Verizon Wireless’’s PR agency was kind enough to send me an evaluation unit of its new MiFi device today, so I thought I’d spend a few minutes sharing some initial thoughts. For anyone not familiar with it, this is a pocket sized portable WiFi hotspot attached to Verizon’s EVDO network, with the intention of allowing your various devices – laptops, phones, gaming consoles etc. – to easily connect to the Internet in a variety of mobile situations.

The first thing I did was pull it out of the box to see what it looked like. I was actually slightly surprised by how small it was:

It’s less than a centimetre thick, so thinner than my iPhone and quite a bit thinner than my BlackBerry Bold. And the footprint is just a hair larger than a credit card. So it definitely lives up to the “pocket-sized” description and it’s extremely portable (I stuck it in my pocket with my iPhone later on as I went to run some errands and forgot it was there). 

The next step was getting the thing up and running, and there I ran into problems pretty quickly. My main personal computer is a MacBook and so that’s the machine I wanted to use to get it started. But although in theory I was supposed to just plug it in with the supplied USB cable and then follow automatic prompts, nothing happened when I plugged the thing in. No disk image, no simulated CD, nothing. So there was no way of getting the device to do anything useful at all whether automatically or otherwise. I tried unplugging it and plugging it in again several times but no dice. This was somewhat disappointing since the box clearly states that it’s Mac OSX compatible:

If the MacBook was my only device I’d have been out of luck. Fortunately, I have a desktop PC lurking nearby I could use, and so I tried that instead. To cut a long story short:

• the first time I plugged the device in, it caused what the PC later described as “a serious error” – it was unresponsive for several minutes and I had to restart it just to get it to talk to me again.
• the second time, things went better. The device registered, drivers were installed and up popped the VZ AccessManager program that manages devices like these as well as Verizon’s aircards and USB modems. 
• I tried to register the device using the program, but the first time around it failed. The second time (once I’d found an activation item buried in one of the menus) it worked. 
• at this point, the device was finally ready for use.

I switched it on and looked for the wireless access point on my MacBook. Nothing. Refreshed: nothing. Finally, it showed up – it appears that it takes quite a few seconds for the device to be ready after being switched on – nothing too wrong with that, I suppose, once you know. 

The SSID is a long string starting with Verizon MiFi2200 followed by a unique 4-digit number (although if they sell more than 10,000 of these things I guess those numbers won’t be unique anymore). Logging in requires an 11-digit numerical password which is helpfully provided on the back of the device in case you forget or need to show it to someone else using your device.

The first thing I did was run a speed test using my laptop on Speedtest.net – results below:

That’s 1.4Mbit/s down, 360kbit/s up – not too shabby. 178ms of latency – not great, but not terrible either, and fairly standard for WWAN networks. Of course, this is based on the nearest server and so on, so your actual speed is in most cases going to be slower since most of the websites you access aren’t within 50 miles.

I hooked up a second laptop to it and ran a Hulu video on that one while I retested the speed – it came in at around 1Mbit/s, so it seems to handle multiple connected devices pretty well.

So in what situations would this be useful?

The question is, why do you need a device like this? Why not just use a USB modem or similar device that doesn’t require separate power (the MiFi does, of course)? Well, one that sprang to mind immediately was my work laptop, which is so locked down that it’s impossible to install anything on it, including the software that comes with most aircards and modems. I’ve never been able to use any of the several USB modems and aircards I’ve received from Sprint and others on my work laptop because I couldn’t ever install them. Assuming you’ve got somewhere else to get the thing up and running first, this is a nice solution – since it just looks like another WiFi network to my work laptop, it works just fine.

Beyond that fairly limited use case though, are there any others? One that immediately occurred to me (and, I think, was suggested by someone at Sprint last week) was hooking my iPhone up to it while out and about for a speed boost. Theoretically, this only makes sense if AT&T’s 3G network is slower than Verizon’s, which isn’t necessarily true, but I thought I’d give it a try. Using Speedtest.net’s iPhone application (warning: iTunes link), I ran three speed tests – one each for my home WiFi (connected to a 20Mbit/s FiOS connection), the MiFi over Verizon’s EVDO network, and the iPhone’s own 3G connection. The summary is below, in reverse order:

The details are here, in the order I described above (home WiFi, MiFi, iPhone / AT&T 3G):

Obviously, my home WiFi with the superfast backhaul was quickest. But the MiFi also beat the iPhone’s own 3G hands-down – by about a factor of 2 on the dowlink, although very similar on the uplink. Why is this the case? Possibly the particular place where I tested the two networks has better Verizon than AT&T signal. Possibly the design of the MiFi gets a stronger signal than the iPhone. I don’t know for certain, but I won’t complain about that doubling in speed. (Slightly off-topic, I also wondered whether the iPhone’s WiFi capabilities are capped at 10Mbit/s – I regularly get very close to 20Mbit/s when testing my home connection over a laptop).

I took the device with me when I went out to run some errands and discovered that a dead spot in AT&T’s network at the local mall (ironically right by the Apple store) was no longer a problem – I had the MiFi on in my pocket while I checked email and Tweeted from my iPhone and had none of the normal connectivity problems. Use case found.

In theory, there are others too – the marketing materials from Verizon suggest family roadtrips, construction sites, college students in study groups, insurance agents on the road and conferences. All are reasonable suggestions, though most would be just as well served by a USB modem. 

Conclusions

In summary, I found that:

• The MiFi provides good speed – even an improvement over the native 3G on my iPhone, and plenty of downstream speed to get work done on the road
• The activation process was cumbersome and would have been a show-stopper if I only had my MacBook. I wonder why an activation process involving installed software and drivers is even necessary – the thing never needs to connect to my laptop after that anyway – why not just let me activate it online and avoid all that hassle?
• There will be some use cases for some people – but probably not for everyone, and that’s fine. USB modems will be just peachy for many people and some people don’t need a mobile broadband connection at all
• I haven’t had it long enough to worry about this or really be able to comment on it yet, but compared with a USB modem I can imagine that remembering to recharge might be a pain.
• The device is truly extremely portable, to the extent that you could chuck it in the same pocket as your phone without an issue and would probably forget it was there (as I did).

Thank you Verizon, for sending me a trial device. I’ll be using it quite a bit over the next couple of months until I have to give it back. It’s probably also worth noting that the underlying device is the same as the Sprint device that also launched recently, so most of what I say here would go for Sprint’s version too – including, most likely, the network performance, which should be similar on Sprint’s EVDO.

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I came across a blog post the other day that highlighted an interesting activity Verizon is toying with at the moment in the social telco space. It’s somewhat tangential to the core of what being a social telco is about, but it’s an interesting model nonetheless and certainly something worthwhile for other telcos to think about. I hope Verizon will be reasonably open about sharing the results of the experiment and what they learn from it.

I have since found the source press release on Verizon.com and there’s some more detail there. Essentially, Verizon has set up online fora for its customers to go and seek out answers to questions or solutions to problems, and many of the responses will come from other customers rather than Verizon employees. The Verizon Community Forums, as they’re known, cover all of the major consumer services Verizon offers, including mobile services, and the front end is split into various product and service categories so you can quickly browse to the one you need help with. 

The press release reads, in part:

The Verizon Community Forums have become the company’s hottest online venue for consumers to submit questions, share advice, and get answers about Verizon’s robust portfolio of broadband, entertainment and communication services.

On the forums, customers can interact with each other, ask questions, problem solve, and learn more about the company’s products and services. Answers posted on the forums most often come from the community’s highly active members, referred to as “super users,” an important subset of customers critical to the success of any online community.

According to Mark Studness, director of e-commerce at Verizon, the Community Forums have been well-received since rolling out last July, generating more than 10 million page views.

“The Community Forums have spurred interaction among customers because people today expect to be able to find answers to their technical questions online,” said Studness. “The feedback we’ve already received shows that our customers value the personalized peer-to-peer advice and feedback they receive from fellow users.”

The fora aren’t actually all that different from those you find on various other customer support sites, with a good sprinkling of official Verizon personnel keeping an eye on things and picking up on issues that can’t easily be resolved (a set of customers was seeing commercials interrupting and playing over regular programming, for example – something no fellow user can resolve). But ordinary users are providing lots of the answers, including on fairly technical topics.

One of the most interesting aspects – and something which takes this beyond the standard fora and into true web 2.0 territory – is a tool which allows active helpers to accrue “Kudos” by providing helpful answers to others. Part of the site is a “most kudoed users” page which lists the user Justin profiled in the Verizon press release in the number one slot. Kudos (treated on the fora as the plural form of something called a Kudo – a sort of virtual currency) are awarded by members to those who provide particularly insightful answers or solutions. The Kudos have no value beyond the warm and fuzzy feeling and / or sense of satisfaction or pride they engender, but they seem to provide motivation enough, again in true Web 2.0 fashion.

None of this is earth-shattering, and AT&T is doing some similar things with its business customer support, but it is a good example of the kind of thing that’s possible and an encouraging sign that telcos are thinking a bit more imaginatively about some of these issues.

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Interesting news today on Verizon’s approach to the open access requirements associated with the 700MHz spectrum it won in the recent auction:

On Friday, Google urged the FCC to block Verizon Wireless’ $4.7 bil. successful bid for the C Block band of spectrum in the recently completed 700 MHz auction unless Verizon is forced to agree that open access rules apply to handsets it provides its own customers. Specifically, Google claims that Verizon Wireless has no intention of abiding by the open access rules governing the C block spectrum for devices it gives to its own customers and that the FCC should condition Verizon’s grant upon a clear commitment that Verizon will not exclude these handsets from the requirement.

This echoes in reality what I had said might happen in a previous post a few weeks ago:

…isn’t Google mistaken here? Is it assuming that the FCC’s open access rules go further than what Verizon Wireless had already agreed to do? The FCC’s rules are unfortunately vague, and it may be counting on a more favorable interpretation of them than Verizon is.

Google and Verizon have had conflicting opinions on the meaning of the FCC’s open access requirements – each taking the position that most clearly reflected its own views – Google’s being the most expansive interpretation possible, and Verizon’s being the most minimalist. However, in my previous post, I pointed out that even though the rules are vague, they certainly strongly suggest that Verizon will have to go beyond its existing open access project. For example:

Wireless service providers subject to this requirement will not be allowed to disable features or functionality in handsets where such action is not related to reasonable network management and protection, or compliance with applicable regulatory requirements. For example, providers may not “lock” handsets to prevent their transfer from one system to another. We also prohibit standards that block Wi-Fi access, MP3 playback ringtone capability, or other services that compete with wireless service providers’ own offerings. [emphasis mine]

At any rate, looks like we’re in for more fun and games, and more uncertainty for Verizon and its customers. Not what anyone would have wanted, and it could all have been avoided if the FCC had just been clearer about these requirements up front. Verizon can now reasonably argue that it bid based on its understanding of these rules and it’s too late to change that understanding now.

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Back in February, I posted about the Qwest analyst conference and a brief conversation with Ed Mueller, Qwest’s CEO. Part of what I said was as follows:

On the wireless side, the company is planning to rethink its partnership with Sprint and form a new partnership (possibly with Sprint again but likely with someone else) which would provide deeper integration but also a portfolio for Qwest that would more closely mirror its competitors’. Mueller appears confident that he can get this, but given that Sprint has historically been much more aggressive about MVNO activities than the other major wireless carriers, and Verizon and AT&T have very little incentive to play ball, I’m not hopeful. It looks like Mueller may be a little naive in this respect.

This was a major theme from the event and one that got a lot of coverage at the time, though things had been fairly quiet on that front since. Well, today Qwest announced that it had signed a deal with Verizon Wireless. But rather than tighter integration, Qwest has gone for a far looser integration, and has taken another step back from direct participation in the wireless market. In the space of just four years, it has gone from being a wireless player in its own right to being an MVNO to being a reseller:

Qwest Communications International Inc. (NYSE: Q) and Verizon Wireless announced today they have signed a 5-year agreement for Qwest to market and sell Verizon Wireless service beginning this summer.

…

Under the agreement, Qwest customers will have access to the full line of Verizon Wireless handsets, smartphones and BlackBerry devices, as well as high-speed broadband wireless services for e-mail, Internet access and multimedia services. Residential customers will be able to choose “wireless only” and be billed directly by Verizon Wireless, or include Verizon Wireless service as part of a Qwest bundle with their home phone, Internet and video services, and receive one bill from Qwest for all services.

Ed Mueller had said in my conversation with him that, in the TV market, Qwest was perfectly satisfied to merely take commissions from its satellite partner, rather than participating directly (according to that conversation, these commissions are around 15%). It now appears that Qwest is willing to take exactly the same approach with wireless. Having recognized that it doesn’t have the skills to compete in this market itself, it is hitching its wagon to a player that can. But again, it is limiting its upside in one of the few markets that are still really growing. Once again, it appears that Qwest is not all that concerned about growth.

In the meantime, this is somewhat bad news for Sprint, which will have to cope with the loss of one of its resellers (albeit not the largest) and the expansion of Verizon Wireless’s ability to compete through bundling with wireline products, on top of all the other bad news it’s had recently.

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Several major wireless carriers this week announced unlimited wireless plans for $99 – Verizon kicked things off, AT&T followed suit, T-Mobile joined the crowd, then US Cellular finished off the week with its own announcement.

The Verizon and AT&T deals are pretty much identical – $99 per month for unlimited calling. T-Mobile threw in unlimited texting, which makes sense since its user base tends to skew young and therefore is more prone to communication via thumb than mouth. US Cellular’s is a national offering too but its user base is more regional.

Financial analysts and investors have largely seen all of this as a bad thing, either because it will start a price war, or because it will take everyone spending over $100 on voice currently and bring their spending down to $100, by definition decreasing their spending (Om Malik would appear to be a case in point).

There is already speculation that Sprint will attempt to undercut all of the above, which it could do by simply charging less than $99 for its unlimited voice plan, or presumably by charging $99 or slightly more for a plan that would include unlimited voice and messaging and/or data usage. Certainly, Dan Hesse has suggested that he has what have variously been described as “nukes” or simply “missiles” he can fire off to kick-start the turnaround at Sprint, and one of these is presumed to be a dramatic move on prices. With the other carriers having now stolen a march on that particular idea, he may need something new.

However, it’s not clear that it would have made a huge difference even if Sprint wasn’t playing “me too” at this point. Think about it. Wireless churn stands at somewhere between 1 and 3% for the larger US carriers. That means that in any given month, only 3% (or fewer) subscribers switch carriers, or put another way the average lifetime of a subscriber is between 3 and 8 years. Even the most dramatic move on pricing would be unlikely to loosen up more than a small number of additional subscribers in any given period. Look at the iPhone – growth appears to have slowed, and there are doubtless several reasons. But one is the simple fact that many people are locked into 2-year contracts (which by themselves would limit churn to just over 4% if everyone stayed in them) and over three quarters of US wireless subscribers are currently with a carrier other than AT&T.

Given that Sprint currently has negative “flow share” towards the other three big carriers, just turning that trend around would be something. But simply reducing prices will not likely do the trick on its own, especially when competitors are making similar moves. Forrester has a survey which has been used by Morgan Stanley to look at brand loyalty, and it illustrates where Sprint’s problem really lies:

Verizon scored an average response of 7.7 out of a maximum score of 10, AT&T and T-Mobile scored 7.2 each, with Sprint Nextel averaging 6.1 among their customers. Factors such as reliability, trust and prior experience
were rated as key factors in making a carrier choice.

Sprint has by far the lowest rating of any of the main carriers (Nextel’s independent rating is even lower), and this ties in directly with its churn. It needs to be doing a better job of keeping existing customers happy at least as much as it needs to win new ones.

As to the question of whether the impact of unlimited pricing plans will be good or bad, it’s hard to argue they’ll be good. The answer really depends on which of four resulting trends is strongest:

• existing customers of a carrier switching to a higher-priced plan (i.e. going from limited to unlimited), which would have a positive ARPU and revenue impact
• existing customers of a carrier switching to a lower priced plan (i.e. because they currently spend more than $99 either because their plan costs more or because of overages), which would have negative ARPU impact
• customers switching from other carriers, which would have positive subscriber and ARPU impact, but which seems relatively unlikely on the whole because the model has swept all but one of the major carriers in the space of a week
• new customers signing up with the carrier because of the new plan (which seems least likely of all, since current wireless non-subscribers tend to be poorer, with poor credit scores, and are therefore much more likely to adopt pre-paid or at least low-priced postpaid offerings.

Given that the fourth trend is likely to be negligible, and third also small, that leaves the first two. There is an argument for switching from a lower-priced to a higher priced plan if it allows you to make another simultaneous change – i.e. to switch your calling from another network to your wireless carrier. If people cut the cord either at home or in business as they make this change, they may save money overall while increasing spend with their wireless carrier. The premium on top of more modest allowances of minutes is likely to be at most $50 and probably considerably less, so it would be competitive with unlimited wireline calling plans. However, it seems likely that the percentage of subscribers currently paying more than $100 for their voice services who will switch to the $99 plan will be close to 100% within the first few months. While providing some goodwill benefits similar to those enjoyed by Sprint with its Fair & Flexible plans and AT&T/Cingular with its Rollover minutes, it’s not clear those will translate to sufficient churn reductions to offset the loss in ARPU / revenue.

Had Verizon been alone in making this move, the picture would look very different, even if it only had a few months of lead time over the other carriers. But because the others have responded – or are likely to respond – very quickly the overall impact seems likely to be at least slightly negative.

On the other hand, it’s also worth asking what would have happened to voice ARPU over the next year anyway. It has been stable for some time, and with most growth coming from prepaid and family plans at present it is likely to drop considerably in the coming years. Per-minute pricing has been dropping for some time, since that ARPU has been buying ever larger numbers of minutes over time. The current model for consumer communications has flat-rate pricing as its endgame every time (see broadband, wireline voice, TV), and although it has taken a very long time to get there with wireless, we’ve arguably had several baby steps already – the “bucket of minutes concept” and the elimination of long-distance and roaming charges being among the most obvious. This will doubtless accelerate the decline in ARPU somewhat, but overall it may simply cap voice ARPU at a nice high rate (about twice current ARPU), freeing consumers to increase spending on data, which is where all the growth is today regardless. It may not be as bad as some people think.

Note: the image used in this post is a picture I took myself a while back on a walk through NYC. Unaccountably, a huge inflatable rat was sitting on the back of an unattended trailer outside a Verizon Wireless store. Seems somehow strangely apt for this story. Original can be viewed here.

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