iPhone just for China. However, this is not the point I want to focus on in this analysis. Rather, I want us to think differently about why 5G is important, and why it’s better for us to think about 5G’s value less about smartphones and more about everything else.

5G and the New Internet
5G is bigger than smartphones. Yes, it will make our smartphones faster, and let us stream more high-quality video, play more games with little to no latency, and overall help us browse the Internet faster. At a global level, this matters because there are markets whose consumers are still using painfully slow wireless broadband. So yes, 5G will be great for smartphones, but the story is much bigger.

There is a much larger connected world looming on the horizon, and 5G is absolutely built for the bigger connected world. In the LTE world, our smartphones alone are clogging the near entirety of the network. There is simply no room for connected cars, smart cities, smart grids, smart home, robotics, remote healthcare, public safety, etc., the list can go on. For the vast array of billions of devices not yet connected to the Internet, 5G was built for them. And thus, this is why I am positioning 5G as the foundation for the new Internet.

What Would 5G Bring To the New Internet?
There are a number of fundamental new advantages that come with 5G. A few key points are the ones I think make up the core of the new foundation 5G will enable that was not possible in the LTE era and LTE network architectures.

  • Low Latency enables Mission-Critical Applications. The dramatic increase in the amount of data which can be pushed up and down the network with 5G at incredibly low latency is essential for the new Internet. I mentioned autonomous cars, but these are on the shortlist of mission-critical processes that benefit from low-latency. We can’t have cars that can’t visually process the elements of the road and use a hybrid on-device and cloud processing to make split-second decisions on the road to suffer from network latency. It just simply will not be possible to have fleets of autonomous cars without massive throughput at low latency, and that is not possible with LTE. 5G was built for low-latency, and the architecture underlying both at the network and on the chipsets is essential to move autonomous transportation forward. On this point, 5G was not designed just for low-latency but levels of reliability that we have not previously seen in older network technologies. For things like autonomy, robotics, even things like remote health care (remote surgery, for example) things we all believe we are working toward in the future which are mission-critical can now become possible.

  • High Throughput and Low Power. In an industry research report I read on 5G, a point was made about 5G bringing significantly more capacity for edge devices than 4G/LTE. The report’s analysis dove into the technical elements that make this possible, but analyzed how in the 4G/LTE era, any given network/tower could only support around 2,000 devices per square kilometer. 5G enables this number to move up to 1 million devices per square kilometer. Again, all with higher throughput capabilities, at lower power demands on each device.

    This point alone helps us understand why 5G was built for the Internet of things. Many forecasts estimate in the 2021/2022 timeframe we could have 30 billion connected devices. This will not be possible without 5G.

  • True Edge Computing. Yes, edge computing is a buzzword, but enabling much higher levels of computational capabilities of edge computing devices like a vast array of camera sensors, health sensors, IoT edge devices enabled by smart cities and smart grid, and more, will all require much more computational capabilities at the edge with direct integrations into the cloud computing systems they are running on.

    There is huge upside in the data center on this point alone, as well as enabling growth for the cloud providers like Microsoft, Amazon, and Google in this future and it won’t happen without 5G infrastructure.

  • Dynamic Network Slicing. This one is interesting as it will fuse machine learning at the network level in new ways. With dynamic network slicing, which is a completely new feature with 5G, carriers and service providers will be able to dynamically optimize a portion of the network, for specific use cases. Say a specific city has higher demands on the network due to smart grid, or robotaxis, a network can smartphone optimize their network for any areas specific use case thus providing the highest quality of service. Being able to tune networks, on the fly, for specific use cases is one of the more interesting features I’ve come across, and it will be interesting to see how carriers use this part of the new 5G infrastructure.

Those buckets are the ones that stick out to me as things that 5G enables that are new, and as I said, this is a much bigger story and a much bigger future than just smartphones. Will smartphones benefit? Yes, and as augmented reality keeps developing, and other core technology the smartphone will help drive, they will all be enabled by 5G in ways LTE could not. But the 5G era is critical to moving us forward into the digital future we envision. One that will bring many businesses into the digital world in ways not previously available to them. It will transform industries and create tremendous additional value for economies worldwide.

Will it be easy? No, this may be one of the more difficult network transitions simply due to the complexity and fundamental changes in the network and on devices. This may be one of the more difficult “Gs” and costly. Unfortunately, we have had in decades if not ever. That being said, it is worth it for the benefits, and many industries are moving to take a vested interest to move 5G forward.

I understand the voices of the critics and the 5G skeptics, but the criticism I hear is large because the 5G narrative has been isolated to smartphones. This is why I encourage a much larger picture to be embraced when we think about the role 5G will play and why I think we will look back on this transition like the one that enabled a fundamentally new kind of Internet.

Apple’s Services Marketing Advantage

There are a wide array of entertainment industry trends in Apple’s favor when it comes to the changing behavior of consumers and how they consume entertainment. The big shift in winds is coming as cord-cutting continues to accelerate in growth and share of wallet opens up for new digital services that consumers find valuable content with. I wrote yesterday about my optimism for both Apple TV+ and Apple Arcade and had the opportunity to speak with a few friends who work in the entertainment industry, and the buzz is strong in Hollywood as well for Apple TV+ in particular.

What I think is being underestimated at the moment is the advantage Apple has over so many others in this space when it comes to being able to market their services. This point is being entirely underestimated, in my opinion, and the more I’ve thought about this, the more I think Apple’s services have the potential to become a behemoth in its own right.

Apple’s Retail Weapon
I’ve long written about Apple’s retail strategy as a core pillar of Apple’s competitive advantage. While Apple retail itself may not be the driver of most of the sales of Apple’s hardware, it is the single physical place where Apple controls the customer experience from the time a customer enters the store to the time they leave.

I remember when Apple News+ launched, and I was in a retail store a few weeks later. Promotion of Apple News+ was the default screen on nearly every device you could see in the store. It was then I realized how powerful Apple retail stores could be in driving awareness of their services.

If you think about the two companies getting into the digital entertainment business with direct to consumer subscriptions with the largest physical presence and foot traffic, it is Apple and Disney. Apple retail sees over 500 million retail visitors each year, and Disney had 157 million visitors to their parks worldwide in 2018. You could argue that these two companies are the best positioned to take advantage of areas where they have a competitive advantage over other digital services, competing for a share of wallet.

While it is true Disney has much more established brands and franchises at their disposal, Apple has a larger retail footprint and daily touchpoint with over a billion consumers. Both reasons why I consider these two companies best positioned to accelerate the adoption of their digital services in ways others can’t.

I’m yet to see how Disney will promote Disney+ in their parks, but we know it will happen. Interestingly, even with the hugely popular franchises Disney owns, forecasts for Disney+ are in the 60m range by 2021. Now, I think those forecasts are low, but you see how consensus thinking behind these forecasts shows just how difficult it is to scale here and get customers.

Thinking about Apple retail, consider how powerful the daily touchpoint Apple has with its customers from their retail associates. Apple doesn’t just need to have their services promoted on walls or screens in their stores but can also use retail employees to help drive awareness or plant the seeds of their services. Imagine a customer buying an iPad or iPhone and the Apple employee helping the customer simply says, “have you checked out Apple TV+ yet? The Morning Show is great, and I’ve loved the series.” Or have you checked out Apple Card yet? Did you know you get three % back on Apple purchases and daily cashback you can spend anywhere? Application is free and immediate through the app.” It is common to have retailers promote the benefits of their credit cards in their stores, but how Apple can promote Apple TV+ and even Apple Arcade with the help of retail employees feels, to me, a unique advantage.

For Apple Arcade, a service I’m much more optimistic about having seen some of the games, consider how many times you walk past an Apple store and see the iPad tables full of kids playing games while their parents’ shop. Going forward, all iPads can have Apple Arcade there and kids and be exposed to all the games in the library and see the full benefit that Arcade has to offer. Again, it’s the touchpoint of over 500 million customers each year that has me most intrigued with how Apple can use their retail presence to help sell the value of their services.

Again, the scale here feels entirely reachable by Apple when you consider the largest the sheer size of their customer base, the daily touchpoints they have with devices, and most importantly, their retail foot traffic. Netflix, the largest direct to consumer streaming video service, has 148 million subscribers from their latest earnings report. Growth has slowed for Netflix, and I don’t see a sudden burst of new subscribers for them in the coming years. While I don’t think for a second the vast majority of consumers in developed markets are going to cancel Netflix to move to Apple TV+ or Disney+ because the reality is both those services would be additive to Netflix. What should worry Netflix is that Apple and Disney begin to steal time from them, and I think that is a very real possibility. Remember when Netflix CEO said the things that worry him are things like Fortnite that pose a larger threat than HBO. Apple has two things which can steal time from Netflix now in Apple Arcade.

With Netflix at 148 million worldwide subscribers, HBO with 140 million as of the end of 2018, Amazon with over 100 million Prime subscribers who have access to Prime video, it seems entirely reasonable both Disney and Apple have upside here among the same potential numbers if not more.

For Apple, I am watching how they use retail and their daily touchpoints with customers it will be interesting to see how they strike a balance to gentle promotion instead of feeling like its being pushed too hard. While I think retail is Apple’s secret weapon here, I encourage Apple to keep the customer experience front and center and preserve that even as they look to use retail to drive awareness and adoption of their services.

Apple’s Aggressive Pricing on New Services Reflect Their Strategic Importance

Apple led off its September keynote this week by offering a closer look at its two new upcoming services, Arcade and TV+. The company invited developers on stage to show off some of the new games coming to Arcade, which launches September 19th and showed previews of some of the shows coming to TV+ when it launches November 1st. The company also announced that each service will cost $4.99 a month (after a week-long free trial) and that people who buy a new iPhone, iPad, iPod Touch, Apple TV, or Mac will get a year free of TV+. This aggressive pricing, especially around TV+, represents just how important the success of these new services is to Apple.

Apple Arcade
Apple’s new gaming service will let players access games on their iPhone, iPad, iPod Touch, Mac, and Apple TV. It includes more than 100 new games exclusive to Apple Arcade, and it will first role out Sept 19th with iOS 13. It will come to iPad OS and tvOS on Sept 30th, and to MacOS Cataline in October. Apple has also announced support for third-party controllers including Xbox Wireless Controllers with Bluetooth, PlayStation DualShock 4, and MFi game controllers.

Apple Arcade is interesting in that, unlike other gaming services on the market, Apple has focused on serving casual gamers rather than the hardcore players. This has the potential to cut both ways, as it represents a much larger total available market, but those players are—by definition—less invested in their gameplay. That said, I’ve always questioned the validity of the label casual gamer. Most people who play a game do it to win, and that can mean coming back to a game over and over until they’ve completed it. Just because it’s a “casual” game doesn’t mean people approach it casually.

That’s clearly one of Apple’s goals with Apple Arcade. To offer a wide range of top-shelf games in the hopes that a few catch on with each player. This makes the subscription cost a no-brainer to anyone who wants access to those few games to kill time while they’re waiting in line at DMV, stuck waiting for their kid’s school to let out, or sitting on a plane waiting to take off. By pricing the service at less than $5, I imagine a significant percentage of players will set it and forget it.

Apple TV+
Perhaps more surprising was the $4.99 price point for TV+. Unlike Apple Arcade, there are plenty of comparable services to Apple+, from Netflix to Hulu to Disney+ and more, and they all cost more than five bucks. Plus, as noted, when you buy new hardware from Apple, you get a year-long subscription for free. As others have noted, the free-year-with-purchase means TV+ will scale to huge numbers nearly automatically over its first year, an advantage that can’t be understated. And by pricing the service very aggressively versus its competition, Apple is hoping to bring in non-Apple hardware buyers to take a look, too.

And what they will find is a large and growing slate of all original programming served up without advertising. Apple’s early track record with original video content is spotty at best, but the company has new shows on tap with big-time Hollywood stars such as Jennifer Aniston, Steve Carell, Reece Witherspoon, Jason Mamoa, Snoopy, and even Oprah Winfrey. What it doesn’t have is a back catalog of old shows, a key aspect of the success of other streaming services.

Just like Arcade, Apple knows that subscribers to TV+ don’t have to like every show on offer, but if they love one or two, then they’re going to stick around. That said, unlike games that can be consumed in small, bite-sized bits when you have a few minutes here or there, video content requires a commitment. People will only make that commitment if the quality of the content is good, and so a lot will be riding on Apple’s first slate of shows.

Show Me the Bundles
One thing that Apple didn’t announce at this week’s event was any bundled package of services. Now that we’ve seen the pricing for all of its offerings, and added Arcade and TV+ to the roster, I’d very much like to see Apple offer customers a package inclusive of other services such as News+ and Apple Music. I’d even roll in iCloud storage. Make people a great deal on this broader set of services, and many will take the leap. This has the added benefit of getting people to use Apple services they might not have seriously considered buying individually in the past.
And the ultimate package: Apple’s full suite of services, plus hardware as a service rolled in. This could include a new iPhone, new iPad, and/or a new Mac on a regular one, two, or three-year cadence, inclusive of Apple Care support. This isn’t the type of package for everyone, but I’m convinced there is a market of “all in” Apple users that would welcome the ability to pay a single monthly fee to have everything just taken care of for them.

Bundles or not, Apple’s current announcements show just how serious the company is taking its entrance into these new service categories. Apple and Wall Street expect these services to drive real growth for the company over time.

If things go well, I expect at next year’s September event Tim Cook will spend some time talking about how many subscribers Apple’s new services have acquired. Two key things to watch for specific to TV+: How long does Apple keep the subscription at $4.99, and will it eventually turn off the free year to Apple hardware buyers? When and if those both happen, you’ll know Apple considers the service a success that can stand on its own.

China vs. US Manufacturing Follow Up

Last week I described the experience of trying to find a U.S. manufacturer to build a consumer tech product and getting no response from most of those that were contacted. One reader summed up the column as, “Our problem isn’t China competing “unfairly”, it is the U.S. not bothering to compete at all. “

These are manufacturers that produce high tech products for others, mostly printed circuit board assemblies that get assembled into various enclosures with other components. They’re called contract or independent manufacturers and are used by companies that don’t have and don’t want to invest in their own factories.

A contract manufacturer, whether here or in Asia, has become a necessity for many companies that design complex consumer products. By outsourcing manufacturing, the product companies reduce their costs, leverage existing manufacturers, and get to market sooner. As a result, Silicon Valley hardware companies and China manufacturers have become reliant on one-another, the former creating the products and the latter building them.

(Refer to this excellent article by James Fallows of The Atlantic: China Makes, the World Takes)

If product companies are forced to look elsewhere to build their products because of the pressure to leave China, the option of doing it in the U.S. is bleak. It’s much more likely they’ll go to another country such as Taiwan, Vietnam or Mexico. The arguments for making products here, to create more jobs, is not going to happen without major structural changes as well as a mindset change.

Building consumer tech products in this country takes very different skills and require resources that don’t exist. They include the ability to find, communicate and develop a supply base around the world, since the parts that go into consumer tech products come mostly from Asia – the batteries, displays, optics, switches, connectors, cables, microprocessors, and plastic parts.

It requires developing the engineering talent to take a consumer tech product into manufacturing from a prototype, and provide the services that companies in Asia offer, often at little or no cost in order to keep their factories full. Skills such as design for manufacturing (DFM), packaging, logistics and supplier management. There’s no reason they can’t acquire these skills, if they wanted, which leads to the next reason, having the mindset to compete. In fact, as my story showed, some don’t even seem to want to try. Risk taking, so common in China, is rare over here.

Our manufacturing infrastructure cannot now compete with China’s. Much of it has been hollowed out and it was never built for consumer tech products. Our government promoted a manufacturing infrastructure to support the defense industry, while China created an infrastructure to build consumer products, with suppliers of every part located closely together.

China has always had a cost advantage due to a lower labor rate. But labor has become a smaller percentage of a product’s cost, often about 10% for products made in China. The cost of components is often similar, since they can be sourced from the same suppliers. One of the biggest differences remaining is overhead and profit. Chinese companies are satisfied with a 5% profit while U.S. manufacturers often want 20% to 30% and almost always have a more costly overhead.

Being able to get to market first with an innovative product is often more important than cost. This is where China excels. Because of their experience, resources, and work ethic, products take much less time to go from prototype to production. Companies can easily find manufacturers with the skills needed to build their products, because they build so many similar products.

With all that said, the U.S. can offer some advantages. It’s preferable for manufacturing to occur near where the design is done; it results in better communications, closer collaboration and less time traveling long distances.

Building products in China often require ongoing monitoring to maintain quality. Too often manufacturers there gain the business with a low quote, only to find ways to cut corners after manufacturing begins. While U.S. manufacturers are often slow and lumbering, they are less likely to cut corners.

Intellectual property is safer doing the product in the U.S., although I’ve rarely encountered any problems. Lastly, and an increasingly important consideration, is the added difficulty and risk in working in China. With the curtailing of freedom in Hong Kong, the increases in surveillance, and limitations on using the Internet, a time will come where we just won’t want to do business there.

It may eventually be possible to build products in the U.S. But it won’t happen by making it more difficult to build in China. It will only happen if we solve our own problems first that make it so difficult to build these products here. As the reader said, “Our problem isn’t China competing “unfairly”, it is the U.S. not bothering to compete at all. “

Apple’s Pricing Surprise

The most common question I recovered from the media and financial analysts I talked to after Apple’s event was what stood out most to me. As interesting as a number of things were that Apple released, but one thing stood out to me the most, Apple’s pricing strategy.

Hardware Pricing
Apple has bucked its own trend of hardware pricing in smartphones. The iPhone 11 enters the market $50 less than the iPhone XR, whose place the iPhone 11 takes place in the line. The iPhone 11 has notable upgrades to the XR. It has dual cameras. It also has the updated processor, the A13 Bionic, which enables cutting edge features in computational photography, graphics, and performance. Given Apple’s pricing strategy for the last few years, you would have thought that adding such features would cause them to raise the price instead of lowering it. But, Apple decided to price the iPhone 11 compellingly for the market. There are a couple of ways we can read into this that may shed light on Apple’s pricing tactics in the future.

The first way would be to point to Apple’s success in driving volume in the X and XS/XR products the past two years, and that component ramp allowed them to get favorable pricing for key components which allowed them to lower the price. If this is true, it may be an indication of a new pattern. The pattern we understand, since we now have two major new design cycles to learn from in the move from iPhone 5 to 6 design and then from 6/7/8 design to the X design and those cycles happen in four years. Basically every four years, Apple move to a totally new design for iPhone. With the 6/7/8 designs, we didn’t see too much year-over-year price increase. Then with the X design, there was enough new innovation to bring prices higher due to components and other manufacturing costs. The potential new pattern here is if Apple moves to a new design that costs dramatically more to produce, we may see higher costs the first two years of the cycle then perhaps a lowering of costs once Apple’s component cost curve comes down.

If this pattern is a repeatable one, then it means Apple’s ultimate goal is to bring costs down of the hardware, as the manufacturing costs become more favorable thanks to their scale.

While that is one way to look at this surprising change of direction from Apple on iPhone pricing, the other is Apple reaping the rewards of their services business, and looking to drive more customers to their services and as a result able to offset the hardware margins with services margins and offer their hardware at lower price points. This in no way suggests Apple becomes a services company, only that by having a healthy and growing services business it allows them to give margin in hardware and make it back in services. The result could be a continued strategy of affordable products that bring more customers into the ecosystem and thus contribute to the cycle that allows hardware to stay moderately priced.

On a per feature basis, it will be hard to ignore the value of the iPhone 11 compared to the competition which was already preparing to price against higher ASPs and try to compete on price. Apple has fundamentally taken that strategy away from competitors, particularly those who don’t have many surrounding businesses to cushion themselves as Apple does.

If you look at Apple’s pricing from iPhone 11 at $699, or keeping Apple Watch Series 3 in the market at $199, or the new iPad loaded with features at $329, even the XR $549 and iPhone 8 at $499, it seems Apple is hitting a range of price points with still competitive products in their respective markets. For customers looking to upgrade the prices have never been more attractive, and it’s a similar story for prospective new customers looking to get into the Apple ecosystem for the first time.

The bigger picture point here on pricing is to emphasize Apple is not following the path most people thought which is to keep raising prices and milk their base now that they are locked in. Certainly, understanding the global markets and price pressure is part of it, but by looking to be aggressive on price when the economics line up, Apple is able to pull levers in manufacturing, absorb margin, or look to offset with revenue growth in other areas and continue to price products in ways that competitors can not.

Services Pricing
As surprising as the pricing for iPhone 11 is, the pricing for Apple Arcade and Apple TV+ were even more surprising. The consensus across a range of sources from Wall St. and even Hollywood was Apple would price Apple TV+ at $9.99, and they honestly could have and probably still had a decent conversion. No reports, or industry gossip I heard ever had Apple TV+ priced at $4.99.

For Apple, the strategy for TV+ seems to be coming into view. For more talent to get involved and want to showcase their stories with Apple, there needs to be a sizable viewing audience. While actors and storytellers like money, they also want their stories to be told and seen by as many people as possible. That is why attracting the best storytellers to Apple’s platform is not just about Apple paying more than other studios but having a much wider reach. This is where the pricing at $4.99 makes for a much easier entry point for the masses, particularly since it is a family plan for that price. The other way Apple is cleverly looking to build the Apple TV+ customer base is to bundle it with the sale of an iPhone, Mac, iPad, or Apple TV. Basically, if you buy a device you can watch Apple TV+ on then you get it for a year free.

Apple told me this is a limited-time offering, but there is no timeline for when it would expire. My gut says they offer it for at least the next six months, although, I’d encourage them to offer it for the next year. If Apple let this promotion for run for a year they would sell over 200 million of products that would get the Apple TV+ service for free, and if even 50% of those start watching the content they would have a view base almost as large as Netflix and larger than Amazon Prime in less than a year. That is a pretty compelling user base to keep attracting the best Hollywood talent and storytellers to Apple TV+.

With $4.99 being the price for a family, up to six people, it would be hard to estimate just how many individual eyeballs Apple TV+ is reaching. Apple would likely know this, and it will be interesting what statistics they share with content producers in order to keep them interested. But the pricing here certainly makes it feel like there is more subscriber upside than many initially thought and that bodes well for Apple and Apple TV+ as a service.

The other new service launch was Apple Arcade. To be entirely honest, I had pretty low expectations of Apple Arcade going into the keynote. We did some research last month, which we used as a feeler for interest in both Apple TV+ and Apple Arcade, and Apple Arcade stood out as the one with very little interest and excitement. However, after seeing a number of the games available, and the $4.99 price, I’m now much more optimistic on Apple Arcade.

The way I started to think about Apple Arcade was that Apple is in many ways doing what Nintendo has always been good at. In fact, I think internally, using Nintendo as a model is exactly the strategy for Apple Arcade. Some of the best games produced by Nintendo are a cinematic story like experiences. Zelda is a great example. Apple is presenting these games in many of the same ways that you have seen Nintendo showcase their games which have great storylines and a cinematic feel. Apple also feels like a game studio as well now, in that they are essentially purchasing these games for exclusivity and publishing as well as providing the underlying developer tools and hardware. This has long been how game consoles have thrived, and Apple is taking many of those components and integrating them for their ecosystem of hardware.

While not all the 100 games, at launch, will be playable cinematic stories, the ones Apple spotlighted did have more of the story feel. Which keeps their theme for both Apple TV+ and Apple Arcade consistent in that humans like great stories and with Apple TV+ you can watch those stories, and with Apple Arcade, you can play them.

I think Apple Arcade will do much better than many originally thought, and in particular with the younger demographic and it may as well be extremely well-positioned for Asia and China in particular.

If you take a step back and look at the whole picture, there is quite a compelling story for Apple’s products, software, and services ecosystem. There are hardware options galore at varying price points, marketplaces, commerce, and services of all kinds. From the Apple customer perspective, there is deep value in this ecosystem and whey, and I’m confident Apple’s loyalty will remain high for many years to come.

Observations from Apple’s iPhone 11 Launch Event

I have attended just about every major Apple event since 1981. The only one I did miss was the WWDC in June of 2012 when I had a triple bypass the Friday before the WWDC keynote. Consequently, I have some experience with Apple events and since I view and analyze them at a much deeper level than the mainstream media, my takeaways are somewhat different than how they perceive and report on these events.

Here are five things that made this event important and not just an incremental iPhone update in my opinion:

  1. Apple’s ownership of hardware, software, and services as well as the entire stack of their processor design is much more important than most people understand. This allows them to design software at the micro level to take full advantage of any new hardware and processor designs. After the keynote, I spoke with Phil Schiller, their head of worldwide marketing and he emphasized to me the fact that the processor team is in constant discussion with their OS team as well as their applications group and are much more in harmony on the way they go about creating hardware, software, and services.

    This gives Apple a distinct advantage when all of what they create is optimized to take advantage of other things the design into all of their products.

  2. The new A13 Bionic processor with its neural engine and increased us of AI in its architecture is a big deal. At the moment, this is the most powerful CPU and GPU ever created for a smartphone. This is the picture of the Bionic 13 processor features.

    One important piece of this processor is the neural engine. Apple has been developing this for a while and with the A13 it looks to take a leap forward. It has a lot of functions, one major one I will get into in the next bullet point, but it plays a major role in how it manages tasks and allocates how much power is used for any particular app. This, in turn, helps manage battery life. The A13 Bionic processor can handle one trillion transactions per second and has 8.5 billion transistors packed into it.

    Apple’s silicon engineering team had stage time for the first time ever at an iPhone presentation and emphasized the importance of Apple designing everything down to the transistor of their own silicon. This is one of the primary reasons Apple’s smartphones have more computational capability than their competition and why even several year old iPhones can still outperform many of the latest smartphones sold all over the world.

  3. The three camera system managed by the neural engine. The three new cameras in the iPhone 11 Pro Series deliver some of the best imaging quality available on a smartphone today. But what makes this different is how the neural engine manages the photo images and the new special software that will come out later this year that will deliver enhancements that will be closer to what you can get from some DSLR cameras. I got to see some of these images on an iPhone 11 up close, and they were stunning. The amount of detail with no noise was amazing. And this was without the new enhancement software that will come out later this year.

    When we research this area, consumers tell us that one of the top three things that are important to them is the quality of the pictures they take on their smartphone. The idea of a camera in your pocket has changed their mentality on taking pictures, and this is the one area that they look closely at and are willing to pay more for better quality pictures. While the best imaging will be on the iPhone Pro series, even the iPhone 11 that uses the same Bionic processor and its neural engine is finely tuned to use this chip to deliver stunning photos on a mid-level iPhone.

  4. Aggressive pricing. Apple pricing the iPhone 11, starting at $699 is an important milestone. Some think that this is tied to Apple being more price sensitive to the market, and to some degree, this is correct. But I believe it has more to do with lower component costs for this phone as Apple has worked hard with suppliers to bring costs down in the last year. I suspect this will be their best selling phone in the holiday season as its camera is of great quality and has a lot of features that were not in the iPhone XR.

    The pricing on the Arcade gaming service is very consumer-friendly too. $4.99 for up to six players in a family is reasonable, although this will be most attractive to families with younger kids. But would not be surprised if my wife gets this subscription as she loves these kinds of games.

    Apple TV+ is also reasonably priced at $4.99. This particular streaming service is interesting to watch and could have an impact on the streaming business. Apple is setting a new bar in streaming by having a service that is tied only to movie level cinematography and storytelling. Unlike Netflix that does have original programming, some of its low quality, as well as shows that while they are still loved, some are as much as 15 years old. By creating a service of only very high-quality content and pricing it at $4.99, if the shows are compelling, it too could eventually add serious revenue to their service business. Also, the fact that they will give a full year of Apple TV + to anyone who buys new iPhones iPads and Macs starting Sept 10, 2019, will give them a subscription base of around 100 million by the end of 2020. A year of watching shows on Apple TV+ could go along way in helping them develop loyal customers who will stay with the service after their first year.

    Also, look at the pricing of other products they have in their line.

    -$329 feature loaded 7th gen iPad
    -$699 iPhone 11 ($50 less than XR)
    -Series 3 Apple Watch left in market at $199.
    -iPhone XR left in market $599. iPhone 8 $449.

If we just looked at a price to value analysis of Apple’s services, and even their hardware lineup, we could argue from a hardware standpoint, it’s the most affordable time to upgrade or enter the Apple ecosystem. Apple’s pricing was surprising to many, but the argument that Apple is pricing itself out of the market seems to be one that is now very difficult to make.

Apple Event: Upgrades, Upgrades, Upgrades

On Sept 10th, at the Steve Jobs Theater, Apple gathered press, analysts, and guests to take a first look at the new iPhone models. During the keynote, Apple introduced the new iPhone 11, the iPhone 11 Pro, and the iPhone 11 Pro Max together with the new iPad 7th Generation and Apple Watch Series 5.

There was a lot packed into the keynote. Rumors seem to be getting better every year, but it is about the final details on how new features and specs are delivered that help you understand the impact these new products might have on Apple’s business and the market.

iPhone

While not immediately evident at the start, it became clear, that iPhone 11 is the new iPhone XR. The name is a smart move from Apple as it simplifies the naming convention but, even more so, because it does not label the product as inferior. You might not be able to afford the iPhone 11 Pro, or you might not see yourself as a pro user, but you do not feel like you are settling for a “second best” product by buying the iPhone 11.

Despite all the concerns about the trade war with China and the impact that tariffs might have on pricing, Apple maintained iPhone 11 Pro pricing in line with last year and dropped the iPhone 11 price by $50 compared to the launch price of the iPhone XR.

While we get excited about the new products, future sales are also driven by iPhone models that remain in the line-up and get a price cut. Apple XR now starting at $599 and iPhone 8 starting at $449 offer two great options for current users who are looking to upgrade.

Upgrades are not just crucial for Apple to drive hardware sales. Making sure the current users base is on one of the most recent iPhone models ensures they can access and benefit from the services and key features Apple is providing from Apple Card to Apple TV+ to Face ID for security.

Missing from the rumored feature set was reverse charging. Your guess is as good as mine as to why we did not see this feature, but I do wonder if Apple thought iPhone battery life might get impacted too much or that charging time was not fast enough to provide a positive experience.

Apple Watch

iPhone XR and iPhone 8 were not the only two products that remained in the portfolio with a more attractive price point, Apple Watch Series 3 did too at $199. Apple Watch 5 will get the press and drive upgrades, but Apple Watch Series 3 will certainly attract new users who have been looking at Apple Watch but were either unclear about the value or they just could not afford or justify the price. I expect Fitbit to be the brand most impacted by the new price point and not only on their smartwatch portfolio but on their bands too.

The new Apple Watch Studio is a great new way to purchase Apple Watch. Customers will be able to pick size, material, and band to create precisely the product they want. This will certainly drive out of the box satisfaction, and I do not expect to negatively impact sales of additional bands as the choice is now so broad and users have started to have specific bands for specific occasions.

Apple also announced three new health research studies and a health research app which proves once again that Apple is committed to making Apple Watch not just a fitness device but a health device. It may seem a subtle difference, but it is about turning a device from being useful to being essential.

iPad

The iPad line up saw a new 7th generation iPad launch at $329 replacing the 6th generation and getting a 10.2” screen and a smart connector for the Smart Keyboard. The new design, coupled with the existing Pencil support offers a device that not only competes with the few Android tablets left in the market but also with lower-end PCs and Chromebooks.

The iPad, which is the most popular model in the portfolio, is often the first Apple device consumers buy. If you have an iPhone and an iPad, the value of having both is clear, but many consumers still see the iPad as a device that delivers a computing experience that is separate from the phone. Researching iPad over the years, I have often seen Android phone users with an iPad, and this has become more the case as the numbers of brands bringing Android tablets to market has been decreasing.

Apple Arcade and Apple TV+

Apple Arcade and Apple TV+ pricing was probably the biggest surprise of the keynote. Both are $4.99 for a family subscription. A pretty striking difference to the $14.99 Apple Music family subscription and $9.99 Apple News+ which maybe just helps to bring home the cost of licensing content and adding your cut on top.

Apple Arcade is the first of its kind as it does not target at core-gamers, but at the much broader casual gamers market, so pricing does not have a real comparison yet.

The super aggressive price of Apple TV+ compared to expectations, but also to other video services, signals a few things. First, it might be that Apple is sensitive that they do not have a track record in video content. Actually, their first attempts at producing content with Planet of the Apps and Carpool Karaoke were not very successful, to say the least. It might also be that Apple does not feel they have enough catalog that would justify a higher price from the get-go.

Second, I think that at $4.99 it becomes less about subscribing to Apple TV+ instead of another service. You are instead deciding between Apple TV+ and a movie rental or a latte. This makes the decision process much easier.

Lastly, being more aggressive on a subscription price has no negative connotation on the brand. This is quite different in the hardware business, where a lower price does impact the way the brand is perceived.

From tomorrow if you are purchasing an iPhone, iPad, Mac or Apple TV, you will receive a free annual Apple TV+ subscription. This is really not about helping devices sales, but it is about giving Apple TV+ an audience.

 

And this brings me to my final point about what we saw from Apple. As hardware and services come together, the value-add from one to the other is no longer a one-way street. We used to see software and services add value to Apple hardware, and now we also see Apple hardware being instrumental to the success of Apple services. Some services have gone beyond Apple hardware: Apple Music recent web-based beta or Apple TV+ on Samsung, LG, and other TVs, and on the web, however, Apple hardware will remain the biggest driver for Apple services uptake. This means that making sure users have the best possible device to get the added value of services might require some different thinking when it comes to pricing. This need rather than market pressure is what you saw Apple respond to this week.

The State of Tech

I often get asked about the state of the tech industry when I share bigger picture trends with companies we work with. Up to this point, I have been articulating the tech industry as being in a bit of a lull while we wait for the next major category or paradigm of computing to shift. I have since shifted to describe the tech industry as being in transition and not necessarily a lull.

It sounds odd to describe an entire industry as in transition, but when you step back and look at the forest in the trees, it becomes clear the tech industry is moving toward a moment when technology can be labeled by a few categories or industries to when every industry and product category becomes a part of the technological whole.

Just look at how many big problems technology companies are looking to solve and how each of these are still in their infancy. Machine learning, artificial intelligence, robotics, autonomy, logistics, agriculture, smart grids, and smart cities, education, retail and commerce, health and wellness, home and living spaces, transportation, and the list could keep going. The broad point of that list is to show how little, or how immature technology is as a whole even if it exists in some of those industries.

The history of computing has focused on a specific computing product like a desktop or notebook, then the smartphone and tablet. But with those categories maturing, the much bigger world is becoming tech’s playground.

This is a good evolutionary path for what we consider technology today, but it is also one that is harder to measure, or sometimes see, and also one that will take much longer to manifest as a whole. As we think about this, there are two fundamental things still needing to happen before we could see an inflection point of the “technolofication” of everything.

Continued Advances in Semiconductors
I’ve written several articles on the semiconductor golden age, but the point still stands that needed innovation in silicon at the CPU/GPU/accelerator and overall architecture design is still needed. We still, and may never, have enough computed power to fulfill the needs of industries from a technology standpoint.

We have come a long way with semiconductors, but there is still a long way to go. A big question is if we will get there with pure silicon-based technologies or whether something like Quantum computing designs are necessary in order to lead us to the breakthroughs that bring tech to the next level.

Besides advances in process technology, for example, we are just entering the 7nm phase for core computing silicon, which will bring advances in power and performance. However, innovation and creativity in the architecture design and overall system of the silicon as well. This goes beyond just one chip and focuses more on how all the different pieces of silicon work together as a complete system. One thing mentioned here has been the chiplet architecture, which has enabled design innovation as well as faster time to market, but I still sense new architectural system innovations are still ahead.

5G
The other critical component is 5G. I know the pushback I get from readers who still don’t see the value or need for 5G, and I’ll go into a much deeper article on this point I’m about to make at some point. But, the best way to think about 5G is that it is the way we will bring high speeds, low-latency, long battery life, and more to everything beyond the smartphone. Yes, 5G will have benefits for your smartphone, but 5G is really the first time we see a path to bring connectivity to all the other IoT products that need for mission-critical applications. Edge computing for visual processing, smart cities, and smart grids, autonomy, robotics, etc., are the things 5G is really built for.

5G is barely into its first inning. And while by the end of 2021 it will be common in the vast majority of smartphones sold, 5G is truly about enabling the broader world of computing objects and connecting them to the Internet in ways that enable computing and connectivity in ways we have not had before.

In my broader discussions on trends and my current way of explaining tech as being in a transition, it is important to set a baseline expectation that this transition may take much longer than people realize. 2025 is likely the earliest we see the fruits of the labor of work going into new silicon designs and 5G infrastructure. Even in 2025, we may still feel like we have not progressed much from today since these things move gradually.

This is not to say interesting things won’t happen between now and then but that we just went through a time when over the course of 10 years we saw significant innovation in core consumer computing product. Because of that intense period of innovation and adoption of technology, this next phase will feel rather boring, perhaps. But the point of this article, and others I’ll write over this time horizon, is to help set a baseline of expectations along with some of the innovation points along the timeline to watch for which will help enable the more obvious market solutions we can point to along the way.

Vendors to Watch In the 5G Era

In these very early days of 5G, it certainly seems on the surface that the vendor ecosystem is similar to what it has been for the past several years. The Big Three network equipment companies — Ericsson, Nokia, and Huawei — are winning the lion’s share of 5G contracts, with Samsung and ZTE gaining some share. It also appears that we’re not likely to see any major shifts in the handset ecosystem in the near future. Qualcomm remains in a strong position in the 5G chipset, licensing, and radio modem business – the biggest threat comes from the internal development on the UE side, such as Apple’s ultimate frenemy move of acquiring Intel’s modem business, barely a week after they settled their dispute with Qualcomm.

But as we truly enter the 5G era, which will move from ‘commercial trial’ phase to more broad-based network and device availability in 2020, there is an opportunity for a new wave of vendors to play a significant role. I’d like to use this column to provide a glimpse of some companies and categories of opportunity to keep your eyes on. A few caveats. First, this list is inclusive of the broader next phase of opportunity in wireless, including companies that will contribute to 5G, edge computing, new business cases and different economic/cost models. Some of these companies are [well-funded] start-ups, while others are established companies making a big play for 5G, in some cases through some recent acquisitions. Second, this is just a sample of a few companies – it is by no means exhaustive. Finally, no company has paid to be on this list or has sponsored this column in any way.

New Era of Networking
Among the companies to keep your eye on in the networking space, a few stand out.­ Mavenir is helping to transform mobile operator economics, with a comprehensive portfolio across nearly every layer of the network infrastructure stack. It is playing a particular role in contributing to the move to more software-oriented solutions for mobile networks.

Altiostar, which provides a 5G-ready virtualized RAN software solution, has raised more than $200 million. It is one of key vendors supplying Rakuten, a new, high-profile operator in Japan that is building the world’s first end-to-end fully virtualized, cloud-native mobile network.

Parallel Wireless. Although not a major 5G play at this point, Parallel has contracts with more than 60 smaller operators worldwide, with its pioneering 2G/3G/4G Open RAN solution consisting of a Converged Wireless System (CWS), a software-defined base station, and a fully virtualized HetNet Gateway (HNG.)

New Opportunities in Mobile Broadband
Evolved 4G and 5G networks are positioned to offer a competitive broadband solution, particularly in areas that are un-served or under-served by broadband. Starry, which has launched fixed wireless access in 5 cities covering some 2 million homes, has raised nearly $200 million and just won 104 licenses in the 24 GHz auction. Airspan has numerous solutions for network densification – they’re behind Sprint’s innovative ‘magic box’, and recently acquired Mimosa Networks, which focuses on fixed wireless solutions and adds some new IP in the massive MIMO space. Adtran is  playing an important role in backhaul, customer premise, and access solutions for mobile broadband. And as opportunities in fixed wireless expand, Cambium Networks is well-positioned in certain geographic areas and parts of the radio spectrum that are not typically covered by the mainstream network equipment providers.

Opportunities in User Equipment (UE)
Although we’re not forecasting any significant near-term share shifts in the handset (smartphone) market, we believe that there’s a new breed of opportunities for wireless modems (i.e. bricks/pucks/mobile hotspots) in the consumer and enterprise space. Some notable companies include: Inseego, which has won some of the initial contracts for Advanced 4G LTE (i.e. Cat 18) and 5G networks; Cradlepoint, which provides a comprehensive suite of 4G/5G/IoT routers and edge cloud solutions; and Netgear, which has among the industry’s first 5G mobile hotspot and Wi-Fi 6 products.

Edge Computing and Storage
An important element of next generation 5G networks is bringing connectivity and content to the edge, which improves network performance and can significantly alter network economics. This will expand opportunities for established Big Tech companies to expand their business in the telecom/wireless sector. A good example here is VMware, which at the recent VMworld, laid out a compelling vision for the evolution of the telecom network as a cloud, as part of the company’s Telco NFV solutions. Seagate, one of the world leaders in storage solutions, is expanding its footprint into telecom , given opportunities in the evolution of the edge and the data center. On the start-up side, VaporIO has an innovative solution that places data centers at the base of cell towers, which brings cloud-like services to the edge of the wireless network.

CBRS/Shared Spectrum/Wi-Fi 6
Another company on our watch list is Federated Wireless, which is among the leaders enabling CBRS (shared spectrum in the 3.5 GHz band) with its Spectrum Controller platform. The coming commercial launch of CBRS is key to proving the pioneering shared spectrum model, and will play an important role in the evolution to 5G.

Finally, not that many in the broader tech ecosystem are that familiar with CommScope, a $5 billion company which for years has been a significant supplier of a range of wireless network equipment, such as antennas and amplifiers. Among the reasons to keep your eyes on them is the recent acquisition of Arris, which more than doubles the company’s revenue, and through Arris’ ownership of Ruckus, provides substantial a substantial footprint in the enterprise/telco Wi-Fi and CBRS areas. I also believe Cisco is poised to play be a bigger player in 5G. The company is in a unique position, given its broad portfolio in the enterprise, mobile, and Wi-Fi areas.

We’ll address some key players in the IoT and enterprise segments of 5G, including the industrial aspect, in a future column.

Market Questions for Foldable Devices

In June of 2018, I attended the annual Society of Information Display Conference in Los Angeles, and I saw prototypes of foldable displays from BOE, a Chinese display manufacturer. I got to play with a folding phone that used their flexible display and wrote that the era of foldable smartphones was on the horizon.

I was very impressed with the conceptual idea of a folding phone, and since then, Samsung has brought a version to market that had a bumpy start but is now scheduled to deliver their “fixed” foldable phone later this month.

To date, most of the foldable phones that are being designed are created to fold in half from the center out. The idea behind this is that when unfolded, the screen goes from a single 6.0-inch screen to one that when opened, can have a screen that diagonally reaches up to 10 inches, thus creating a kind of mini-tablet.

The other folding smartphone design is one that has been shown by Motorola, and it folds in half, from top to bottom. While this design does not add a larger screen surface that one gets in a smartphone that folds out from the center, it allows for a bigger screen, and when folded in half, it is a smaller form factor that is easier to carry around.

While these new foldable phones are an engineering marvel, there is one big question about folding smartphones that have not been answered. That question is if there is an actual market or business case for folding smartphones and if there will be any real demand by a mainstream mobile phone user?

I wrote about this in detail in my Tech.pinions column in April of this year and laid out the fact that the jury is out on whether these folding phones are an anomaly or represent a real market opportunity.

In talking with two folding display vendors recently, they told me that it is unlikely that they will make the kind of investments needed to expand their foldable display manufacturing lines given the demand for more mainstream displays, especially OLED displays, that are in high demand and very profitable.

In fact, BOE, who showed me their first foldable display in mid-2018, has just landed a lucrative contract with Apple to work on OLED displays for them. The display vendors tell me that the next big demand in displays will be for OLED in premium phones and then as they ramp up their manufacturing lines to create them in greater numbers, we will see OLED displays in mid-range smartphones as early as 2021.

I do love the ingenuity and technical designs of a foldable smartphone, but I am just not convinced that they will ever garner real demand by mainstream users. Most likely they will remain a product that attracts early adopters and some verticals and no-one else.

On the other hand, I am becoming more bullish on folding laptops. In May, Lenovo introduced their first foldable in their Thinkpad X1 line of laptops. I got to spend some real hands-on time with it in May and again recently at a private event in North Carolina. This is still a prototype, but it was designed by Lenovo’s stellar Yamoto, Japan labs, the group that created the solid Thinkpad line of laptops.

I have tracked laptops since their entry into the market in 1985 and have a good feel for these products design and functionality. This new Lenovo foldable and two others that will be introduced later this year or early next year could represent the next big step in portable computing.

To get a look at how the Lenovo X1 foldable works, check out this video from the Verge.

The keyboard on this foldable PC is external so to use it you would stand the unfolded laptop up and place the Bluetooth keyboard in front of it. Surprisingly, this works well and is not at all an odd configuration.

In the folded mode, it feels like a book. Unfold it, and it is a large tablet. The more I got to play with it, the more I began to realize that this design for portable computing could be a game-changer.

At first, it will be way too expensive for the mass market and instead will find its ways into vertical markets where I suspect it will get serious interest initially. Over time, if the prices come down, it could find a niche market with road warriors and executives who want the ultimate in portability and will be willing to pay the premium prices for this type of mobile computing experience.

The cost of the foldable display in a laptop is close to triple the price of a foldable display in a smartphone, and making them in large volumes is not really in the cards for these specialty display manufacturers, at least in the near future.

While I believe that foldable laptops may fair better than foldable smartphones, at best I see them eventually being only about 10-12% of laptops shipped by 2022.

At this point of our research, and with what we know of other foldable laptops in the works, I sense there will be greater interest in this foldable form factor over folding smartphones and, at the very least, will help drive new innovation with laptops for mobile users in the future.

A Vacation with Apple Card

I spent the past three weeks in Europe with my daughter and just before we left, I received my Apple Card, so I thought this was the perfect opportunity to test it out and learn what I like and what I wish it had.

I had registered my interest in Apple Card as soon as it was announced and when Apple offered the opportunity to be part of the group who would get a preview, I jumped on it. I was leaving for Europe and the thought of having to pay currency fees for three weeks worth of purchases made me a little sick to my stomach. I was in the process of upgrading one of my credit cards to a $95 annual subscription fee card that would also provide a no currency fee option. Despite starting the upgrade process over a month before my trip, I was not sure I would get the new card in time. I just wanted to avoid paying currency fees, which, if you travel, you know, can add up to a considerable amount.

A Weekly Credit Card

I am not much of a credit card user outside of travel. If I have the funds, I prefer to use my debit card, and I keep track of my purchases on a spreadsheet, so I am always on top of my finances. My debit card does not provide me with any rewards, so the idea of swapping my debit card with the Apple Card, especially for Apple Pay was a no brainer.

Apple Card’s repayment process makes it so that I can keep track of my purchase and pay at the end of the week so that funds are taken from my current account rather than building up debt for the whole month. I am sure it is more psychological than anything else, but in this way, I feel like I avoid any temptation of overspending. Apple certainly seems to be wanting to help drive healthier financial choices as they highlight the impact of interests on your spend.

Although I use Apple Pay regularly, it has not been my default payment option outside of tested retailers where I know it is available, and it works. As convenient as it is to flip my wrist to pay, I hate to have still to ask whether or not Apple Pay is accepted. Even within the same chains, it gets down to individual stores having updated their POS. This quickly leads to frustration, which then makes me reach for my wallet instead. Now with the Apple Cash 2% cashback incentive linked to Apple Pay, I make more of a conscious effort to use Apple Pay, and you know better than I do, that consistency creates habits.

Registering Apple Card as the default Apple Pay card was, of course much easier than the steps I had to take with any of my Citibank debit and credit cards, especially when authorizing multiple devices. This is one less friction in the whole process that consumers have to face especially those who update their iPhone on an annual basis.

Once I got to Europe, the ease of contactless payments compared to the US made it so that using Apple Card on my Apple Watch was the most convenient option. Convenience aside, using Apple Watch rather than reaching for my wallet on a busy subway or tourist spot also made me feel safer in areas where tourists can be targeted explicitly by pickpocketers. This, of course, is true for any card you use with Apple Pay but my peace of mind extended to the fact that I knew that if my Apple Card was ever compromised, I also could generate a new card number and continue to use the card while on my trip.

Apple Card’s Data

As I mentioned, I keep track of my transactions regularly. I have a spreadsheet where I list what I spend, including recurrent payments, and what I earn. Apple Card provides an incredibly useful and detailed set of data if you, like me, want to have an accurate view of where your money is going. By the time you have processed the transaction, you get a notification on your iPhone, detailing retailers, location, and amount in your primary currency. Needless to say that when you are on a three-week trip not having to worry about retaining all the receipts so I could document my expenses on my return and check them against the final amount debited in my home currency is a huge bonus too.

I particularly appreciated the speed of the transaction notifications when, while trying to buy tickets online for a museum in Rome, the transaction was flagged as possible fraud. As the payment was rejected online, my iPhone notified me of the purchase and asked me to confirm if I was indeed attempting to make the transaction. I was then able to go and try the purchase once again, which this time was cleared. If you have any credit cards, you know that that this process is not usually as simple. In most cases, even if the card issuer sends you a text message, asking you to validate the transaction, your card might still be blocked, which will require you calling your bank and having the card released. The two steps process takes considerably longer and creates much more friction for the user, especially when under time pressure on completing the transaction either online or at a physical retail store. The timeliness of the notification and the sense of control I had through the experience made Apple Card feel more like a modern, intelligent banking experience than anything I have experienced before.

I do wish Apple took the data a step further and allow users to either import the data into Excel or another budgeting app of my choice. Being able to use the data provided by Apple Card in expenses apps would also be valuable and would open up new opportunities for Apple in the enterprise space. Interestingly the recent study we, at Creative Strategies, ran on Apple Card had others mention the desire to have some level of integration into their favorite finance management app. The enterprise segment has been growing in importance for Apple but mostly as a hardware play. Being able to solidify its presence by delivering or integrating a service like Apple Card into core enterprise apps for travel and expenses would broaden the opportunity for Apple in the enterprise. As Apple pointed out over the past several earnings calls, enterprises have been investing in designing their own applications aimed at devices like the iPhone and the iPad, and you could argue that Apple Card could be another “device” those apps could consider.

 

During my trip, I earned just over $50 in Apple Cash.

While there is some good feel factor about it. That said, I have to admit that the real benefit of Apple Card for me came down to three things: a modern banking experience, peace of mind and a sense of control over my data and finances. What is interesting however is that I associate the benefit to my iPhone as Apple Card and iPhone become one for most of my purchases. As sexy as the physical Apple Card might be the only time I saw it while in Europe was when I showed it to someone. Hopefully, this will be the case more and more in the US too as contactless POSs continue to roll out. I have always said that Apple Card could be one of the stickiest services to bring value to the iPhone and in my short experience, it certainly seems that way.